how you can quickly figure out the financial mumbo jumbo in your business
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© Copyright One Sherpa Pty Ltd 2010
How you can quickly figure out the financial mumbo jumbo in your business
© Copyright One Sherpa Pty Ltd 2010
Do you find it difficult to work out what your business numbers are saying?
© Copyright One Sherpa Pty Ltd 2010
Do the numbers in your business look like ants walking up a page
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Do your eyes glaze over when a set of numbers is given to you?
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Are you frustrated about the fact that you can’t get what the numbers are saying?
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Do you wish there was an easier way of understanding the numbers of your business?
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You may not believe this but did you know that the numbers are one of your greatest assets in your business?
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The only asset which you can use to see what’s going on when you’re not IN your business are the numbers
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If you can just grasp the shape of your numbers then you will gain enormous leverage on your Time and Money
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Because they can give youan objective view that’s impossible with just words
Understanding the numbers can help you solve most of the other problems you might be facing…
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PROBLEM #1
Has three measures which can show you the shape of your business and help you avoid operating a flawed business model
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The first measure is called Customer
Value
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The first measure is called Customer
Value
This measure makes sure you are making the right margin on your sales
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The second measure is called Transaction
Flow
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The second measure is called Transaction
Flow
This measure makes sure you are bringing in the right volume of sales for your business
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The third measure is called Money Flow
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The third measure is called Money Flow
This measure makes sure you are not leaving profits and cash locked up in your business
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These three simple measures will tell you whether you’re wasting your time on a flawed business model and where to focus to get things right
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Let me show you how to check these measures in One Minute Business Checkup
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PROBLEM #3
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The first step in addressing the shape of your business is to ensure that you have the correct margins flowing in your business.
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The best way to address this is to find out how much cost you can afford for the CURRENT level of sales.
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In the short term you have more control over your COSTS than your SALES so let’s see how to do that
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PROBLEM #3
$10,000 off Annual Other Costs
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Once you are getting the right margin on the sales that are currently in your business (i.e. Your Customer Value Measure is Correct)…
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The next step is to make sure you have the correct volume of sales in your business
(i.e. Address your Transaction Flow Measure)
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The reason for this is that to be sustainable your administration costs should not exceed 12 cents in each
dollar of sales.
To calculate the correct volume of business, take the Administration Costs and divide by .12
i.e. $120,000 / .12 = $1,000,000
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Adding $200,000 of sales will also require more interaction costs such as product costs , people costs and marketing costs…
so we’ve added $160,000 to other costs in the model
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PROBLEM #3
$200,000 more sales
$160,000 more costs
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If you are able to hold your working capital to the same level with the additional sales then the model
looks fine
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However with additional sales and costs of interaction it is likely that both Accounts Receivable and Accounts Payable will increase
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To calculate the likely increase we ratio the increase as follows:Accounts Receivable
Original Accounts Receivable DIVIDED BY Original Sales MULTIPLIED BY New Sales EQUALS New Accounts Receivable
$120,000/ $800,000 * $1,000,000 = $150,000
© Copyright One Sherpa Pty Ltd 2010
To calculate the likely increase we ratio the increase as follows:Accounts Payable
Original Accounts Payable DIVIDED BY Original Other Costs MULTIPLIED BY New Other Costs EQUALS New Accounts Payable
$90,000/ $580,000 * $740,000 = $114,827 say $114,830
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PROBLEM #3
$30,000 more Accounts Receivable
$24,830 more Accounts Payable
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Checkout your own information now.
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Using the sandbox you can ‘play with the numbers’ to make sure you aremaking sustainable profits
© Copyright One Sherpa Pty Ltd 2010
Go to www.oneminutebusinesscheckup.comand make sure you’re achieving
sustainable results in your business
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