Joseph Belbol

What If Your Spouse Is Reckless with Money?

Did you take a financial compatibility test before you got married to your spouse? I am sure the answer is no and even if you did, people and circumstances can change over time. If one spouse is more cautious with spending and one is reckless, then this will not only cause tension, but the financially reckless spouse will most likely hurt or greatly strain your finances. It can also be a huge source of marital tensions. What should you do if you find yourself in this situation?

Here are some approaches, from rational, gentle approaches, to tougher, harder approaches, along with observations:

Communicate and work together: Hopefully, the remedy to your situation is as easy as communicating with each other to make sure that you are on the same page financially. If your finances are steadily strengthening, debts are decreasing or paid off, savings rates are sufficient, and charitable giving is charitable, then it doesn’t really matter if your spending seems reckless. However, when your income is growing and you are still struggling to pay for ordinary expenses, then it is time to have a talk. Both spouses should be aware of financial matters, savings goals, and limitations on spending. One can hope that this will solve the problem, but if not, then try again or move on to another approach.

Take charge and prioritize cash outflows: First, the more financially responsible spouse should be in charge of financial matters, including saving and paying bills. Next, the order of financial priorities needs to change, including saving first, preferably automatically, then paying bills and debts. This will cover your basic financial needs.

Cut off access: If the previous approaches still do not work, then you have to cut-off or greatly restrict access to funds and credit. I know, this sounds harsh and controlling, but it is not. If someone had a gambling addiction then you would do the same or you will find yourself homeless, which is not an exaggeration. Spending addictions are similar and you need to protect yourself and your family. If you are at this point then your spouse has issues with spending money.

Outside support: Financial decisions, views, and habits are very much driven by our emotions, our past experiences, and our attitudes about money. If you truly have a spending addiction, then seek the support and help of a professional that is experienced with these matters. I am not a psychologist or therapist, but anecdotally, it appears that reckless spending stems from several causes: seeking happiness by purchasing things (which is short-lived, possibly for mere minutes), the attitude that you deserve “things” (this is kind of related to the first cause), you do not care or think about finances (adults need to behave like adults), and lastly, you are just trying to sabotage your situation (it could be to get back at your spouse or because you do not feel you deserve financial security – again, seek therapy).

This can also happen with a business partner if you put them in place of the word spouse. It just won’t work.

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Why Does a Fast Growing Company Bleed Cash?

The irony of growing a company quickly is that it tends to bleed cash, and a lot of it. Why is this so and what can you do to prevent a cash crunch to keep the momentum going?

A fast Growing company is likely to spend more money to feed the growth of the business then a mature, slow-growing business in such areas as marketing, employees, technology, equipment, improvements, rent, and so on. The key to not going broke is to manage the process to keep the cash inflows consistent and much greater than the cash outflows. For example:

Accounts receivable: Sales growth without receiving money coming in will be awfully painful. Make sure you have billing and collection procedures in place to keep the cash coming in timely.

Marketing: There are different thoughts on how much should be spent on marketing as a percentage of sales. However, instead of thinking about percentages, think about effectiveness of your marketing so that your cash is not wasted.

Improvements & equipment: Building out a new location can be very costly, but there are several ways to minimize the risk of setting up an additional location. First, make sure that your first location is profitable and producing excess cash flow, second, build up a cash cushion, and third, obtain favorable financing or use a combination of cash and financing.

Employees: As sales increase there is a temptation to quickly hire more employees, which is necessary. However, if you hire too quickly, then the productivity of each employee will be too low for you to make a profit. A good strategy is to create metrics, that if met, will let you know that it is time to hire another employee or employees.

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How Long Will it Take to Double Your Sales?

Doubling your sales is an ambitious goal for most business owners, but is this practical and if so, how long will it take?

It is not as difficult as it seems if you break it down into smaller components, such as the average percent increase that is needed each year to double your sales. Here are examples of how long it will take in years to double your sales based on your compounded growth rate percentage:

Growth Rate      Years to Double

5%                          14.2 Years

10%                        7.2 Years

15%                        5 Years

20%                        3.8 Years

25%                        3.1 Years

30%                        2.6 Years

40%                        2.1 Years

50%                        1.7 Years

 

Even a modest 15% growth rate will double your sales within 5 years, which is very reasonable. If you are able to keep your growth consistent for another 5 years, then you will double your sales again, which translates to a quadrupling of sales from your base. For example, a company with $1M in sales will double to $2M in 5 years and in another 5 years will double again to $4M.

Always do the math when figuring out how to achieve your sales goals to make sure you are on track.

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You Get What You Pay For

I like a good deal when I see one, but be careful about going for the “cheap” price. Generally, you get what you pay for and many times it ends up costing you more and you either don’t realize this or realize it once it’s too late. Even commodity type services and products are not really commodities and here are a few examples:

Service providers: The pricing of service providers varies drastically, and includes virtually all services from home maintenance/contractors to professional service providers. Maybe you can find a good deal because the provider is newer in business and is under charging on purpose or is doing so out of poor business practices. However, a “cheap” service provider, especially one that you use repeatedly, will find it hard to provide quality service to you over time. This can be due to a high demand because of low prices, not being able to afford good, competent employees, and not having additional funds to invest in their business.

Products: If you are able to get the same product or software when it is on sale, then that is plain smart. However, when comparing two products, make sure that you understand why one is cheaper than the other. Reasons for a lower price can be because the product uses poor materials, is manufactured poorly, or does not contain a lot of features. The opposite can be true for a more expensive product, which is why you need to make sure that you purchase wisely.

Cost/benefit analysis: When making a purchase for your business, especially a large or important purchase, then weigh the cost/benefit. For example, a consultant may cost you $5,000, but you may expect that his advice will return $50,000 of profit. Alternatively, a software provider may cost you $10,000, but will save you $20,000 of expenses, including salaries. The examples are endless, and it is important to think of each expense as an investment in your business.

Don’t be fixated on price, but make sure that you understand what you are getting for the price you pay. A funny expression is, “If you pay peanuts, then you get monkeys!”

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The One True Business Formula for Success

There are dozens of formulas and ratios that a business can use to determine success and profitability. However, there really is one that is most important and should be used repeatedly . . .

Sales – Expenses = Profit

Keep on repeating this formula over and over again and you will do just fine.

 

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What Keeps Business Owners Up at Night?

Aside from worrying about everything, there are really just a few timeless concerns of most business owners. If you don’t have at least one of these concerns then that is probably a concern. Here they are with a few solutions:

Employees: No matter how well you run your business, it will always be a challenge to manage employees. Common problems are: finding good employees, keeping good employees, and making sure that they are productive. There are several ways to address these concerns that are simple, but no way full-proof. The first step is to take your time hiring and to hire the right people from the beginning. Next, treat your employees well and fair. Lastly, spend the time to train your employees properly so they are productive. It sounds so simple, but maybe that is why it is so difficult.

Taxes: Who wants to overpay their taxes? Not only paying taxes, but staying compliant with all of the numerous tax filings can be a huge burden. Having a good accountant can help to alleviate this concern.

Growing: If you are not growing then your expenses will soon eat up a good portion of your profits. Growing sales is a major concern, however, the focus should be to grow your sales profitably. Aside from smart marketing, each new dollar of sales should be profitable to you, otherwise something is wrong.

Cash flow: Either not knowing where your cash is going or not having enough are both problems. Your accountant should help to explain where your cash is going and why there is a shortage. Common solutions are to improve your accounting systems and procedures, increase sales, implement better collection processes, increase your profit margins, and obtain a line of credit.

Too many hours: I don’t think that you are allowed to stop thinking about your business so technically you work 24 hours a day. How can you work less hours? There are dozens of ways, but a few easy to implement solutions are: better scheduling, delegation, and a commitment to work smarter, not harder.

There are a few other closely-related concerns, such as health insurance for employees, feeling burnt out, and the economy. Unfortunately, we cannot control the economy.

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Follow Your Emotions and Go Broke

According to dictionary.com, one definition of emotion is “an affective state of consciousness in which joy, sorrow, fear, hate, or the like, is experienced, as distinguished from cognitive and volitional states of consciousness.” Emotions can be complex and if you make business and financial decisions based solely on how you feel at the moment without considering facts then this can be a disaster. Here are a few examples and ways to prevent you from making decisions based upon emotions:

Investment decisions: When the stock market tanks and the economy is in a recession, you may be strongly tempted to sell all of your investments, which is most likely the worst decision ever. If you have a good financial advisor then hopefully they can temper your emotions.

Too excited over expected results: A perfect example is when a sales person tells you how much money you will make by placing an ad in their publication because thousands of people will see your ad. It may be true that thousands of people will see your ad, but if they aren’t your target market then your results will be dismal.

Conflicts with customers and employees: If you have a performance issue with an employee, first determine if this is a recurring problem before you pounce on them. Maybe the issue just needs a gentle correction versus more severe actions. What about a customer complaint? Even if you are right, try not to reactive emotionally so as not to let the situation escalate out of control.

There are several techniques that you can use to prevent poor, emotionally-based decisions:

Wait: Don’t be reactive to another person or situation. If the situation requires you to speak or deal with it immediately, then pause, even if just for a moment, before speaking. For other decisions, take a day or more to make a decision. The time spent making a decision should coincide with its importance.

Look at the facts: What you think is true based upon how you feel and what actually is the truth are two different things. Separate feelings from facts.

Seek advice: Speak to a trusted professional, friend, or colleague about your decision. Sometimes just speaking to a third party before making a decision can put things into perspective.

Don’t let your emotions get in the way of your decision making.

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What is a Growing Business Doing Differently than a Struggling One?

There are major differences between the actions of a business owner with a growing business versus that of a struggling business. There seems to be a recurring theme for growing and struggling that closely mimics those who are fit and healthy versus those who struggle with their weight.  The accumulation of certain actions will greatly impact the outcome as follows:

Successful Businesses:

Hire smart and delegate: Business owners who are willing to take on additional employees will find that they are better able to increase sales due to additional capacity. They also do not over do it by hiring too many employees at once compared to needs, which ends up causing cash flow issues.

Invest in infrastructure: This not only includes the physical infrastructure, such as buildings, but also technology and equipment. Have you noticed that franchised restaurants update their locations quite often and do not hesitate to invest in technology and equipment?

Are reluctant to use debt: Debt can easily overwhelm your business even if you are growing rapidly. Although debt can be useful if used for the right reasons, it must be used sparingly and wisely to avoid pitfalls. As a business matures, then the goal should be to rely less on debt to support business operations. Why do you think the interest rates and payment terms are much different with traditional financing versus non-traditional loans, such as merchant loans or hard-money loans?

Seek advice: There are different ways of learning and some are more efficient and effective than others. One way to shortcut your success is to seek the advice of those who know more than you and then implement their suggestions. It sounds easy, but our pride tends to get in the way.

Struggling Businesses:

Are obsessed with cutting expenses: This may come as a surprise, but many struggling business owners are obsessed with cutting expenses. My only guess is that they do not see the link between smart spending to support profitable business operations. They are also penny wise and pound foolish and spend enormous amounts of time trying to save a few bucks, which ends up costing more.

Think that debt is THE answer: Debt may be a part of the solution, but it is not the answer to all of your business problems. Examples of problems that debt will not solve are: a lack of sales, overly burdensome expense structure, too many employees for the size of the business, and bad customer service.

Have an excuse and don’t listen to reason or reality: The economy is by far the most common excuse, along with “nobody buys this anymore” or “no one has time to do that anymore.” They may be right to an extent, but what about when the economy has turned around? If your customers have changed their buying trends, then why don’t you adjust your strategy as well? If you don’t change then you will prove yourself to be correct, but at a major cost to your business.

The probability of becoming a growing business will increase if you take the actions of growing business, while the odds of struggling will increase if you take the actions of a struggling business.

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5 Traps to Avoid When Growing Your Business Rapidly

Growing your business, especially growing rapidly, can be a really great accomplishment, but there are dangers when growing too quickly. Here are several traps to avoid to ensure successful growth:

Cash flow: Quite often, a small business will have cash flow issues when growing too rapidly. This is due to a delay of getting paid, while expenses need to be paid for upfront or before getting paid. There are 3 solutions that can help depending upon your situation. The first is to see if you can obtain terms with your suppliers to delay expenditures, second is to obtain a line of credit to support your receivables, and third, which tends to be the hardest, is to build up a cash cushion first.

Finances: As you grow your business, the financial aspect becomes even more crucial to your success. This entails a focus on investing in more robust accounting software, accounting staff and/or accounting services, streamlined processes and procedures, and internal controls, to name a few.

Employees and management structure: Unless you enjoy working 24/7, you need capable managers to manage your employees (you have been hiring more employees, right?). It is easier to have a few people reporting directly to you then several dozen. Also, make sure to acknowledge and reward the loyal employees that helped you to obtain your success.

Personal time and wellness: It is very easy to put in excessive hours to handle the massive growth of your business. There will be times when you need to work extra, but if this becomes the norm then it is easy for your personal relationships to suffer, along with a decline of healthy habits.

Infrastructure and organization: This applies not only to the physical nature of your business, but especially your operations. Have you outgrown the physical space that you occupy? Are you using equipment, technology, or IT that is not keeping up? Are your vendors and advisors able to handle the growth of your business? What about marketing and marketing staff? These are all areas to consider; otherwise, they will act as barriers to your growth.

Growth needs to be profitable, stable, and smart; otherwise, your results can easily go in the opposite direction that you intended. Think long-term, strategically, and surround yourself with the appropriate advisors to help you along your journey.

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Old School Marketing that Still Works

Google AdWords, Facebook ads, Instagram, and email marketing, are just some of the modern ways to market your business. We are told by social media experts that traditional, old-school marketing does not work anymore. Let’s take a closer look, especially as some digital marketing methods have become overly saturated.

Some traditional marketing methods work better than others, which is the case for any type of marketing techniques. Methods, such as phone book advertising, may be dead because no one receives phone books anymore, but here are 4 old school methods that are still alive:

Networking: Developing a network of referral sources by going to networking events, lunches, dinners, etc. and developing strong, trusted, relationships, still works. People always like to do business with and refer their customers to someone they know, like, and trust. It may take some time though.

Pounding the pavement: If you are selling a service or product to restaurants, as an example, then make an effort to visit them. Make sure to know when it is a convenient time to stop by plus it is beneficial to have information to provide to the business owner.

Direct mail: I’ve heard it being said that direct mail is dead. It’s not true. If you are going to commit to direct mail, which can be very costly, make sure that your efforts are very focused and get noticed.

Speaking engagements: What better way to come into contact with people who actually want to hear and know more about your expertise? Even a small group of attendees can produce a significant return on your time and investment, especially if you make it easy to get in touch with you and obtain contact information from those willing to share this information.

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