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.