End of the Road

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This is going to be my last blog in this series. I hope you’ve all enjoyed reading my entries up to this point. It’s been a privilege to share my thoughts with you. Thank you all for your support.

Over these last few months I’ve shared excerpts in hopes that you will see the value in going out and grabbing a copy of my book for yourself. There’s so much more in there to help you raise the bar of your business.

And if we’re being honest, I just felt like sharing. I created and host the world’s largest dental community for free, I send out one of the most popular dental magazines in the world for free, and I’ve released hundreds of podcasts for free. It only made sense that I’d give away parts of my book for free, too.

I believe in giving back to the community that I love and I want to end this blog series on a similar note.

I’ve talked about the three key elements to running a business: people, time and money. Now for something beyond that, beyond the endless numbers and the innumerable personalities that make up your business.

There’s going to come a day where you are going to be facing the end of the road, whether for your business or when you reach the twilight of your life. You might end up having more questions then than you did when you first started your business, back when you didn’t even know what you didn’t know!

The most important question you can hope to answer before you kick the bucket is, “What can I leave behind that will keep doing good even after I’m worm food?”

What matters to me when all is said and done, is that I leave the world a little better off than I found it. If that means within the realm of my profession, terrific! But if you’re a business owner, you owe it to yourself, and the privileged position you inhabit, to try and make a bigger impact around you in the name of good.

Whether you pull a Sam Walton and die at your desk, or retire into the sunset and enjoy the final years far away from the toils of work, find a cause you’re passionate about and help make an impact.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: In August 2012, I had the opportunity to visit Sweden. It’s such a lovely country and the people are so friendly. They’re enormously proud of their country’s involvement in the global market—from Ericsson to Volvo to Atlas Copco—but the one company that impresses them the most is, as you might guess, IKEA. While I was in Sweden meeting new friends and colleagues, I asked about IKEA founder, Ingvar Kamprad.

I knew virtually nothing about the guy except that he had a passion for providing the world with durable, inexpensive furniture. The first thing out of nearly everyone’s mouth was some version of, “Mr. Kamprad is one of the world’s richest men, but have you seen his house?”

Go ahead; Google “Ingvar Kamprad house” and take a look for yourself. One of the world’s richest men—a man worth billions and billions of dollars—lives in a quaint, little bungalow filled with IKEA furniture (naturally). Nobody in Sweden can comprehend that this guy lives so modestly.

It is my opinion that the other millionaires and billionaires of the world—along with people who are dangerously overextending themselves—would do well to try living by Kamprad’s modest example. Every single dentist I know lives in a much nicer house than the founder of IKEA.

Warren Buffett shares a similar lifestyle. When I was working on my undergrad at Creighton University in Omaha, Nebraska, I had the opportunity to drive past Buffett’s house a couple of times. I was shocked that a man worth as much as Warren Buffett lived in such a modest dwelling. Granted, later in life Buffet purchased his own private jet because he didn’t want to deal with public transportation anymore, but he named it The Indefensible because he felt there was no way to defend spending what he did on that plane. Yet many people who own private jets barely have a fraction of Warren Buffett’s money.

Here’s the thing, dear reader; if money is your main goal in life, if that’s all you want, you’re not only missing out big time, it’s also very likely you’ll fail to get it. Successful people seek a passion and a purpose in life and, when they find it, the money comes. You may have heard the adage, “Do what you love and the money will follow.” I’m here to tell you that it’s true! …

When you retire—or, when you die—how will you be remembered by your community? Will you have made an impact?

I ask my colleagues, “Are you going to be the dentist people recall coming to this community forty years ago when the average six-year-old had three cavities, when now the average six-year-old has four?

“Wouldn’t you rather people in your community say: ‘When Dr. So-and-so came to this town, kids didn’t floss. Now everyone flosses.’”

People who trade money for time go home at night and find something to escape their dull lives: television, alcohol, drugs, food . . . These are the people who constantly complain and say they can’t wait until retirement. People who work with purpose—people like Sam Walton—die at their desks. …

There are people in need within your own community. Charities I’ve taken part in over the years are domestic violence shelters.

Often in domestic violence situations, the man knocks out the woman’s front tooth. The damage is cosmetically devastating and further robs the victim of her self worth. After the shelter contacts me about a woman who has suffered this injury, my team and I fix her smile for free. My mostly female staff finds this particularly touching and motivating. They deeply sympathize with any woman who got her tooth knocked out by a man who’s supposed to love and care for her.

Here’s the bottom line: I highly recommend taking yourself out of your comfort zone and serving people who really need you. So many people need you!

It’s time to realize your purpose! The people who live and work with a purpose don’t need a 401(k). Know why? Because they’re not the type of people who want to retire.

The Boy Scouts have a rule: You always leave the campground better than you found it. Robert Stephenson Smyth Baden-Powell, a British Army officer and the founder of scouting, wrote the original version of that rule in his last letter to the Scouts: Try and leave this world a little better than you found it and when your turn comes to die, you can die happy in feeling that at any rate you have not wasted your time but have done your best.

It Comes From The Core

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Last year I competed in and completed the Arizona Ironman. For those of you who are unfamiliar with the event, that means I got up at the crack of dawn and decided I was going to swim 2.4 miles, bike 112 and then finish it all off with a relaxing, 26.2-mile run.

Needless to say, I nearly died. And who is going to blame me? Keep in mind I didn’t literally just get out of bed and go do the Ironman. I trained. I trained my ass off.

Running a business is a lot like running the Ironman. It is one of the most rewarding experiences you’ll ever have while simultaneously being one of the hardest, most challenging endeavors you’ll ever face.

If there’s something in common between running a business and running the Ironman, it’s this: You have to have a strong core. Without it, you just won’t make it. In the Ironman, that means having balance, stability, strength and good posture to prevent injury.

In business, having a strong core means always returning to your roots and constantly addressing your mission statement and the goal you set out when you started your business.

Always keep your core in mind when you make decisions as a business owner. When you make decisions from your core, you’re making decisions based on strength, stability and a great position.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: The companies that blow away the competition always reinvest in their core business. If you’re not moving faster, more efficiently and offering your goods and services at higher quality but lower cost, you’re just spinning your wheels along with everyone else …

I recently ate dinner at a Chipotle Mexican Grill. Started by Steve Ellis in 1993 in Denver, Colorado, Chipotle grew at a slow and steady pace until 1998 when McDonald’s bought a minority share and then a majority share one year later. By 2003, with McDonald’s financial backing, Chipotle expanded to three hundred locations. Then in 2006, McDonald’s divested from Chipotle, Boston Market, and other non-core business restaurants.

Why? Why would McDonald’s offload these properties? Chipotle is a wildly popular food chain, as is Boston Market.

Answer: The same reason Target sold off Mervyn’s in 2004. The same reason Ford Motor Company sold off its Aston Martin division.

Companies like McDonald’s, Ford, and Target figured out the best possible return on investment comes from strict focus on their core business. McDonald’s has some of the toughest competition out there with Burger King, Wendy’s, In-N-Out Burger, Sonic, and dozens of other fast food entities nipping at its heels. McDonald’s has a major war on its hands and, realizing this, looked inward and decided it wasn’t in the company’s best interest to spend time trying to master burritos and rotisserie chicken on the side.

The exemplary employees working at its Mervyn’s subsidiary did nothing to help Target in its struggle to compete against the giant Wal-Mart. Besides, Mervyn’s faced off against Kohl’s, Sears, J.C. Penney, and about a dozen other chains that were soundly beating it at its own game. So Target brought all of its Mervyn’s superstars back to the mother ship and offloaded the weak department store chain.

The same goes for Ford. Consultants told the carmaker that its best people were working on Aston Martins—a luxury line that caters to a miniscule market and makes little profit. Ford was convinced that it needed to spin off Aston Martin, and move those engineers over to design Lincolns and Mercurys where they could sell ten times the number of its higher-end vehicles.

In selling off these secondary properties, McDonald’s, Target, and Ford were able to retool and bring the focus back to what made them exceptional in the first place…

Stick with what you know! Focus on your core business!

You want to make more money? That’s great! Why not invest in your own business? See what your peers are doing to increase revenue, productivity, and the “wow” factor for their customers. Look into new technologies that will improve the way you do business, and when you’re done doing that, go get trained in them! Then, when you’re proficient in these new technologies, invest 3 percent of your collections in the form of advertising to new customers and marketing to existing customers. A little time, investment, and marketing of technologies that will improve your business makes a lot more sense than renting out or buying another property, hiring a wait staff and cooks, learning the restaurant business in five minutes, and hoping someone comes in to order your daily special. Most likely you’ll end up eating crow.

Cooked Books

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I’ve heard some horror stories from business owners. No, nothing like Freddy Krueger, but something just as terrifying: embezzlement. I want you to go to Google News right now and just search for the word embezzlement. Then look at the dates on all those stories. It happens every day, and those are just the cases where someone is caught!

We all know the name Bernie Madoff. Madoff (and this pun has been done before but I’m going to do it anyway) made off with $65 billion. Right now he’s hanging out in prison, serving 150 years. While Madoff became a household name, embezzlement remains a quietly talked about subject, a white-collar crime that never hits the mainstream media unless the money hits into six figures. The reality is that there’s a 50 percent chance that embezzlement has occurred or is occurring in your business. I think that’s mainstream enough to get your attention.

Like a lot of risks in life, embezzlement is not something you can ever fully protect yourself from. Instead, you just have to be proactive in checking for opportunities that embezzlers can take advantage of. Things like improving your hiring protocols, learning the warning signs, and establishing and maintaining controls and checks, are the difference-makers in helping keep your business out of the hands of financial Freddy Kruegers.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: I have been consulting for twenty-five years in dentistry, and I have many close friends in the consulting business. We all universally agree on one thing: Walk into any dental office in America and check for embezzlement and you will find it 50 percent of the time. My friends who consult in other small businesses in America report the same percentage.

So what does this mean? If you own a small business, there’s a 50/50 chance you’re being embezzled from today. There is no foolproof system for protecting against embezzlement, but removing the opportunities will dramatically reduce your chances of it happening to you. Unfortunately, and all too commonly, small businesses fail to take the steps to protect themselves from embezzlement until after the crime has been committed.

One day a colleague approached me with a story about how his front-office employee had embezzled money from him and his partner before she was caught. This front-office employee deposited insurance checks into her own accounts located at several different banks. She had a stamp made with her name on it to enable her to add her name to the check. The banks where the deposits were made took the checks without question; since they saw her so often, they assumed there was no problem. She posted the insurance checks to the patients’ accounts in the practice management software. Patients never received statements and the outstanding insurance report did not reflect a problem. Since she only went to the bank once or twice each week, there was no daily deposit slip to match up to a day sheet. The dentists failed to request any paperwork from her on a daily basis, eliminating any checks and balances for collections.

This woman was caught only after the second dentist started questioning the low deposits. During the investigation, the deposits from the first dentist showed up and the dentist was notified. Up to that point, the dentist was unaware that any money had been stolen from her. By then, this front office employee had left the dentists’ office for reasons other than embezzlement. She currently faces felony charges and the total amount stolen from both doctors is still under   investigation. …

I want to help keep you from becoming a victim.

The key to preventing embezzlement in your business lies in improving hiring protocols, watching for the warning signs, and insisting on high ethical standards among your staff. In addition, you must establish internal controls, implement strong internal systems and do regular safeguard checks. …

  • Be transparent about embezzlement with your entire staff.
  • Do background checks on all potential new hires.
  • Establish internal controls, systems, and checks for you and your staff. Make sure that more than one person is handling the bookkeeping to ensure double-checks.
  • Watch for the warning signs. Monitor the performance of your employees and consider performing random drug tests if you notice any unusual behavior.
  • Conduct regular audit reports.
  • Partner with a CPA.

Where’s My Money, Man?!

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You started your business because you believed that you had something of value to offer to customers. You put your name, money and reputation into your business. It’s personal. How could it not be?

You get the ball rolling, and you bring in new customers, the kind of customers you hope to have for years and years. You know some of these guys and gals on a first-name basis. Maybe some of them even live down the street, or you run into them at the grocery store.

It is inevitable that one day, one of those customers is not going to pay. And let me tell you, it’s awkward and uncomfortable for everyone. It’s one of the worst situations to be put in, and there is never an easy way out. But there is a way to never get into that situation in the first place, and that is the smartest move you can make as a business owner when it comes to getting paid for what you provide. That move, simply, is to get paid first and then give the service or the product.

We all want to believe in the goodness of people, especially when they’re our customers, and while it’s great to have a big heart as a business owner, a big heart doesn’t fix the red in the ledger.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: Collecting money at the time of sale is the most important insurance policy you can have in order to stay in business. You can’t give someone $1,000 worth of goods and services and get paid ninety days later, because you need ninety days worth of cash to maintain your operations—to pay for labor, supplies, rent, mortgage, equipment, computers, insurance, and software—while you’re waiting to get paid. So if your business does $100,000 a month in sales, you effectively need $300,000 in savings because you’re getting paid three months behind.

The geniuses at business reverse this strategy; they collect all of their money at the time of sale and then they pay all of their bills three months down the line—effectively getting a $300,000 loan at zero percent interest.

This is why selling traveler’s checks was one of the most profitable businesses in America for a century. Before going on vacation, consumers bought travelers checks that weren’t cashed for days, weeks, maybe even months. That traveler’s check company basically sat on a mountain of free cash. …

At one of my recent seminars, I was asked, “What do you do when you practice in a town of five thousand people and one of your patients hasn’t paid you for six months?” …

Reluctantly, I responded to the dentist that he had a couple of options, neither of them good. As the dentist, you can turn Mr. Jones over to collections, which will likely ruin his credit, which means every time you run into Mr. Jones at the bank or the grocery store, you each will feel major pangs of guilt—or worse. Or, you can write off Mr. Jones’ bill, but that only suggests to Mr. Jones that the dental work he received might not have been quality, because you aren’t valuing it. …

At most dental practices I see, the patient comes in with a problem, the doctor treats it and then spends the rest of her time tracking down the money owed to her.

But you can avoid it!

Consider fast-food restaurants. Does McDonald’s have collection problems? No! And why?

  1. They take your order.
  2. They take your money.
  3. They give you what you ordered

No teenager behind the counter at McDonald’s has a problem asking for and collecting money from the customers, because of one simple policy: no food unless you’ve paid for it.

Why not make all of your customers read and sign a collections policy that states they have to pay their share up front, instead of this ridiculous backward way so many businesses operate under—many of them failing as a result? …

Let me make this real simple. If your business sells something for three dollars and it costs two dollars in overhead to make it, then your profit is one dollar. If you don’t get paid your three dollars, you still spent two dollars making it, so that means the next two dollars of profit is going to pay for overhead and expenses that went into the product you should have sold for three dollars. …

I cannot stress enough: get paid for your goods and/or services up front. Get cash. Get a credit card. Outsource to a finance company. However you do it, get paid at the time of sale.

Numbers To Grow Into

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Any moms or dads out there know something that a lot of business owners ought to: your baby is going to outgrow things faster than you anticipate. I raised four sons. I can’t tell you how many shoes were outgrown before they even got scuffed.

If you’ve been following my blogs to this point, you know I’ve been talking about numbers quite a bit. We’ve talked internal numbers, external numbers, benchmarks and budgets. But there’s another set of information that you can gather from all those figures, a kind of forecast for your business that—if you’re paying attention to the numbers—will help you predict the storms as well as the droughts.

We’ve all seen the checkouts at Wal-Mart. There are 50 registers stacked at the front of the store, yet when we’re shopping there, there’s only a few open. Why is that? The obvious answer is that having cashiers on every one of those lanes would be a waste of money. While that’s true, it isn’t the real reason.

A customer’s mind asks, “Why do you bother to have this many registers if you only open three?!”

A business owner’s mind asks, “What change in demand would warrant such a huge capital investment in this many checkouts?” That’s the mentality you need to have and keep throughout your life.

Leave room for your business to grow, and build out in ways so that when Christmas hits, all those lanes at Wal-Mart start making a lot of sense.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: Consider this: If you earned $15 per hour working twelve hours per day, seven days per week, 365 days per year for 2,000 years, you still would not earn $1 billion. There are only three ways to become a billionaire. The first is to inherit from a billionaire. The second is to marry a billionaire. The third is to borrow other people’s money (OPM) and buy or build something that pays back the billion dollars. This is called leverage.

Your accounting numbers also help you manage supply and demand.

The most successful restaurants are the ones that have mastered supply and demand. McDonald’s continually adjusts supply to increasing demand. When I opened up my dental office in 1987, Ahwatukee had one McDonald’s. Twenty-five years later, Ahwatukee has three McDonald’s.

Consider banks. When banks build their drive-through lanes, they know that in a 168-hour week, they may only need one lane for much of that time. But when payday comes on Friday, customers will flock to their ATMs. So they construct three drive-through lanes to match capacity to the flow of the demand.

Go into a Barnes & Noble bookstore, and often you might find only one employee checking people out. Yet because the company knows its demand comes in waves, there is the capacity for eight checkout registers. At times of high demand—say, when a movie lets out at the theater next door—all eight registers will be humming. The company has tracked the numbers and set up its stores to match capacity with the flow of customers.

In a nutshell, you don’t match your capacity and infrastructure to your total demand. That only works on an assembly line where a Ford truck is coming down the line and you only make so many trucks per hour. You match your capacity and infrastructure to the flow of your demand. Every millionaire businessperson I know has excess capacity and infrastructure to match the flow of demand. If you are a retail outlet in a mall, and you know you are going to sell 40 percent of your year’s merchandise over the Christmas holidays, you keep excess inventory in a warehouse ready to meet that demand. You don’t plan your inventory to sell X units per day, because you don’t sell X units per day.

Again, match your capacity and infrastructure to the flow of your demand—not to the total demand.

I explained this to my four boys when they were little using a model of a go-kart. I’d tell my boys, “The go-kart represents your business and the racetrack represents the flow of customers through your business. When customers start stacking up in front of your go-kart, you only have two options because you only have two pedals. You can (A) slow down (or brake) by raising your price; that way you’ll get the maximum amount of money from the people who want and value your product or service the most.

“Your other option is to (B) punch the gas pedal to create more capacity. A restaurant for example might add more tables to increase the number of customers it can serve at any one time.”

Budgets

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I don’t even want to think about what it must’ve been like, trying to run a business 50 years ago. Think about how much easier it is now. Today you can get online and look up the benchmarks for publicly traded companies with a few clicks of the mouse. You could go on Google right now and find out how your company compares to competitors, research trends and see where your business stacks up.

Then you’ve got great sites like Bizminer, a huge financial information aggregate that, for a fee, gives you the kind the information that business owners 50 years ago would’ve killed for.

If you’re looking for another resource, check out your competitors on LinkedIn. Or even better—you might be shocked at how much they’re willing to talk about if you just ask.

What all this boils down to is getting your business’s benchmark so you can sit down and figure out a budget.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.” The book comes out in October 2015 and is available for preorder at HowardFarran.com.

 

Excerpt: Many businesses operate under the formula, cost + profit = price. If each tomato costs one dollar to produce, and the producers want a one-dollar profit, then they set the price of each tomato at two dollars.

This is a formula for failure.

What if they can’t sell any tomatoes at two dollars? They end up going out of business.

In business, you set the price first. Determine the price at which your product will sell, subtract your profit, and now you have a budget.

Price – profit = budget.

So if I sell the tomatoes in the market for one dollar and I make a 10 percent profit margin, I have a budget of ninety cents. If I can’t bring my tomatoes to market for ninety cents, then I don’t have a business, because tomatoes are selling for one dollar.

The goal is to stay within the parameters of the benchmark percentages when you build a budget.

Price is a very important variable in business. This is where the term price elasticity comes from. Price has a very elastic effect on demand. The higher the price, the less you will sell; the lower the price, the more you will sell. In fact some business people consider “price” as marketing. Want to sell a lot more furniture (like IKEA) or plane tickets (like Southwest Airlines)? Just lower your price! That low price could be the best marketing you’ve ever had! The low prices Southwest Airlines can offer by having a low-cost structure is that company’s best marketing tool. Of course they spend money on television commercials and billboards touting their low prices, but you know what lets most people know about Southwest Airlines? Word-of-mouth referrals from happy customers!

You need to determine the price of your product and you need to make a profit. You cannot build a high-quality Mercedes-Benz and sell it for the price of a Chevrolet or you will go bankrupt. …

Again, benchmarking enables you to see what others in your industry are doing so you have a basis for determining consumer demand in your market and the price points for your products and services.

There’s not a single publicly traded company on the Standard & Poor’s 500 index that doesn’t have its budget in place for the entire year at least a month before the year begins. Every successful business starts with a budget. Create a budget at the start of your business and put it in writing. Overlook that step and there’s no point in starting a business at all.

Remember, work like no man has for a decade and you can reap like no man has for the rest of your life.

What to Watch, When To Market

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With so many numbers to watch, which ones are the most important? I have three go-to reports that have served me well over the years. You’d be wise to run these reports like clockwork: Statement of income, statement of cash flow, and balance sheet. I get into great detail in my book, including real examples and breakdowns.

It goes without saying that the most important of the three reports is your cash flow, or the movement of money in and out of your business. If you’re not fully confident of your cash flow situation, get on it pronto.

Just because your business is profitable is not an excuse to be lazy about knowing the data within your business. While earning my MBA at Arizona State University, I learned that 90 percent of U.S. businesses that go bankrupt were profitable. Think about that.

When it comes to people, time and money, money really can be the trickiest to manage. And once you’ve got the rundown of all of your finances and you’re in a well-educated position about every dollar in your business, you need to turn your eye to an even trickier area of business. Marketing and advertising.

I want you to challenge the fallacy that when times are tough, it’s time to cut back on marketing and advertising budgets. If great business minds have shown us one thing, it’s that in the toughest of economic times, the best move your business can make is to get out there in marketing efforts and advertising campaigns.

Think back to the first quarter of 2000, when the stock market went in the gutter. Michael Dell began losing a ton of customers. Rather than cut back and play it conservative, he launched one of the most notable computer ad campaigns out there, “Dude, you’re getting a Dell!” As a result, Dell came out of that stock market despair with flying colors.

Don’t ever drop your marketing or advertising efforts because of lowered revenue. You need both to attract new customers and keep the current ones from cutting out.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: The best companies have the highest percent of sales going toward advertising. At my dental office, I have spent no less than 3 percent of revenue on advertising for twenty-five years through good times and bad. During the bad times, however, I have increased it to 5 percent. I’ve even borrowed money in order to advertise with big campaigns.

During the early years of my practice, I took out ads in the local newspaper to announce the birth of each of my sons. I ran a family-oriented dental practice, and my ads spoke to parents—particularly mothers—who wanted that kind of practice for their own families. I got to show off my beautiful babies to the community, and, as a bonus, attracted more patients to my business.

Advertising is not something you can just stop doing. If you do, good luck. Companies that stop advertising and marketing in down economies always take a larger hit than they would had they gotten their names in front of more and more  people.

You also need to be able to determine the best return on investment (ROI) for your marketing dollar. Try new things and track what’s giving you the best bang for your marketing buck. Back in the good old days, all it took was an ad in the Yellow Pages and maybe some direct mail pieces to market a dental practice. Today you’ve got the Internet, search engine optimization (SEO), texting, and social media. Direct mail and the Yellow Pages may or may not work in your market; some dental offices report that neither of those work for them anymore, although this tends to be more the case in urban markets. In rural markets, Yellow Pages advertising and direct mail are still effective.

The key is to track everything! …

The definition of an entrepreneur is someone who continually moves their money and assets from lower to higher rates of return. So, if grandma only has one $5,000 CD to her name and she moves it from one bank paying 2 percent interest to a bank that pays 3 percent interest, grandma is an entrepreneur! If your advertising budget is $1,000 per month, then as an entrepreneur, your job is to move those dollars from less cost effective methods—which in my case were the Yellow Page ads—to more cost effective options such as digital Internet marketing.

Bottom line, tracking is everything when it comes to advertising. You want to attract the greatest number of new customers for the least amount of money.

What I see too often—whether among plumbers, restaurateurs, or dentists—are business owners who spend all their time making something. Again, the people who focus more on the money—on watching the numbers—than they do on making their product are infinitely more successful. You’ll be a lot better off having a well-run business focusing on the numbers with an average product than you will having an outstanding product with no one watching the numbers.

Remember: Watching the numbers is more important than making your product. So if you haven’t already, go run your reports. Find out what your numbers are. And if the numbers aren’t where you want them to be, find ways to improve them! Maybe you can begin including new procedures, goods, or services in your business or figure out better ways to market to your customers.

The Importance of The Score

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There’s a thing called “The Score” at my company and in my dental practice. It’s a literal printout pulled from our secure server that is put up where my employees can see the business’s financial status. It’s a matter of transparency, and one that has been a continued source of motivation for my employees. They see what we make, what we spend, what we have to spend, and most important, that we’re not wasting money.

I’ve read too many articles and seen too many broadcasts about businesses going right down the toilet because the owner either neglected the financial numbers or put all of the responsibility to manage them in the hands of one person.

Yes, that includes when it’s the business owner handling all of the finances. We are humans and humans are nothing but talking monkeys, and guess what, talking monkeys make some pretty big mistakes. Don’t ever assume that one talking monkey is enough to handle all the finances of the business, especially if that talking monkey is you!

At my dental practice we make it a habit to review and balance all of our figures on a daily basis. We set aside weekly and monthly goals as well, and then measure how we did. Notice how I am not saying “I review and balance,” or “I measure how we did”? It’s a “we” thing and always should be.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: Think of how many well-known actors, musicians, and artists go bankrupt. Francis Ford Coppola, producer of the Godfather movies, nearly always came in over budget and ended up filing for Chapter 11. Sarah “Fergie” Ferguson, the Duchess of York, went into debt for more than $7 million. MC Hammer filed for bankruptcy and then put his multi-million-dollar, twenty-room mansion up for sale. Kim Basinger bought a town in Georgia and then was sued for breach of contract. Toni Braxton, a six-time Grammy winner who has sold millions of albums, has gone bankrupt—twice—after entering into raw deals with recording companies and tying up her own capital in unproven entertainment ventures.

Even Ulysses S. Grant, the highest ranking general in the Civil War and our country’s eighteenth president, went broke for living way above his means and entering into a mismanaged investment venture that sent his partner to prison and left Grant hundreds of thousands of dollars in debt. The only thing that saved his family from even more hardship was selling his memoirs for about $500,000.

Either these talented, accomplished individuals went broke because they were not watching the numbers, or the person they paid to watch the numbers looked away. …

If a business owner knows all of her numbers, she will have the information she needs to know when to speed up or slow down. Businesses get into trouble when they spend all of their time working on the product and not on the business.

Even those business owners who realize they need to do a better job of watching their numbers may turn their attention to them again for a week or so, but then go right back to doing whatever they were doing.

Make watching your numbers a personal, life-long habit.

There is really one very simple trick to watching your numbers and that is simply:

WATCH YOUR NUMBERS!

Most entrepreneurs and business owners are excited about their newest service or the next transaction they’re going to make, but if I asked you what your revenues were last quarter, you’d probably shrug and say, “Let me get back to you.” I can’t stress this enough: You need to learn to love this part of your business as much as you love making your product or providing your service. Unless you do, it almost doesn’t matter what you’re making—especially if you don’t have the revenue to do it.

Require your staff to give you reports on a daily, weekly, and monthly basis and really look at them! Keeping your reports in a stack on your desk without looking at them is like holding a gym membership to your forehead and expecting to lose weight! It’s just not going to happen. Eighty percent of working out is simply showing up. The only bad workout is the one you didn’t do. It’s the same with business; you have to put the time and effort into reviewing your numbers. …

Three key factors make for a healthy financial environment within a business. First, no person in a position working with incoming and outgoing money should ever be allowed to perform all the duties themselves, no matter how long they have been employed or what relationship they may have with you. Just knowing that checks and balances are in place assures the staff that the person in charge of the money (in this case, me) has no room to do anything unethical or improper.

Second, the entire staff should know “the Score”: the business’s financial picture. We keep these numbers in public files on the company server to encourage open communication among the staff, give them the peace of mind of knowing where the company stands, and keep motivation high. Transparency with the numbers encourages staff to monitor expenses and enables us to work together in planning for future needs.

Last, a solid collection policy is critical to a healthy cash flow, especially come payroll time.

 

 

Eye On The Numbers At Home

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Getting my MBA from Arizona State University was one of the best decisions of my life. I could make a million great decisions from now until the day I’m in the ground and that statement would still hold true.

If I could give you one piece of advice that I picked up during my program at ASU, it’s this: watch all your numbers. You don’t need an MBA to do it, either.

A number of years ago a new restaurant opened up down the street from my house. They advertised everywhere, and I mean everywhere. I couldn’t get away from seeing their name or finding one of their coupons in my mailbox.

Eventually I broke down and went in. The food was good. The place was packed. It seemed pretty successful. At one point the owner came around and asked our table how everything was. I told her it was great, and then I asked a very important question.

“How many new customers did you get this month?”

She told me she wasn’t sure and offered a guess.

About a week later, I was in a favorite restaurant of mine, one that had been in business for over 25 years. I knew the owner and he knew me, and I asked him the same question.

He knew not only how many new customers he got that month, but also the breakdown of how all of his new customers had heard of his restaurant, whether it was Facebook, Google, word of mouth, etc.

Not knowing the number of new customers isn’t going to be the thing that makes or breaks your business, but the difference between the two restaurant owners knowing their numbers is an indicator of which business is going to continue thriving.

Why do I say that? Well, I guarantee you that an owner that pays that close of attention to the number of new customers he or she gets each month is also going to pay closer attention to every other number in that business, and that kind of attention to detail is what will inevitably separate the places that thrive for a quarter of a century from the ones that close up shop when those new customers stop caring about free coupons.

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”

 

Excerpt: Millionaires become millionaires not because of what they make, but because of what they save. You don’t need to be a genius to understand that if you spend more than you make, you’ll end up broke. The world has plenty of broke geniuses. …

To fully understand the importance of numbers, you need to take a step back. Reexamine your personal life and your personal financial goals. I tire of listening to fellow dentists complain that their practices are failing, that they can’t afford to undertake a marketing campaign to attract new patients, while they live in mansions and are willing to lease a Mercedes-Benz at a thousand dollars a  month.

If this is you, take a good look at yourself in the mirror. Why aren’t you making the tough decisions? Are you concerned about how your stay-at-home spouse will react if you say it’s time to rein in your household spending and to get a job? Are you afraid that downsizing your house and trading in your BMW for a practical car will cost you your high-class image?

Put your Rolex up for auction on eBay, and you might pick up a couple thousand dollars along with the revelation that you’ve invested too much money in needless stuff. To borrow a line from the movie, Fight Club: “The things you own end up owning you.” You don’t need the boat. You don’t need the vacation condo, the fancy cars, or the membership to the country club. You can’t afford to go out to eat four nights a week. You need to sit down and figure out how to cut your personal expenses, because they’re also eating into your business’s bottom line. Seriously, how good does it feel that you bought your wife that Gucci purse or your husband a new Rolex watch? That’s $5,000 that you could have reinvested in your business. You could have built a new website for your business for what you dropped on a fancy handbag or watch.

Consultants Work

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It’s not easy asking for help. Maybe even harder is admitting that you need it. But the fact is, at some point in your business you’re going to reach a point where you’re not going to be able to see the forest for the trees, and bringing in outside eyes will be the smartest decision you can make.

If you’re a smart business owner, you’ll realize that bringing in a consultant isn’t even a sign that you need help—rather, it’s a sign that you’re ready to take your business to the next level.

Consultants don’t stick around long if the advice they give doesn’t work. They are experts in areas of business.

Think about it. You know your business like the back of your hand—after all, you built the thing. But a consultant may have seen 101 businesses just like yours, and over the course of years has amassed more information about what’s worked and what hasn’t. Are you telling me that you don’t want to hear what he or she has to say?

The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.” The book comes out in October 2015 and is available for preorder at HowardFarran.com.

 

Excerpt: Consultants exist because they work. Modern day economies are so efficient that people who don’t provide value for the price usually don’t stay in business very long. Many entrepreneurs are arrogant because they know what they know and they know they’re “successful.”

Yet as I like to say, you know what you know, but you don’t know what you don’t know. You live inside your business. You know everything about your business. What consultants bring to the table is the knowledge they have gained from observing scores of businesses within your vertical. What works and what doesn’t work tend to trend across a sector. …

Recently I sat with a couple of dentists during lunch break at a dental meeting. They were commiserating, sharing war stories from “the front.” I figured the two were good friends, because they were talking about some major problems they were having in their offices. One dentist asked the other how her office scheduled patients, admitting that his days contained a host of frustrations. There was no rhyme or reason to how his scheduling coordinator organized his day. His practice’s production was nowhere near where he thought it should be.

The other dentist listened and then recommended he hire a consultant.

It took me the first two years of running my practice to realize I didn’t know it all. Although my team and I had already doubled our annual income, I brought in Sally McKenzie, a consultant specific to dentistry to help me streamline my management systems. I knew it was the only way to bring my business to the point where I could reach my goals and thoroughly enjoy going to work everyday.

Her experience proved invaluable. I lived all day long in my dental practice, while Sally lived in up to a hundred dental offices day in and day out, year after year. She enabled me to look at my practice more objectively by telling me what worked and did not work for all those other offices.

Years later I brought in top consultant Sandy Pardue who took my already successful business to even higher levels.

I cannot stress this enough; the service of a consultant is time wise and cost efficient. …

Consider your own business. Aside from simply feeling things should be better, there are a number of tangible indicators that could benefit your business were you to bring in a consultant: increasing sales and customer retention, as well as reducing your overhead and employee turnover.

Perhaps you are missing specific measurements to evaluate your employees’ performance, or your bonus and reward systems are not targeting the specific actions and behaviors you’re looking for. Perhaps your current job descriptions need clarification.

A consultant can help you with all this and much more. Consultants can save you time and money.