When AR Starts to Rule your Business.

June 2nd, 2012 Posted by blackinkservices

Ok, so this might be therapeutic as this is a situation I am starting to know all to well.

Your good idea became a good small business.  Your client base grew.  You had more cash in the bank then ever before.  Then you start spending…

A bigger office, a bigger staff, more office equipment and supplies, everything starts to add up in multiples.  All of the sudden everything has an extra zero on the end.  Your gut is telling you this has to be a good problem.  There is more work and more invoices as well as more bills.  It is growth, I know, but it is just as hard to continue to succeed once you have started to succeed.

Your businesses balance sheet is now just as important as your P&L.  You find yourself watching your receivables as much as billing.  But, you have to get over the hump!

Are you really making more money?  Just because more is coming in and out are the margins the same or better?  It is a hard reality to look at, but you have to break it down and often.  You can easily hide you mistakes from yourself with cash flow.  Look over your assets (including AR) and all your liabilities daily.  It is simple math and only takes a minute to do with the proper information.  Once a business has grown where you have cash-flow you can easily get into debt and trouble and not even know it until it is too late.

I hand write my balance sheet every Monday after running payroll.  There is something about doing it by hand for me that makes me feel more connected.  The information is all perfectly inputted into our general ledger software (QuickBooks Accounting 2011) and I could push a button to get a balance sheet, but the act is reaffirming.

As long as I see the net worth going north and not south I know that the big picture is going the right way.  I then break down my margins by client.  This might sound over whelming but with the proper operational set-up you can capture the data easily.  If my margins from client to client are not consistent then I need to ask myself why.  I have learned more on how to grow from this act than any other process I do for the business.

Don’t forget to budget time to run your own business!  I have had to become disciplined to run my own house.  I look at other businesses numbers all day and jump on them about watching receivables.  Sometime you have to take your own advice.

Next post…  When debt is good for a small growing business.  And why.

A good time of year for reflection.

January 12th, 2011 Posted by blackinkservices

Auld Lang Syne.  I think this classic can be rewritten for business as well.  As we are busy closing books and comparing proformas to budgets to actual year-end numbers the classic New Years’ mantra and act of re-establishing mostly the same business goals comes to mind.  As with your plan to frequent the gym more often the biggest challenge is finding a way to stick to you business goals.

Regardless of the resolution, I find that the first step is to define it.  It cannot be a broad stroke goal.  We all want to make more money and have more time with our loved ones.  Those are not specific goals.  Get specific.  Whether is it is setting up a new hiring process or a new accounting system, the goal needs to be one sentence.

Now work backwards to your goal.  Don’t hide from the hard to deal with pile.  Be willing to invest in reaching your goal.  It will more than likely take time and money, which is why it is an investment.  Once you have created the to-do list to accomplish the goal, you need to look at your SOP’s (standard operating practices) that are involved in accomplishing your goal.  If the goal is IT related then what are your business’s best practices for handling technology?  If it is accounting related, what are you SOP’s for gathering you general ledger data?

At this point the list is going to get long and here is where you either stick to it or you are one of the guys and gals who only go to the gym in January.  Sticking to the goal is a practice in itself.  Make yourself accountable.  Even if you are the owner, you need to be held accountable for accomplishing you goals.  Set deadlines and make promises you have to keep.  Promise a client, let you staff bug you, whatever it takes to not allow yourself to put the issue back into the pile.  Remind yourself of the investment you have already made and that the process is an investment.

It is natural as a business owner to have goals feel like an albatross.  Business owners by nature wear lots of hats and delegation is key to growth and accomplishing goals.  Be okay with that and growth will come to you.  Learn from the process of setting and accomplishing goals.  Make it a process and you can repeat it over and over.

By the way, Happy New Year.  Don’t forget to make your tax deadline, which is always a good goal.

So you want to start a business.

December 10th, 2010 Posted by blackinkservices

Unlimited earning potential. You set your own schedule. You sign the checks. Your commute is in your hands. Who doesn’t want that?

The terminology of the day is start-up, or maybe entrepreneur. One invokes visions of a venture capital back tech company and the other a rapper slinging an energy drink. What about the guy or gal who starts a business he believes in and builds from the profits of the business? Bootstrappers, these are the real heroes of small business in my eyes. Not that I am against a quick profit or a VC backed deal. Sign me up. It is just a different kind of business all together.

You have the idea. Check. You have enough dimes to pay for internet time at Starbucks. Check. You have a lead on your first client, deal, or sale. Check. Now what?

Every article says Business Plan first. I disagree. Start with a goal. Is it a dollar amount, a life-style, or ego? Start there before investing an ounce of energy or a dime into the next step. Once you have a clear reason for venturing out of the world of employee and into the world of business owner, then it’s time to start your business plan.

One important thing to keep in mind on the road to being a business owner is that you first have to become self-employed. These are two very different things. I am borrowing and merging two concepts here from two very helpful books. One is The E-Myth by Michael E. Berber and the other is The CashFlow Quadrant by Rich Dad, Poor Dad author, Robert T. Kiyosaki. As with any business book, I do not agree with 100% of the approach or content but in regard to what being a business owner is, these two books do a fantastic job.

Here is the long and short of it, all of us are one of four types of people. In order of worst to best: Self-employed, employee, business owner, and finally investor. Let’s just walk through how you get to being a self-employed person to a business owner. The majority of small business owners must pass through the painful process of being self-employed. Here is the major difference: A self-employed individual’s income is solely based on their hours of work, whereas a business owner’s income is based on the profitability of the business.

For example, a man named Jeff decides that his passion is baking. He quits his job and leaves the security of being an employee with benefits and the option to get unemployment if he was to be laid off. He starts getting the word out that he is for hire. He gets some orders and starts to bake. He sells his goods and after paying his bills he makes a nice profit for himself. Jeff at this point is self-employed. After a couple months orders start rolling in and Jeff has to start turning away business; his next move, hire. This is the most crucial decision that he will make. At first he will make less money. His profitability will go into the tank. But, Jeff is about to become a business owner. Orders grow and now Jeff runs a bakery. His presence is not crucial in the making of money in his business. That does not mean he is not crucial. Jeff now handles the finances and marketing and the growth of the company is not tied to the amount of hours he can put in baking. Never lose sight of becoming a business owner. That will provide you the true freedom of chasing your dreams.

You have your business model nailed and a clear path to how to get the ball-rolling. The next step is to get organized.

From day one this is the biggest mistake new business owners make. Make sure that you understand the order in which things must happen. Permits, Certificates of Authority, tax accounts, company formation, payroll, and the list goes on. This all happens before day one. Once day one happens you will lose more valuable time trying to do all this on the fly. You will also more than likely be non-compliant with some state or federal agency. This can cost you your business.

Once you have the legalese and company organization done, it is time to tackle finance. Once again this happens before day one. The possibility of being penny wise and pound foolish is very high. Recognize the value in having a solid accounting and bookkeeping system on day one. This will ultimately save you time and money. It cost a lot more to pick up the pieces of screwed up books. Don’t ever forget that you have a partner in your business, Uncle Sam. He is not very understanding of mistakes.

Bookkeeping is data entry. It is not rocket science. What is important is to do it right. This can be accomplished by having a solid system set up from day one with standard operating processes in place to capture the data efficiently and effectively. Consult an accountant or a pro on your chart of accounts. You will be living with this decision for a while. It doesn’t need to be complicated. Keep it simple to start.

Now you have the system in place start to think about the analytical side of the books. The bookkeeping is a necessary operational function for your numbers to tell you the health of you business and where you are failing and succeeding. Deciphering the numbers can be a daunting task, and to those who don’t speak the language it can be overwhelming. If this is the case for you, hire someone to help you translate. If you do not understand the story the numbers are telling you then you are flying blind.

Now you are off to the races and the real work begins. Don’t ever forget that you must stay on top of your businesses organization. The biggest mistakes can hide behind your successes. But they will always come back to bite you in the ass. Revisit the process often and tweak your capture practices daily. Detailed data can tell you everything you need to know about whether you are succeeding or failing.

Restaurant… and Business?

November 15th, 2010 Posted by blackinkservices

Everyone wants one. We all go to them. How much fun would it be to own a business where your job is to make people have a good time? Right…

We love them and anyone who has ever been bitten by the hospitality bug has felt the drug of being in the biz, part of the industry, in the know. Once you see the interworking of the restaurant business it is as if the curtain has been pulled back on the Wizard of Oz and there is a new sense of clarity to how the world really works.

Now this is a blog post, not a book. There are hundreds of books published every year dedicated to the business side of serving food. And there is my first point. There is no single algorithm that explains or breaks the code for the restaurant business. There are so many nuances to the business I will not attempt to answer them here. Instead I am going to just touch on the business side of hospitality. The question I ask every new member of the restaurateur club: WHY?

For the purpose of this discussion let’s define restaurant as a sit-down experience where there is a server who brings you your food.

I think the first important point to make is that a restaurant is not a product business but a service/product business. This might sound obvious but on day 90 with every new restaurant owner I quickly remind them of what they sell. They sell an experience. The product plays a starting role in that experience, but it is not what you sell. If it was just food, a restaurant by my definition would not only be the biggest rip-off ever but drive-thru’s would be the sole way we would purchase prepared food.

Okay, obvious I know. Let me tell you the first time I review a Profit and Loss statement on a new venture I am asked, “What is the break-even?” In a service/product mish-mash business like a restaurant, this is by far the golden ring we are all chasing and always is just out of reach. The truth is that a static break-even point for a restaurant is non-existent. The real answer is that there will never be an clear answer and get comfortable with that on day zero. Now that does not alleviate you from the task of chasing the ring. A prudent and successful owner is always chasing the margins. This is where bookkeeping in the restaurant business is so important. It is always the task that is quickly lumped into miscellaneous administrative tasks. It shouldn’t! It is job number one if you plan on success. The amount of data that flows through a restaurant is astounding and overwhelming. Most owners approach this with after-the-fact bookkeeping (also known as a checkbook) or by collecting every ounce of data and getting buried in the details that will never paint the picture you need to see. The real task is to determine the information you need in real time to make the decisions that will affect the bottom line, and quickly.

Start now, before you start. The biggest expense you will have is also the first one you will have – rent. Rent will be by far the biggest nut you have to cover and one of the hardest to push-off or change after you get started. Solid pro formas of your restaurant model will tell what you can afford. Start smart and concentrate on what the business can afford in the worst of times. You only get one shot at getting this right, and this can be the quickest way to success or failure. Labor will be the second of three things you can control quickly. Too much and you bleed, too little and you clientele will feel the pain. You have to find the right fit and quickly. This process will take time so track immediately and be nimble with your staffing model. Visit the model and drill down frequently. Whether the Chef, Manager, or Owner is in control of the labor, it will affect the bottom line and the customer experience, and fast. Third, is every restaurant owner’s favorite acronym, COGS. Cost Of Goods Sold is the life blood of success and failure of the kitchen. This is anything that leaves in the customer’s belly. It is a moving target and made up from many expenses and many vendors and is always a mix of product. Do not chase the product, chase the percentage. Always look at your COGS as a percentage of your gross revenue. Once you identify a trend in your COGS, you can use that data to adjust your purchasing. That does not excuse the Chef from buying smart the first day.

In computer programming there is another popular acronym, GIGO. Garbage In, Garbage Out. All bookkeeping is the same way. This is why finance in a restaurant is a team sport. You must have the standard operating practices in place to track and follow all the information. Without this, the rest is pointless.

The last is the first. We get the chance to meet potential restaurateurs when they are just making the decision to enter into the business. Without exception I ask them all the same question. Why? There is no right answer or wrong one. Just make sure yours is sensible and in line with your life goals. The hospitality industry is a long hour, high failure rate business. It is not easy and if executed improperly or untimely or lady luck does not shine then this can be the most expensive venture you have ever made. On the other hand, well thought-out restaurant ventures can be extremely profitable. Make sure you have a balanced ego, sufficient finances, and dreams… balanced with reality.

Want a little more of the aesthetic and construction side of opening a restaurant? Check our one of our clients, Bruce Bruschel’s New York Time’s blog. Click Here


November 12th, 2010 Posted by blackinkservices

Welcome to Black Ink’s Blog. Over the course of the next few months, you will hopefully find articles useful in your business endeavors.

As a business owner and consultant to many start-up businesses, I have had the chance to learn from my mistakes and the mistakes of others I have always found the internet to be a wonderful resource and continue to use it as a business tool for research and practical applications. Hopefully this forum can provide a place for us to share ideas and solutions. Whether you’re a neophyte or a seasoned professional, we can all agree that there are never too many good ideas or solid opinions.

A successful business takes on a life of its own. As a business owner you understand how the business quickly becomes an organic entity with its own identity rather than just an extension of the owners. Your relationship with your business is not unlike one with a spouse. It is full of love, commitment, ambivalence and compromise.

Hopefully this blog will provide advice and insight about that relationship as well as some of the tools to make it a lasting, satisfying, and prosperous one. If there are topics you wish to see discussed here, please feel free to contact us.

Cheers and thanks for visiting.