Love Your Business TV – 10 March 2020 Transcript
be Hello and welcome to Love Your Business TV. Warm welcome to everyone this week.
Really excited to be here once again. I’m Adrian Peck, the presenter of a Love Your Business TV, and I’m also the owner and founder of Better Never Stops. We deliver business advice and coaching programs to business owners who run or want to run one million pound plus businesses.
Now I’m on a mission. I’m on a mission to help the UK’s entrepreneurs and business owners to really get the most out of their businesses. The one thing for us business owners and entrepreneurs is the amount of time, energy, passion, and the hours that you consume in your businesses. And I really want you to get most out of them; particularly have more fun, earn more money out of it and also get time to go and do stuff and really enjoy the lifestyle that you deserve out of it as well. So every week we bring you a live show. We stream it at half past two on a Tuesday afternoon, and the idea is we’re gonna build a community of like-minded entrepreneurs and business owners to learn and share lots of free advice and support for you. Each week I’m gonna bring in guests as well to help me to co-present. I’ve got some guys lined up in the coming weeks, and I’ll let you know that a couple of weeks in advance. I’m also gonna post a schedule on the website as well and share that with everybody, so you can see some of the people that were gonna come in and co-present with me over the next few weeks. And so it’s all that to really to help you grow your business, have more fun and enjoy your business a lot more.
We’re growing, each week we get more and more viewers, and I really thank everybody for all the positive stuff that you sent me last week, and the amount of people that now start to say that they’re watching the show, which is really really great and really encouraging, that I’m not sitting here on my own talking to a camera and an empty desk. Now we’re now live on Facebook and on YouTube, you can also download the podcast now on Spotify. Ooh-ooh. We’re now in Spotify so you can go on our Spotify channel and we’ve got Love Your Business TV on there, and you can get the previous episodes and this week episodes on there. So a warm welcome to our listeners now on Spotify. I will hopefully try and explain what we’re doing through the process so you’re not completely spellbound. But those guys who are listening to us on a podcast, you can go onto our website and you can see the show as well, and hopefully the slides will make a bit more sense of what we’re doing as well. So please feel free to get in touch, as usual through adrian.peck@peckuk, or from our website; www.loveyourbusiness.TV is the other one, that takes us through all our website as well.
Now so let’s crack on, let’s crack on with this week’s agenda. And as we’ll always, we cover off some business tips. So we’re gonna take a deep dive today into cash, and most importantly I’ve got some hints and tips for you to really put some extra profit directly onto a bottom line, and you can do that pretty quickly as well. I’m gonna share that with you. So we’re gonna look our success model instead of honing on cash, and particularly the financial management of your business. We’ve got you the Love Your Business Surgery; questions and answers that we do every week as well. I’ve had one question sent in so far from Richard who runs a facility management company. So thank you Richard and will answer your question about invoice and financing or cash flow financing as some people call it. So I’ve got that, hopefully we’ll get some other questions as we are live as well. So if you want to, you can just input those coments via Facebook and YouTube, and they should come up on my stream yard view as well as we go through it. And then we gonna talk about success. So really, really want us to share our success stories on Love Your Business TV. I think it’s really, really important that as a community we share the stuff that we’re doing really well and the stuff that’s working, and that in itself becomes a learning piece for other businesses. And not only that, as you all get to profile your business live across the nation and of course it is gonna be on them YouTube forever anymore as well, so you get your business plugged on this. So please, please, please, send in your stuff as well now cover that off at the end on how you can share that with us.
So without further ado let’s crack on and let’s crack on with this week’s show. Like I said, we’ll talk about success and our success model. I’ve been working with business owners and entrepreneurs now since 2011. And during that time of built up program, the program is based on what I say is the seven key aspects of running a successful business. The first one is about having a strategy in place and about knowing where it is you wanna go and how you’re gonna get there. The second part is about empowerment or teamwork, if you call that better, it’s about building a team around you that will also know about where the business is going and they can be part of that journey. Business is a team sport and that’s such an important part. The third element and then is about controls. If you’re gonna have a destination, you’re gonna have a team around you, the one thing you need to know then is about where you are on that journey, it’s about putting controls and measures in place to maximise that and know where you are and have a scorecard in place. The fourth one which we’re looking at this week is about cash and about managing the finances to your business, particularly managing cash flow ’cause that’s what so so critical in your business. The fifth element is about efficiency. And that all about getting more or less and about making your business more and more efficient as it grows. The sixth one then is about competition and separating away from your competitors. And then the seventh one is good old sales and marketing techniques. And it’s about your business been out there selling every single day and having a constant marketing plan that’s implemented every day as well. So that’s our seven key aspects of success.
And I say today we are going to hone in on cash, and particularly I’m gonna some stuff with you about maximising your profits and put some incident profits onto your bottom line. So there’s obviously a lot more in our book, in my book, “How To Fall Back In Love Your Business.” There’s a whole chapter on this. So when we talk about cash, and I’ve got an acronym for cash which is costs, assets, sales and HMRC, and that makes up my acronym of cash.
So costs is all about managing your costs of goods sold and your overheads. So is cost of goods sold without going into too much jargon. It’s really the direct costs that are directly attributed to your sales. So when you sell something, invariably there will probably be products involved, and therefore the cost of those products is a cost of goods sold. So when you take away those from your sales, that’s what when you’re given your gross profit level. So we talked about cost of goods sold and then we talked about overheads. So the overheads are the everyday costs in your business such as heating, lighting, insurance, your premises, your telephones, all that kind of stuff. So it’s the cost of running your business before you even open the door, before you even turn a light on in the morning, so to speak, is the cost of having that business there.
And then we talk about assets, is about maximising cash flow with your assets.
We talk about sales which is those four key drivers in sales.
And then we talk about HMRC, which is about making sure your business is tax efficient.
Like I said, all of those bits are covered in my book, but I want to really, really hone in today on the first part that really, it’s about managing your costs in your business. This is really about direct impact on your net profits. And what I’ll say is there’s three key what I call profit levers for your business. There are three profit levers. And putting each one of these will increase your net profit. So what are they? The first lever, yellow lever here is about sales. And the first leave it you can pull, and there are only three levers in a business, you can either pull your first one which is about pulling your sales lever. And that lever is about increasing your sales revenue. Now this isn’t just doing sales for the safety of doing sales, this is about increasing your sales revenue without increasing your gross profit or increasing your overheads. So the first lever you can pull is about increasing sales revenue. And the easiest way of doing that, and I know you gonna scream at me, it’s probably the hardest for you though of what you see, is it simply by increasing your prices. By increasing your price you pull back that lever and you instantly put more money through your account and therefore on to your bottom line. The second lever then is about a decreasing the cost of goods sold. So again a very simple analogy here; is about by going and talking to your suppliers and reducing the cost of your products. And that it has an instant effect by decreasing that costs of goods sold, and has an instant hit onto your bottom line as well. And then the third lever is then about overheads. So that’s about again decreasing your overheads of your business. So that you know again very simply, going out and talking to your suppliers, reducing down your costs of your utilities, reducing the cost of your phone calls, reducing the cost of your insurance, that kind of thing that we’re talking about. So there’s your three levers, and they’re really, really powerful levers, very, very powerful levers. There are only three levers. And so the first one is about sales; increasing your sales, and then decreasing your cost of goods sold and decreasing your overheads, and there’s your three levers. So we look at the business here, we’ve got 1000 pounds. Again a really simple sum put together. We’ve got a thousand pounds worth of sales, we’ve got a cost of goods sold is 600 pounds and our overhead is 300 pounds. So therefore our net profit is 100 pounds. Well, what we’re gonna do now is we’re gonna pull those levers. We’re gonna pull those levers, first of all we’re gonna drive up those sales. So we’re gonna make a 10% impact on each one of those levers. the first one to do is pull those lever back, and we’re gonna increase our sales revenue to a 10%. Or we gonna increase it without increasing gross profit. Let’s say, purely in this scenario we’re gonna increase our prices by 10%. So we’re gonna add another 100 pounds on top of our sales. We’re gonna decrease our cost of goods sold. So we’re gonna go and talk to our supplies and we’re gonna get a 10% decrease on cost of goods sold, and we’re gonna take that down to 540 pounds, and we’re also then going to negotiate, let’s say we negotiated with our utility provider and various other things, we’re gonna get a 30 pound savings, a 10% saving on our overhead. So we’ve now made increased our net profit from 100 to 290 pounds. That’s not bad going, is it? Now the real adsorbent ones from you will recognize, will notice from that, but actually what we’ve had, is there’s a multiplier effect through that process. So when you pull all three levers, you don’t get a 10% effect, you actually get a multiplier applying effect across that. So in this case it’s actually 26.4%. It’s not 10%, it’s 26.4%. So you can see how powerful is when you pull each one of these three levers. Some you’ll be able to increase by more and some by less. But the idea is that you don’t just pull one, you pull all three levers, and you can see the effect it then has on it. If you want a go for bangs four bucks, so to speak, the most immediate effect you can have and actually the highest effect you can have is actually by reducing your cost of your overheads. And I’ll try and explain hopefully to you why that’s such a powerful effect. If we take our scenario here where we’ve got 1000 pounds worth sale, 600 pounds worth of cost of goods, and we’ve taken out our overhead down by 30 pounds to 270, and therefore we’ve made 130 pounds worth of profit. So we’ve increased the profit by 30%, which takes up the 13%. That 30 pounds worth of profit we’ve made extra, if we would want to do that purely on sales, we’ve got a gross profit here of 40%. So, in order to get the same effect out of sales, would have to increase it by 2.5 times. So therefore every pound saving in overhead, if you make a 40% gross profit, it’s equivalent to 2.50 worth of sales. So pounds worth of sales is 2.50 worth of sales increase. So at one pounds worth of savings on overheads is a 2.50 increase in sale. So in the scenario here, 30 pounds of equals 75 pounds worth of in sales. Let me just show you through how that works. I mean in the sales here we’ve now got 1075 pounds worth of sales, and therefore you’d increased your cost of goods sold ’cause you’re 13% margin, a 30% gross profit. So to do the same you’ve got 1,075 pounds, you’ve got your cost of goods 645, your overhead stay the same at 300, therefore your profit is 130. And therefore that’s how you actually on here you get a 12% now net profit rather than 13%. But you can see whether it starts to kick in. And the lower your gross profit margin, the higher the overhead return is. So let me just try to explain that again for you. So this is based on the one to two and a half ratio is based on you making a 40% gross profit. If you were to decrease that gross profit, let’s say you take it down to 25%, it’s actually down one in four, since the ratios one to four. And if you take down to 20%, it’s actually one to five ratio. So every pound that you save on sale on overhead is worth five pounds in terms of sales. And I hope that kind of makes them sense to you. So you get more bang for your bucks if you focus it on your overheads than you will in anything else. But of course I recommend you put all three levers, ’cause you get at this multiply effect across the whole of ’em. If you were start from somewhere today, start with overheads and you’re reducing your overhead cost down. And I say for every pound on a 40% gross profit margin for every pound that you managed to save there, that’s worth equivalent of 2.50 worth of sales. Okay hopefully that might make some sense, and I’ve explained that. So your action today is to get putting those levers. And again go back to your three levers, how do you increase your sales, increase your sales revenue, decrease your costs of goods in your business so you actually decreasing that and therefore you’re increasing your gross profit margin, and how can you decrease the cost of your overheads as well? And so you have this multiplier effect; if you do all three at the same time in your business. So in the best possible way of gold blue Peter, I have given you some free tools on the betterneverstops.global. If you go to Free Business Tools, it’ll take you to this page here. Go to Free Business Tools. If I increase this here. So go to the Free Business Tools, and then that will take you to this section here, you scroll down, and you can come to the Better Never Stops, the review templates here. There’s a Better Never Stops overhead reduction project template I’ve put together for you, which is a Google sheet, or you can download it here on excel or you can indeed you can download it from Google as well at the same time. Just let you know we’ve also launched a get your financial management assessment now as well, we’ve launched a french review scorecard this week as well, and you can assess your business about how well it’s doing on financials as well as there’s some free tips and tips and more content on there for you. So if we just dive into the Google sheet. Just go onto here. Let me just take you through how the Better Never Stops overhead reduction project sheet that I’ve set up for you and how that works. So the idea is, if you go to file and you can either download it in Excel or you can make a copy, you won’t be able to do it directly in here, but you can make your own copy and you can fill out your own figures in here. So step one is to then, again you’ve got some instructions up here. But if you copy and paste your overhead costs into here, and I’m giving you some idea what they might look like to start with, but if you copy and paste them into here, and then if you can put the costs in there as well, but you can go through and let’s say we put the costs in as we go through it. So you can kind of do that kind of stuff. Put ’em all in. And then go through each them line by line and go, okay, in the next twelve months, can I reduce those costs down? So let’s say we can’t reduce them, or bring it but actually we could reduce our marketing and advertising, and we think we could actually get that down to a few pounds, let’s look at utility. So that’s like we’re gonna reach other teams and let’s say our utilities it’s 1500 pounds a year. Just picked just these numbers, and let’s say if we shopped around, we think we’d get a 1200 pounds. So the idea is you can start seeing now that you’re starting to get some savings in place. So that’s your current, that’s your new budget, and you’re getting savings in place. And you go through every single line. Yes gonna take a little while, but I can guarantee you this is about putting money direct from your bottom line. So the next step one here is go, okay, we need to negotiate new terms with X. Who’s gonna do it? So let’s say that John’s gonna do it, and he’s on cracking on with that same progress. So we’ve now got a live document that you can update and keep going and work through all those things there, and you can see what that saving is going to be at the top line there. And obviously month to month you can go back to it and track it and keep doing it. As always, better never stops, so don’t just do one round of it, keep going at it and keep managing down those overheads. It’s really, really easy for overheads in a business to run away with business owners and lose sight of it. So that hopefully gives you a good steer on there about how you can do that, and how you can start managing those costs in your business. And that’s your homework this week. So if we go back to your action for this week is about putting those levers; how can you increase sales, decrease your cost of goods and decrease your overheads? I say there’s a lot more content on our website and also in the book. If you want a free copy just drop in email and I’ll get you a free copy of my book out to you as I Love Your Business TV viewer. So let’s crack on and look at Love Your Business-Surgery. So I have been sent in a question, or another question come up in the screen now as well, so I’ll take you through that in a second. The question I had from Richard, I’m just glancing up my notes here. Richard says, we run up on this facilities management company and we have been looking at cash is very tight in our business, and everything a month it’s a bit of a struggle. We’ve been talking to our financing company about invoicing finance facility. So for those that perhaps don’t understand what you’re talking about, this is where you can actually go out and companies will loan you money based on your invoices that you get in, and they’ll give you a period of… So if you’re on 30 days or six day, terms for instance let’s say, let see terms of a company up for one of your customers, you invoice them today, you can drill down a percentage of that straight away from your financing company, and then in 60 day times when it’s paid, you get the other balance of that payment your bank account, and obviously the invoice and financing company get a fee out of that as well. So Richard says basically how do you feel about that Adrian and what would your advise be? Okay so, it’s difficult to know obviously from a sunny start about really understanding your business. The one advice I always give to business owners when they’re looking at this type of financing is, you’ve got to treat as a short-term loan. I see many businesses that use it and then it just gets absorbed into their business, and it can replaces a bank overdraft, and now that I’ve got invoicing finance in their business and all you’re doing really is robbing Peter to pay Paul in it. So you have to be really, really careful that, and my big advice to business owners is that, before you get into it, have a plan of how you’re gonna get out of it. And the reason I say that is that invariably, invoice and financing it’s a bit like payday credit that you hear about on you see, it’s there as a sticking-plaster because that’s just covering up something else that’s underneath it. So I would first urge you to get really on top of your finances, if you need it it’s a short term bridging exercise, then do it but make sure you have a plan of how you’re gonna get out of it in due course. Now getting out of it maybe in six months time, it may be in 18 months time, etc. But have a plan about how you’re gonna get back out of it and how you gonna put cash into your business. Cash is really, really important in your business, and I can’t overemphasize enough how important it is to for a healthy healthy business. Really, really important. So hopefully Richard that makes some sense. And if it doesn’t please just email me and lets jump on a call, we can help you out from there. So I’ve got another question that’s come up on screen, and it’s from Phil. Phil says that we run… Does not say what type of business that you run. It just says, we run a business and you mentioned about increasing prices hahaha, we’re a really competitive environment and it’s really, really hard to increase prices against our competition ’cause what they’re trying to do is drive our prices down. Fully understand. And I feel I had a pound for every time a business owner said to me, or the people in the business said to me, “Adrian, we’re in a very competitive business “with different body else.” You really aren’t. Every business is in a competitive situation. The one piece advice I can give to you is to make sure that you are delivering value. And it’s all about delivering value. If the more value deliver the higher prices that you command and your customers will love you for more and for longer. So how can you increase the value that you deliver to your customers? If you’re in a competitive environment, like I say, every business is in a competitive environment, you’ll be in a commodity market and your products and services are commoditized. Make yourself different, decomonetize yourself and look for the value you can add to your customers. They will then pay you the additional prices that you want out of that as well because of that value adding. So that’s my big advice to you Phil. Again if you wanna know some more we wanna pick my brains more, please drop me an email, we can jump on a call and you can challenge me to how I’m gonna increase your prices, and I’m happy to help. So that’s the two questions I’ve got this week. Please bring them, keep giving them in. Next week we can be talking about efficiency and increasing productivity and improving processes. If you have any questions around that you wanna fire into us please do and I look forward to taking your questions. Now into our last part which is your success stories. Again I’m gonna keep banging on about this every single week, ’cause I really, really, really want to share your success. One because we can learn from it, we can learn what other people are doing well and share that across the community. And secondly I wanna plug your business. I wanna help you grow your business, and by me plugging it hopefully we can get some the referrals in or we can get to see what great business you love that you’re running as well. So every single week I’m looking for to share this and share your successes. Again if you go on to our website, you can see a forum on there. So if you go to loveyourbusiness.TV, Love Your Business TV, and you can see this forum, fill out this form, we can then upload your logo and stuff and we can then share your great news bankable business. So please do that. So next week we’re looking at our on our fifth step of our seven stage process. We’re looking at efficiency and we’re looking at business efficiency and getting more for less for your out of your processes. Really looking forward to doing that next week. So it’s the same time, half past two. It’s not a past three next Tuesday. Loveyourbusiness.TV, we’re live on Facebook, live on YouTube as well, and you can download our podcast as you go as well. So thank you very much this week, really, really enjoyed it, and hopefully you’ve got out of it. Please keep your comments coming in. Tell me your positive stuff that you’re finding from here. And again we wanna show you access stories. Keep those questions coming in as well. Thank you very much and remember better never stops.