It's all about Revenue!

Nov 20, 2013

If you are a small business particularly just starting out, it is all about revenue. Your accountant will tell you (very wisely) to focus on profit and I’d agree. However when you are trying to grow and get some mass, revenue can be just as important. I’m not saying you should do business for a loss or just for the sake of getting revenue, but I am saying that growing your customer base and getting cash flow going is key.

Of course it also depends what the vision of your business is. If you plan to stay small then the importance of profit goes up. If you want to have a team and enjoy some leverage then the focus of your efforts should be on growth and acquiring revenue.

I make this point because I see many small business owners getting caught up in the day-to-day operations and not spending enough time and effort on sales and marketing.

Think of it this way, if you had enough revenue to hire people to do your operations, then you could spend your time in other areas. And this is the catch 22 for small business. How do you spend time on revenue generation when you also need to spend time on operations? This is not a simple answer and will depend greatly on the business and the owner’s skillsets. The short answer is to get the low skill activities off your plate and free up at least 30% of your time to invest in sales and marketing. Even if you take a short term hit in profits due to the extra expense of an admin person, the time gained will quickly generate far larger profits.

Supportive Work Team

How do I bonus my team at year end?

Nov 28, 2012

Some Insights on an Effective Bonus System

It’s that time of year when business owners are thinking about ‘how do I reward my team’ or ‘they are expecting a bonus … what do I do?’

I am a believer in sharing the financial rewards with your team. AND I believe it is important that there is some structure and education in place or else it can and usually does lead to entitlement or a misunderstanding what the ‘bonus’ is for.

Here are the key points to ‘Bonusing’

  • Profit Share vs Bonus. Profit sharing should be based on how the company does financially. Bonusing can be more subjective and less effective. Lots of profit, lots of sharing. No profit, no sharing. We are all in this together.
  • Be sure people understand what has to happen in order for the company to have lots of profits. Education is key. And make it transparent so they have the power to impact the result.
  • Keep your formula simple. I like x% over a certain amount of profit (remember to keep enough profit in the company to finance growth and reward shareholders) goes into a pool. That pool is then divided up equally or divided up based on salary levels.

It may be too late this year to put a structured system in place and do the education necessary. If that is the case for you then certainly bonus but make sure you position that moving forward you will be developing a system so everyone can have an effect on how much they get at the end of next year. Managing expectations is very important.

The points I’ve outlined above really are just the high level things to consider. For a details understanding of what I believe to be the best, simplest and most effect system read Brad Hams “Ownership Thinking”