You have been in business for some years, and your team of employees and/or contractors keep your business in motion. While business is doing well (sales have increased year over year) you wonder if you are doing enough to run a healthy business that can scale.
According to Houzz Staff Economist Marine Sargyan, “Professionals across industry sectors report slower business activity in Q3 2022, citing increased costs of labor, products, and materials, shortages across all aspects of the business, and customer concerns about cost.”
The question is then what effect your current business practices and patterns have on the long-term sustainability of your business. Are these practives creating stress for you as a business owner, depleting the business cash flow, decreasing your business potential to scale?
In this blog we identify four areas that many business owners can't explain comfortably or simply do not know. These areas are not directly correlated to making more sales ... let's start. 1.🍃 Not knowing your overhead or fixed cost: This seems like a basic concept- know your monthly overhead costs, but you will be surprised to know that many business owners like yourself do not know how much they spend to keep the doors open every month. How do you determine your overhead cost? Grab your Profit and Loss report and add all those expenses that are not in direct correlation with projects – Things like rent, software subscriptions, and some of your payroll.
2. 🍃Not knowing your business credit limit: How much credit does your business currently have access to? How do you get this number you ask? Add the credit limits on all the business credit cards you own. Don’t forget to include any line of credits your business may have. Also, business owners tend to overlook the overdraft protection in their business chequing accounts. If you do not have overdraft protection, make sure to talk to your bank account manager and request one. It will only cost you if your bank account is overdrawn.
3. 🍃Not knowing your Payables: Do you owe taxes to CRA with respect to previous periods of GSTHST, payroll, or corporate filings? Many business owners often overlook these overdue balances. To get up-to-date balances log in to the My Business CRA webpage. And if you have not created a business account with CRA let this, be a reminder to get to it. We hear you... being behind on your business tax obligations is a source of shame and anxiety. Rest assured that this first step can be the beginning of the change.
4. 🍃Not having standard practices around collecting Receivables promptly: Many #interiordesigners and #architects collect funds from their clients at the onset of the project. This is a great business practice that provides an assurance of commitment from your business to your clients and contributes to the #cashliquidity of your business. We explain client deposits or retainers in more depth here.
Do you consistently and judiciously start projects with retainers/deposits? What rule do you apply? A percentage based on the project at hand, a fixed fee, or different approaches depending on a series of factors? Be honest with yourself and take note of what you typically do to address the receivables situation.
In summary, a business owner should be able to comfortably describe or talk about the following:
The total monthly Fixed Cost of running your business
The total amount of credit available to your business
The most up-to-date amount of CRA liabilities overdue
The percentage or fixed fee that you collect from clients
All this information will allow you to start understanding the current practices and patterns that you carry on for your business. In our next blog, we will discuss how to use this information to transform current practices and patterns so your business can achieve financial success and scalability. Stay tuned! If you'd like to learn more, click here to contact us. Comment below. Is there a pain point we haven't listed?