5 Acronyms You Should Know

No, those aren’t text messages from your teenager. And they aren’t computer parts, or government agencies either.

If you look at these five abbreviations and have no idea what they are, or don’t understand the role they play in your business’ finances: read on. While we spend a great deal of time going through these topics with our coaching clients, we'll skim the surface here so that at the very least, you can familiarize yourself with some of this terminology and how important it is to the financial health of your business.

P&L – Profit and Loss Statement

Your Profit and Loss Statement (or income statement) describes your company’s overall performance. The P&L tells how much money you’re making in your business and how you’re making it. It measures revenues received and costs incurred over a certain period of time. It tells you if you’re making money or not, and how much you’re making or losing.

E-Myth Business Coach Tip: Go over each line item, and compare it with the previous month’s P&L. If you don’t understand what a line item represents, find out. The numbers should make sense to YOU, not to your accountant. And if you haven’t already, organize the line items so that similar items are closer together. The default setting in most financial software usually lists the expenses alphabetically. For example, it makes sense to see “Product Packaging Materials” next to “Merchandise Purchased for Resale.” Feel free to combine line items to make your P&L more concise, and/or break apart line items to show you more details so you can make some sound business decisions based on what the numbers are telling you.

COGS - Cost of Goods Sold

Also referred to as the “cost of sales,” COGS are the direct costs attributable to the production of goods sold. This includes material cost and production (labor) costs but does not include indirect cost like advertising or R&D. COGS will show up on your P&L Statements.

E-Myth Business Coach Tip: Watch the percentages, not the actual dollar amounts from one month to the next. The percentage should stay pretty much the same with regards to revenues.

EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization

This is the most complicated of the acronyms we’re discussing today, but essentially EBITDA measures the core income that your company earns before your cover your debt payments and income taxes. It’s an indicator of operating performance and profitability, but it’s not a good measure of cash because it doesn’t include changes in working capital.

EBITDA will be important if you want to sell your business; it allows buyers or investors to evaluate your operating profitability and profit trends without the unique variables that might distract from bottom line performance.

E-Myth Business Coach Tip: EBITDA is a good way to measure your profitability, but be forewarned: even businesses with a great EBITDA can go out of business due to cash flow. EBITDA leaves out the cash needed to fund working capital and the replacement of old equipment. Profits are great, but if you have no cash, your business will “bleed out” pretty quickly.

BEP – Break-Even Point

This is one of those numbers you want to know by heart and just like it says, this important indicator tells you at what point your business “breaks even.” It is the dollar amount of revenues that exactly covers all your operating expenses (variable and fixed costs), with nothing left over for profit. It’s an important indicator of risk because it shows you how close your business is to the “no profit” line. For instance, if your business is currently producing revenues at the level of $100,000 per month, and your break-even point is $60,000 per month, you are comfortably above your no profit line.

You want your BEP swimming in your head at all times. It’s your minimum target for slow months, and it’s where you begin all of your budgeting and forecasting. At a minimum, your revenues (sales) should be at least as high as your BEP. The goal, of course, is to increase this number over time so that revenues (sales) are above the BEP.

E-Myth Business Coach Tip: If you don’t know what your BEP is, you need to find out. Now. And how many customers does it take to hit your BEP this month? Per week? Per day? How many leads do you need to get that many customers? Also: if you want to lower the breakeven sales number, reduce your cost of goods sold or your operating expenses.

CR and QR: Current Ratio and Quick Ratio

Current Ratio = [Current Assets ÷ Current Liabilities]

The current ratio measures your ability to meet short-term obligations by determining if you have enough current assets to cover current liabilities. Ideally, your current ratio should be near 2.00, meaning your current assets are two times, or 200%, of your current liabilities. If your current ratio is below 2.00, your short-term debt-paying ability is reduced. This is an unstable financial position, and you should examine your finances to see where improvements can be made. If your current ratio is above 2.00, you have above average debt-paying ability; however, if it is too high, it may mean that you are not utilizing your assets effectively. If it’s below a 1, then you’ve got an emergency on your hands.

Quick Ratio = [(Current Assets - Inventory) ÷ Current Liabilities]

Like the current ratio, the quick ratio measures short-term debt-paying ability. It is calculated without inventory because inventory is not as easy to turn into cash as your other current assets. Thus, the quick ratio examines assets that can be turned into cash in the least amount of time. Businesses that carry a lot of inventory need this important planning tool. Ideally, your quick ratio should be at 1.00 or higher. If it is lower than 1.00, you may have trouble meeting your current obligations. Below 0.5 is an emergency. Note that if you don't carry inventory, your current ratio and quick ratio will be the same.

Money doesn’t have to be elusive, complicated, or difficult to control!

All it really takes is a commitment to two things: (1) understanding the relationship between money and your business activities and (2) creating and implementing—on a regular, ongoing basis—a few straightforward money management tools and strategies. When you understand how money flows in your business and you can control your money systems, you will make informed decisions about prioritization, management and investments.

You don’t have to be a finance expert; you just have to understand enough to make the decisions that matter.

Pushing the Spectrum

Marketers have long tried to turn happy events into shopping opportunities. Macy's and Gimbels and others pushed us to see Christmas as a chance to buy gifts. Shopping is right next to happiness on the spectrum of emotions, I guess, just as green is next to blue in the rainbow. They did it to Valentine's day and now, of course, Halloween.

Lately, some marketers would like to push us to move from fear to hatred. It makes it easier for them. We honor and remember the heroes who gave everything, the innocent who were lost, the neighbors who narrowly escaped. A day to hate? I hope we can do better than that.

Loyalty

Loyalty is what we call it when someone refuses a momentarily better option.

If your offering is always better, you don't have loyal customers, you have smart ones. Don't brag about how loyal your customers are when you're the cheapest or you have clearly dominated some key element of what the market demands. That's not loyalty. That's something else.

Loyal customers understand that there's almost always something better out there, but they're not so interested in looking.

Loyalty can be rewarded, but loyalty usually comes from within, from a story we like to tell ourselves. We're loyal to sports teams and products (and yes, to people) because being loyal makes us happy. Why else be a fan of the Cubs? Some customers like being loyal. Those are good customers to have.

Loyalty isn't forever. Sometimes, the world changes significantly and even though the loyal partner/customer likes that label, it gets so difficult to stick that he switches.

I think there's no doubt that some brands and teams and politicians and yes, people, attract a greater percentage of loyal fans than others. Not because they're bigger or better, but because they reinforce the good feeling some people get when they're being loyal. Hint: low price or supermodel good looks are not the tools of choice for attracting people who enjoy being loyal.

Rewarding loyalty for loyalty's sake--not by paying people for sticking it out so the offering ends up being more attractive--is not an obvious path, but it's a worthwhile one. Tell a story that appeals to loyalists. Treat different customers differently, and reserve your highest level of respect for those that stand by you.

If you want to learn to do marketing...

then do marketing.

You can learn finance and accounting and media buying from a book. But the best way to truly learn how to do marketing is to market.

You don't have to quit your job and you don't need your boss's permission. There are plenty of ways to get started.

If you see a band you like coming to town, figure out how to promote them and sell some tickets (posters? google ads? PR?). Don't ask, just do it.

If you find a book you truly love, buy 30 and figure out how to sell them all (to strangers).

If you're 12, go door to door selling fresh fruit--and figure out what stories work and which don't.

Set up an online business. Get a candidate you believe in elected to the school board.

The best way to learn marketing is to do it. JUST DO IT!

by: Seth Godin

Virtual Project Management

Project Management (PM) is a complex and challenging task that strives for solutions and deliverables within time and budget. Virtual Project Management (VPM) is an even more daunting task. PM is the discipline of planning, organizing and managing resources to bring about the successful completion of specific project goals and objectives. VPM is attempting the same, except all project team members are not physically in a single location, possibly spanning different states and/or countries. VPM is the art of bringing together many diverse people to work towards a common shared goal. One can look at VPM as a new dimension of project management, in that it is a new way to manage projects that was influenced by the rise of the internet and the use of collaborative software tools that are used to facilitate projects. Project members can now be organizationally disbursed across the globe and come together as knowledge workers to complete the tasks.

VPM has unique challenges.

Since team members are often scattered in different locations around the world, they have different schedules, cultures and expectations. Managing a virtual team makes it difficult to micro manage which is a traditional concept in project management. Project Managers often need to manage people for whom they have no first-hand or personal experience with. Project members have to become acutely aware of their team member’s differences and somehow align them to work together. The entire team is dependent on technology to do its job in order for the project to be successful. Project Managers need tools tailored to the challenges of virtual project management.

Virtual Project Management Tools

The tools that are used in VPM need to accommodate teams in a global work environment. The key task that any VPM tool must accomplish is to allow team members to communicate with one another. Because team members are not physically in the same location, and may have no prior knowledge of each other’s work, communication becomes key. In addition, tools must have the ability to allow team members to collaborate in the virtual space, as that is the only venue open to them being from different locations. Tools need to be equipped with the capabilities to allow the project manager to manage the project – scheduling resources and tracking progress on tasks. Being a project manager in a virtual setting does not allow the PM to micromanage the team, therefore the tool should be equipped so that the PM can manage, track and facilitate the projects with ease and stability.

In order to accomplish full life cycle virtual project management, VPM tools were researched and compared. Software Tools must have the following features:

• Web based
• Creation of schedules and tasks
• Assigns resources and activities
• Reporting functionality
• Document management
• Collaborative software
• Notification feature

The Corporate Conscience

...by Seth Godin

There isn't one.

Corporations don't have a conscience, people do.

That means that every time you say, "It's just my job," or "My department has a policy," or "All I do is work here," what you've done is abdicated responsibility--to no one.

It's convenient and even comfortable to blame the anonymous actions of many working in concert on a evanescent brand or organization, but that starts you on an inevitable race to the bottom. Organizations have more power than ever before. They are better synchronized, faster, and possess more tools to change the economy and the people in it than ever before. And the only option available to the rest of us is for individuals to take responsibility (it's not given) for what they do and how they do it.

The very same tools that permit organizations to synchronize their efforts are now available to you and to me. I guess the question is: will we use that power to humanize the systems we've created?

PS It's not just about being a good citizen: when bad behavior comes back to hurt the company, it hurts you, too.

Build Sales Partnerships in 5 Easy Steps

The traditional view of the sales rep is the “lone wolf” or the “road warrior” who overcomes objections and wins the deal. However, in many B2B selling environments, it’s only possible to put together a deal with the cooperation of multiple companies. And that means multiple sale reps from multiple firms working together.

For example, a company selling printing services may need to involve a graphic design company, a shipping firm and a paper supplier in order to clinch the deal. Similarly, the sale of a customized software system may involve components sources from half-a-dozen firms, requiring the active participation of half-a-dozen sales reps.

Unfortunately, not every sales professional knows how to build the kind of sales partnerships that allow teams of reps to pursue and win these complex opportunities. This post contains an easy-to-understand, five step process for creating and maintaining sales partnerships that help you sell.

STEP #1: Identify Your Strengths and Weaknesses

Before you can consider a sales partnership, you must understand what you, and your firm, is bringing to the table. The traditional way of doing this is to use a traditional SWOT (strengths, weaknesses, opportunities and threats) to determine what you and your organization has to offer - and where you need help from outside.

For example, if your company has a strong set of products but little experience selling into a specific industry, you may need to partner with a firm that has few products but lots of experience inside a specific industry. Similarly, if your company is heavily deployed in one geographical region of the country or the world, you may want to develop a partnership with a rep who works in another geographical region in order to develop a global opportunity.

There’s also a certain level of self-assessment that’s required at this point. It’s a natural tendency for individuals to want to keep control of their destiny. As such, many reps feel uncomfortable giving up a certain amount of control over a customer account, which is always part of a partnership arrangement. Similarly, when it comes to selling, the undeniable fact that “knowledge is power” leads many a rep to horde information that, if shared with a team, might result in a quicker sale.

Successful sales partnerships require the development of trust as the foundation for a long-term relationship. Unfortunately, many sales reps, while trained to develop such relationship with customers are often at a loss when it comes to partnering with their peers, particular when those peers are also (in a certain sense) their competitors as well.

A good analogy might be drawn from baseball, where the “All Star” games are often relatively uninteresting because the players have little or no idea of how to work together as a team. The same is true with a complex sale involving reps from multiple divisions or different vendors. If you’re going to work together with other reps, you need to be the kind of person who can really be a team player.

STEP #2: Select the Right Partner

If you’re going to partner, you need to understand the strengths and weakness of your potential partner(s), not just in terms of their ability to contribute to the sales process, but their willingness (and psychological readiness) to partner. Just because another has a core competency that you need, there is no guarantee that they will willingly share it.

You need to find partners with whom you can create mutually beneficial value. To do this, you look for complementary core competencies and mutual circles of interest.

Here is a list of the sort of complementary talents that you should be looking for in a sales partner:

• Help in developing and leveraging your core competency.
• Ability to creating valuable synergies in your customer accounts.
• Assistance in reducing your overall sales cost.
• Elimination or reduction of duplication of effort.
• Innovations discovered with their help.
• Access to new customer and prospects.
• Help against established and emerging competitors.
  

Remember that a partnership also means giving up a modicum of control, especially control of the account relationship. Find partners who will not just add value but whom you can trust to treat your customers the way you’d like them to be treated.

As you look at a potential sales partner, go back to your self-assessment to be sure that can deliver the value that the other partner values — not just the value that you think the potential partner ought to consider valuable. The last thing you want is a situation where one partner delivers “value” that the other partner did not consider to be worthwhile.

STEP #3: Build a Relationship Consensus

Before you partner with another rep, be sure to conduct a pre-opportunity meeting with your potential partner. Hash out a working agreement of who is going to do what and when. Build a plan of action to address the opportunity, spreading the work appropriately among the partners who will be contributing (and benefiting) from the successful sale.

Now formalize your agreement with a written outline describing the commitment that each partner has made. Put it in writing, with detailed explanations of activities, expectations and responsibilities of each partner. That’s the road map for your successful alliance relationship, but it’s only a starting place. It will be necessary to make regular “relationship bank deposits” of physical and emotional energy to keep the partnership alive.

If the partnership is to be long-lasting and involves ongoing sales activities, it may be a good idea to have potential problems should be hashed out and a formal contract written and signed. In the case, the sales managers of both firms may need to discussions with their peers in the other companies, in order to reveal potential problems, the nature of the relationship, the scope of the cooperation, and the logistics of the partnering effort.

It may also be a good idea to try to get all the partners using the same CRM system, so that it’s possible for multiple sales reps to collaborate and record activity at a customer or prospect site. Without such a system, it can become impossible to keep sales partnering to from degenerating into battles over account control, where the last rep standing gets the commission.

STEP #4: Execute your commitments

Any partnership between competing reps is likely to be fragile at first, while the individual involved learn to trust. The only way to guarantee that the trust will grow is to make sure that you ALWAYS deliver exactly what you say you will deliver - and then a little more.

The best way to encourage sales partnerships inside a sales environment is to create a “Code of Conduct” that reinforces the partnership behavior and helps to eliminate conflict. Such a code helps create a corporate culture where partnership seems normal.

Here is a sample code to use as a model:

• Be the kind of partner with whom you’d like to partner. This is the sales partnering version of the “golden rule.”
• Ethics and morals are vitally important. Remember: it’s not enough to be honest, you’ve got avoid the appearance of dishonesty.
• Respect others, their beliefs, customs and policies. Every company has a slightly different corporate culture; don’t assume that yours is better or smarter.
• Think as a member of both your alliance and your industry. As Ben Franklin once said: “We must all hang together or assuredly we shall all hang separately.”
• When in doubt, don’t! You’ll probably run across opportunities where you can use the partnership against your partner. That’s like cheating in a marriage. Don’t do it.

STEP #5: Monitor, Measure, and Celebrate

As with any other business situation, great results require ongoing measurement and management. The best ways to do this is through a single CRM system, in which all the partners communicate plans, log activities, request help, and report results. The CRM system tracks what’s happened and generates an audit trail that determines appropriate compensation when the sale is finally made.

But even if you’re not using a CRM system, be sure to consistently communicate to your partner(s) the value you’ve delivered. Ineffective communication is the primary reason that partnerships and alliances fail. You want to have enough communication so that both parties can monitor the relationship both at the “macro” and “micro” level. Then, when challenges pop up, you can quickly work together to address them.

If the partnership develops problems, don’t give in to anger or frustration. Meet your partner more than halfway. If there’s money on the table, dispose of it fairly or offer to buy your partner out. Above all, avoid taking the matter to court. The end result of such court cases is pennies on the dollar for you (if you’re lucky) and a fat stack of cash for the lawyers.

Getting your partnership from initial handshake to a done customer deal requires plenty of “emotional” fuel. The partners will need to allocate and expend resources, time, mindshare and energy to turn the opportunity into a sale. As the sales cycle progresses, you’ll need to invest in building and strengthening the relationship and the level of rapport.

Most importantly, when the sale is won, celebrate - and make sure that the celebration includes appropriate compensation for everyone involved.

SUMMARY:

• STEP #1: Identify Your Strengths and Weaknesses
• STEP #2: Select the Right Partner
• STEP #3: Build a Relationship Consensus
• STEP #4: Execute Your Commitments
• STEP #5: Monitor, Measure, and Celebrate