Five Key Numbers You Should Know About

Posted by Stephan Orlob on 3 December 2020
Five Key Numbers You Should Know About

 

Let's take a look back at last year's results and five key numbers you may want to discover about your business's performance.  To start, grab your 2016 income statement, or better yet, give us a call to help you compute and interpret your results. Now is the time to make sure this year's results will be better based on past information gained.

 

Revenue per Employee

This number measures a company's productivity with regard to its employees and is relevant and meaningful for all industries.  If you have part-time employees, compute a full time equivalent total and use that as your denominator. Compare this number to prior years to see if your company is getting more or less productive.  Also compare this number to businesses in your same industry to see how your company compares to peer companies. You may also want to compute other revenue calculations, such as revenue by geography, revenue by product line, or average sale: revenue by customer, if you feel these may be meaningful to your business.

Customer Acquisition Cost

How much does it cost your business to acquire a new customer?  That is the customer acquisition cost and is made up of marketing and selling costs, including marketing and selling labor.  You'll need the number of new customers acquired during your previous year in order to calculate this number. Compare this number to prior years as well as industry peers.  You can potentially do a lot to lower this number by boosting your marketing skills and implementing lower cost marketing channels.
 

Overhead Costs

Overhead costs are costs that are not directly attributable to producing or selling your products and services.  They include items such as rent, telephone, insurance, legal expenses, and executive salaries.  Although it's not standard practice to break out overhead expenses from other expenses on an income statement, it's valuable to know the numbers for performance purposes. Compare your overhead costs to prior years and industry averages.  You can actively manage your overhead cost by re-negotiating with vendors on a regular basis and trimming where it makes sense.

Profit Margins

Your profit margin can help you determine which division of your business is most profitable.  If you sell more than one product or service, you can compute a gross or net margin by product or service.  You can also compute margins by geography, sales rep, employee, customer, or any other meaningful segment of your business. Your accounting system may be able to generate an income statement by division if everything has been coded correctly and overhead has been allocated appropriately.  Reach out if you'd like us to help you with this. Seeing which service or product is most profitable can help you decide if you want to try to refocus marketing efforts, change prices, discontinue items, fire employees, attract a different type of customer, or any number of other important decisions for your business.

 

Breakeven Point

Do you know how many units you need to sell in order to start generating a profit?  If not, the breakeven calculation can help you learn this information.  The formula is Fixed Costs / (Sales Price per Unit Variable Costs per Unit) which results in the number of units you need to sell in order to "break even" or cover your overhead costs. The breakeven point helps you plan the amount of volume you need in order to ensure that you have healthy profits and plenty of cash flow in your business.

These numbers can help you interpret your business performance on a deeper level allowing you to make better decisions that will lead to increased success in your business.  If we can help with any of them, please give us a call any time at 1 844 577 7654 or at solutions@bizmetrics.ca  Please keep your feedback and suggestions for our blogs and newsletters coming.

 

Avoiding past due customer accounts. Keeping your accounts receivable current.

Posted by Stephan Orlob on 1 December 2020
Avoiding past due customer accounts. Keeping your accounts receivable current.

Do You Have Past Due Accounts?

If you perform a service or ship a product before you get paid, then you likely have a balance in your Accounts Receivable account. If customers pay when their invoice is due, all is right with the world. If they don't, then your cash flow slows down and your bank balance is not as high as it should be. Here are some tips, preventive and supportive, to help you keep your accounts receivable current.

Granting Credit

When you deliver your service or product before your client pays you, you are in effect their "bank," granting them credit. Not everyone deserves to be granted credit. Consider running credit checks, especially if you are billing large amounts of money for your sized business. You may also want to ask for a retainer or deposit prior to starting work or shipping your products. This will smooth your cash flow and reduce your credit risk.

Offer Multiple Payment Options

When a customer is ready to pay their bill, make it easy on them by offering multiple payment options. Perhaps they will pay faster if you take payment by credit cards. Many people have extra money sitting in their PayPal accounts, so that is another payment option.  Apple Pay and Android Pay are relatively recent options to consider. You may also want to revisit the credit cards you offer: Visa and MasterCard are universal, but many places also take American Express. If you are doing international business, consider JCB (Japan), China UnionPay, and RuPay (India). Getting paid right away saves a lot of time and money on collections that far outweight the nominal processing fees.

Collection Process

Once an unpaid invoice has reached its 90-day mark, the chances of collecting it are about 50 percent. This means that you will need to put some aggressive collection processes in place prior to the 90-day mark. If the invoice is due in 30 days, start at the 35- to 40-day mark with a friendly reminder. At 60 days, your customer needs a strong reminder and perhaps a phone call. At 75 days, they need to know what consequences there will be for not paying. Will you report the customer debt to credit agencies? Will you turn the account over to a collection agency? At 90 days, it's probably a good idea to make one final collection effort and then turn it over to a collection agency. It might sound too soon, but the odds of collecting something much older go down significantly as time passes. At any rate, create your own process, and automate it as much as possible. The main thing is to stay on top of it.

Past Due Accounts

From how you first engage with your clients to the last steps in the collection process, there are many cost-effective techniques to avoid past due accounts and the unpleasantness that goes with them for both parties. If this is an issue in your business, try these ideas above and reach out if you'd like our help. For results you can count on, contact us at 1 844 577 7654 or at solutions@bizmetrics.ca  We hope you find all of this useful and, as always, please keep your feedback and suggestions coming.

 

How To Meet Customer Expectations In This Changing Marketplace.

Posted by Stephan Orlob on 9 January 2020
How To Meet Customer Expectations In This Changing Marketplace.
Customer Expectations & Change

Things are always changing as are what customers expect when they do business.  Are you ready? Or struggling to keep up? Change has been the one constant of existence on our planet as the marketplace history shows. Shifts occur in the nature of these changes as well as the speed can vary too.

In 1993 (the year the Internet became publically available), an unprecedented confluence of innovations has further compressed the time of these changes. This can produce high levels anxiety or frustration for business, particularly those not on top of these changes. Some product lifecycles can be as little as 90 days or less. Some call this innovation, and it drives customer expectations. In fact sometimes they become so integrated into our daily lives that we often don't even realize that they are in fact causing expectations to change and quite fast.

But what about your business's anxiety and frustration? Don't get caught out. Keep focused on your WIIFM What's In It For Me view of your customers.  Now for some good news. You can avoid this anxiety, frustration and possible failure because if you know what your customers' evolving expectations are, you can be the one getting the sale.  Some suggestions to ask them about as often as you can:

  1. What do you want?
  2. When do you want it?
  3. What do you want it to do?
  4. How do you want me to tell you about it?
  5. How do you want it delivered?
Keep track of the answers and compare over time and differing customer segments and markets as applicable to your business. Remember what customers told you yesterday will provide all the information you need about future products, service and technology, and in particular your social media and mobile strategy. This famous quote really helps illustrate how you can embrace this into your business: "Get closer than ever to your customers, so close that you tell them what they need well before they realize it themselves" Steve Jobs

It's no secret that if you want to know what your business should be doing tomorrow, next month and next year, ask your customers. They already know and will gladly tell you about their changing expectations if you give them the opportunity.  Be different than your competition, be a step ahead.

Contact one of our small business specialists for a no-obligation consultation to see how you stay ahead of your competition. For results you can count on, contact us at 1 844 577 7654 or at solutions@bizmetrics.ca  and as always please keep your feedback and suggestions for our blogs and newsletters coming.
 

Is Your Business Offering You Added Benefits?

Posted by Stephan Orlob on 20 November 2019
Is Your Business Offering You Added Benefits?

Is Your Business Offering You Added Benefits?

Are you taking advantage of all the benefits of small business entrepreneurship? The typical expected financial benefits realized from small business ownership are: Earned Income and Unearned (investments, distribution of profits from the operation and/or sale of the business) Income.

More importantly there are other advantages (hidden benefits as I call them) in addition to the above. One major hidden benefit, which also has the most wealth creation potential, is for the business owner to personally own the real estate the business operates out of.

Here's the scenario: Many businesses are tenants, likely under the terms of a commercial lease. There are many financial and strategic reasons for a small business to lease property, with the requisite tax deductions of the lease payment and associated disbursements. But there is no benefit for the owner of the business.

Now let's consider this from the hidden benefit side. As long as the business you own is structured correctly, you may be able to accrue benefits by personally owning the real estate your business operates in and leases from you. For example: Probable Inc. (PI), a small distributor, has a single shareholder, Ralph Probable. PI enters into a long-term, formal lease of the property it operates out of with the landlord, in this case the same Ralph Probable. Several benefits might be available to these two entities in an appropriate legal arrangement, including:

  • Rent increases are more predictable and manageable. Lease renewal concerns also eliminated.
  • As with any lease, lease payments and associated disbursements are still operating expenses.
  • As owner and landlord, expenses necessary to deliver on the lease agreement, including mortgage interest, depreciation, maintenance, etc. may be deductible to Probable.
  • Owner Probable could receive distributions from the property, even if the investment showed a loss.
  • Inflation impacts rents vs fixed mortgage payments, supporting increase in distributions
  • Once mortgage is discharged, the property becomes a cash-producing annuity for Owner Probable.
  • A sale of the property, might be eligible for capital gains tax rate or other lower tax treatment favourable to Owner Probable.

 

Many family businesses have operated for decades. But at the end of the founders careers, it turns out that the business itself had little or no value to a prospective buyer without the real estate attached leaving retirement and future generation funding on the table. Talk to an advisor about how this advantage of owning business real estate might be appropriate for you and your situation.

Please feel free to reach out and let us know how we can help improve or transform your business. For results you can count on, contact us at 1 844 577 7654 or at solutions@bizmetrics.ca  and as always please keep your feedback and suggestions for our blogs and newsletters coming.
 

Worst Customer Service Mistakes & What They Cost Your Business, Part 2.

Posted by Stephan Orlob on 29 August 2019
Worst Customer Service Mistakes & What They Cost Your Business, Part 2.

A special two-part Blog. In this week's edition we will look at ways for SMB's to better understand how providing a positive customer experience pays bottom line dividends. Here are some ideas on what to avoid and how to make excellent customer service an integral part of the success of your business:

  • Everyone wants excellent support yet less than 5% of companies deliver excellent customer service. Customer service is a key opportunity to set your business apart in an increasingly crowded market.
  • For every customer that complains, there are 20 that don't. Those that do share with others and their followersand then it gets shared some more, making this a dangerous stat for your business. In today's instant digital society you can't ignore any complaints.
  • When customers have choice in the market, their support can mean the difference between your success and failure. When negative comments are ignored, a company can find itself struggling to attract customers.
  • When something does go wrong, customers prefer to leave companies guessing. Customer service leaders should always know what their customers want even if it means following up with every customer and asking.
  • Often high-profile customers might also be generating the most profit. They're also the first to leave when you relax efforts to make them happy.
  • It just takes one slip-up to impact the customer's experience. Are you looking at the situation from the customer's point of view? Many companies refuse to admit they're wrong in order to keep a customer.
  • The old adage; "when I'm right no one remembers, when I'm wrong no one forgets" still impacts business. We tend to remember events more clearly when coupled with a strong emotional response like a poor service experience.
  • No one likes to contacting support, unfortunately organizations still make customers jump through hoops, putting them on hold and asking to repeat information.
  • Customer perceptions play a big role in what they consider to be great service. Perception affects their view of your brand, their sensitivity to price, product value as well as reception to marketing communication.
  • No one wants to admit their customer service is lacking. A study by Bain & Company revealed that while 80% of companies believe they have great service less than 10% of customers actually agreed.
  • Social media is now a key support channel and most businesses still do not keep up with the onslaught of requests. Consider a plan to use social media to provide an excellent customer experience.
  • Online sentiment may not matter to customers that are familiar with a particular company or brand but over 84% of prospects will simply not purchase from a company with bad reviews.
  • Many companies mistakenly believe that if they don't hear from a customer, there's nothing to worry about. Wrong! Chances are, customers don't know how to reach you or don't think it will make a difference and take their business elsewhere.
  • It's risky to assume that customers want to come back after a bad experience. When they choose to leave, they rarely change their mind. That is, unless you apologize and resolve their complaints gives you the opportunity to turn that around.

We've covered a number of reasons in this series why customer service is an important way to differentiate in today's competitive marketplace. Having satisfied customers makes for a strong business foundation, helping boost profits and growth in your business. Find out how we can help develop an effective CRM strategy for your business. For results you can count on, contact us at 1 844 577 7654 or at solutions@bizmetrics.ca

Next time we kick off our Small Business & Entrepreneur Series to co-incide with October small business month and November as entrepreneur month.
 
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