Strategies to Improve Profitability

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Understand your financial statements.

Many business owners struggle to understand their financial statements and how what they are doing is impacting profitability. I once had a business owner tell me they were getting more clients and increasing revenue. However, the cost of sales for each of those new clients was significant, which will cause that business owner to lose money. There are great classes provided by local universities through the extension courses to help you understand financial statements and how they work. I teach a class for the UCI extension program you should consider. https://ce.uci.edu

Increase Revenues

Once you understand financials, look for ways to increase your revenue. Do so knowing what the gross profit will be for every additional dollar you bring in. Some ways to do this is to improve your marketing. Some of this is common sense. Use the right channels to reach your clients and know what those are. I share a basic marketing plan format with my clients, which helps to clarify what they are doing to reach customers and what they are spending compared to potential revenue results. I once had an employee who wanted to spend $10,000 for and event that reached 20 people, and the net they could each bring to the bottom line was approximately $500 each. It didn’t make sense. Not everyone understands the cost and return for every marketing dollar.

Marketing

There are so many important factors to consider when marketing. Are you using the right outreach for your customers? Are you providing the right product or service? Can you look at the demographics and consider reaching more potential customers? Creating and following a marketing plan will put discipline around your marketing and will help with spending your marketing dollars the right way.

Reduce Costs

For every revenue dollar you bring in, only the gross profit goes to the bottom line. In other words, the revenue less the cost of sales will improve your profitability. However, if you save on costs, the effect to the net profit will be a dollar-for-dollar improvement. How do you reduce costs? Watch the efficiency of the process for your product or service. Can you move things around, to enable your staff to operate with less movement? Can you reduce waste? Can you find less expensive suppliers without giving up quality? Ask your staff for ideas. You might be surprised at the results.

Improve Cash Flow

Cash flow is a little different from profitability, however, just as, if not more important. Businesses can be profitable, but not manage cash well, then go out of business because they run out of money. A couple of key points is to monitor your accounts receivable. Make phone calls to your customers who are past 30-45 days. There are many nice ways to ask when the check is going out. And, the squeaky wheel usually gets paid first. Another thing that creates cash flow casualties is inventory. Too little, and you can’t service your customers. However, too much, is like cash sitting on your shelves. Can you narrow your offerings to reduce the use of cash for inventory? Can you get an inventory supplier that requires less time from the order to receipt of inventory so storing inventory is not as necessary?

Try one or all.

Get help with a consultant. If you hire the right person, they can help you identify the most effective ways to improve your profitability. Call Marla Noel, OC Growth advisors. 714-305-9500.

The Art of Delegation

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Delegate to grow the business. Become a better leader

Most people enjoy learning something new. It gives them a sense of purpose or understanding. When you delegate, you help another person learn a new task. However, many people delegate incorrectly, creating problems, distrust, anger, and frustration. If you can relate to one of those words when you attempted to delegate, then you know what I mean. Suppose you do not want to entrust because you don’t want your staff to make a mistake, then good for you. However, you will never grow, never be a good leader and never reach beyond what you are currently doing unless you find a way to automate. This is why many small businesses fail to grow. Delegating well is an art. It is typically not something inherent in any of us. We have to learn how to delegate.

Where to start? Look at your to-do list for the week. Pick something you don’t enjoy. This is a great place to start. It must be something with a start and a stop to provide instructions on how to complete the task.

My assistant helped me better delegate, which was the benefit of sending her to a class to be a good assistant. This person is now running a business, so money well spent. My assistant and I would review my list of things I wanted to complete for the week. If you are not doing this now, it is time to start. If you need help with this, see my coaching options page. https://ocgrowthadvisors.com

My to-do list was typically a page long, if not longer. As we went down the list, she would ask questions about each item and, for some of the tasks, would say, “I can do that.” For each thing she thought she could complete, we would move it to her list. Once we determined the 5 or 6 items she could take off my plate, I explained each task if it needed additional explanation. We would check in on each of the tasks daily or every other day, depending upon how busy we were.

Once complete, I checked her work.  Many of you miss this step. Then, when the job is wrong, you get angry. Guess what. If the work is incorrect, it is your fault. However, if you have charged the same project to the same person multiple times, reviewed with them what needs to be corrected, and they still get it wrong, it is not your fault.

Start delegating carefully. Part of delegating is learning how each person hears instructions and understands the task or job. Pick something relatively simple and select a person who has the necessary skill set to learn the job. I once attempted to have a brilliant person with organizing a kitchen assist me with organizing my office. It failed miserably because that person had never worked in an office before and did not understand the first thing about office work.

I started with delegating communication I needed for several people or events. My assistant typed out what she thought was a good letter. Of course, I corrected it to my style. However, she put the bones on the work and finishing the correspondence was reasonably straightforward. We reviewed the corrections I thought necessary, so next time, she completed the correspondence with fewer revisions.

One thing you might want to delegate is the documentation of procedures. Writing procedures is difficult for so many people, but so important. Ask the person you have chosen for the task to create an outline. Once done, review the outline with the person. Often, steps are missing. Expand on the procedure with details around each step. Again, this must be someone who is used to writing or has training in writing. It is unfair to assume that everyone is capable of writing procedures. If I want to document procedures, and the person performing operations is not a writer or has no business writing experience, I assign a person to them who can write and make this a team project.  

Once the procedure is complete, please review the documentation to verify its accuracy. The adage Trust but Verify is very important to delegation. Ask questions to ensure that nothing is missing. Then, the last step, tell the person they did a good job. See if you get a smile.

To delegate further, review your to-do list with people that work for you. Ask them if there is something they wish to learn. However, understand they may not complete something else on their list.

What is most important in good delegation?

  1. Excellent and thorough instructions (This may depend upon the person you are delegating to)
  2. Develop a method for reviewing the project before completion. Select mid-points to review your instructions.
  3. A thorough review of the complete project
  4. Have a step by step list of corrections for the person working on the project. Do so in a constructive manner.
  5. Give the person you delegated to a pat on the back or encouraging words.

What if the project is a disaster? Yes, this happens. There may be several reasons. The person may not have and may never have the skill set for the job. They may not like the type of work. I work with Predictive Index and use behavioral assessments to determine the kind of work people typically enjoy. They may not have the education or background for the work or may not be capable of learning the position. Whichever the situation, it is never acceptable to demean a person because they can’t do the job. That never gets the job done and doesn’t help the business.

Have a culture of delegation. When I worked with my senior team, I always had a category in our notes for growing their staff. When we discussed the people that reported to them, we determined how each person could grow with a new responsibility or a class. Part of our budget was for courses outside of the business. There are many suitable classes, and it is frequently beneficial for the company to support outside learning. 

Understand the learning or hearing process. Everyone learns differently. Some learn by hearing, some by reading, and some by doing. I once had a consultant teach delegation to my staff, something I thought was vital for them to learn. The consultant instructed the delegators to ask the person they were delegating to “Tell me what you heard.” In other words, repeat back the instructions. This felt uncomfortable to me. I felt if I asked someone, “tell me what you heard,” I would be insulting them until I needed to use this tactic.

I had a person who reported to me who continually messed up projects. At first, I thought it was the way I gave him the assignment. I know I miss steps when delegating and am very aware of this deficiency of mine. I would be careful to be explicit in my instructions. This person was smart and could grasp the nature of the projects I was giving him, so I was confused when he regularly got my instructions wrong. I worked with this person long enough to know we had to work through the blockage. Finally, I started using the method the consultant suggested and, when giving this manager a project, I asked him to tell me what he heard.

He appreciated the opportunity to be sure he understood the project, and I enjoyed the fact that he would understand the instructions and got the project right. Eventually, we joked about it. It was almost like dyslexic hearing instead of dyslexic reading. He indicated that the teachers in school had identified it but done nothing about it for him. If you are having challenges with giving good instructions when you delegate, ask the person to repeat what they heard to prevent bad feelings and frustration from both you and the person to whom you are delegating.

Look for resources that will help you learn how to delegate.

Apply These 5 Principles For Better Delegation (mtdtraining.com)

The Art of Delegating (shrm.org)

Great Leaders Perfect The Art Of Delegation (forbes.com)

Make your business great

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Why participate in your industry association

You can make your business great by participating in your industry association. Industry associations have many benefits. Yes, many of us left our associations during COVID. The Zoom meetings kept us at our desks, staring at the computer scene for hours, making us feel disconnected from humans. However, now, as we are getting back to meeting in person, consider the benefits you get from participating in industry associations.

Industry education and connections

Most associations have educational benefits for you or your employees. In the meetings, you can learn a lot about your competition. I know I did. Successful business owners can’t help but tell you what they did to become successful. I listened. Suppose you are thinking of buying a business or selling your business. In that case, you will get to know the potential sellers if you are buying or the strategic buyers if you are selling. See Marla Noel if you are thinking of selling for help to prepare for a sale. OC Growth Advisors – Your Partner for Success in Growth

Level of Participation

Too often, we participate in our associations and complain about the lack of benefits. If you can join the association board, you can improve the association with your time and talent to benefit the rest of your industry. You will help your business at the same time.

Who makes a difference?

One of the Women Presidents’ Organization members in Orange County, California, is an excellent example of influence in her industry. JoAnne Williams of JWilliams Staffing participated in her business association, BIA, to create workshops during a difficult time. In 2008, JoAnne helped unemployed executives in her industry get back to work. See Real Estate Staffing, Recruitment & Jobs – JWilliams Staffing. JoAnne is a shining example of how a business owner can improve her business and her association with her force of business knowledge.

How Can Women Gain Access to the Boardroom

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Women on Corporate Boards

Corporate boards hold immense power, guiding the strategic direction of companies that shape our world. Yet, these influential rooms have often lacked diversity, particularly regarding gender representation. Here’s why having more women on corporate boards is not just fair but an intelligent business decision. And how can women gain access to the boardroom? Most women will agree that women belong in the boardroom.

Stronger Financial Performance

Recent studies show a correlation between boardroom gender diversity and improved financial performance. A McKinsey report found companies with greater gender diversity on boards have a 25% higher chance of delivering above-average profitability.  I listened to a couple of speakers an unnamed university had regarding diversity. Their take on diversity? It slows down the decision-making process. However, a fast decision is not necessarily the right decision. Board diversity brings a broader range of perspectives and experiences to the table. The results are more effective decision-making. See How to accelerate gender diversity on boards | McKinsey

Diversity of Thought When Women Gain Access to the Boardroom

Homogenous boards are prone to groupthink, where challenges to the status quo are discouraged. Women bring different viewpoints and experiences to the table, fostering a culture of questioning and innovation. This can lead to a better understanding of the marketplace, especially considering women’s vast consumer power.

How Can Women Gain Access to the Boardroom

There are many reasons why women are not as dominant on corporate boards as men. During childbearing, women frequently give up opportunities for the benefit of their children. There are more options available to help with home care. However, not all are financially viable for a young family. Education used to be a reason for women to lack the skills needed to participate in boardroom discussions. However, with women becoming a larger component of college participants, this is no longer an excuse for women to be shortchanged on the lack of participation in the boardroom. Networking and knowing how to network is another limiting factor. We plan to educate women on improving networking skills to enable the right connections to obtain board positions. See OC Growth Advisors – Your Partner for Success in Growth to learn more about Marla Noel and how she can help you and your business.

Role Models and Mentorship

When women see themselves reflected in leadership positions, it inspires future generations to pursue board opportunities. Increased female representation creates a talent pipeline and fosters a more inclusive environment within the company.

Set and Accomplish Goals for 2024

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Meet your goals, get an accountability partner

We are working on the second quarter and heading into the second half of the year. Have you set goals you want to accomplish for 2024? If you have set goals for 2024, are you on track to achieve your goals? Or, do you need to change what you are doing to accomplish more? Many of us are creatures of procrastination. Therefore, we put off what we don’t like to do. We put off calling potential clients if we are focused on sales. Or we don’t provide our employees with their reviews if we have unpleasant topics to address. We can put off so many of the “should dos” and make them “gonna dos”, only we don’t ever get to the gonna dos.  

Set and Accomplish goals for 2024

Get help, every so often, to make sure you accomplish what you say you want to accomplish at the beginning of the year. You want to set and accomplish your goals for 2024. What is the best way to do this? Get an accountability partner. Your accountability partner can help you follow up on and reach your goals. Face it, follow-up to accomplish goals requires discipline. Therefore, if someone is looking over your shoulder and checking with you regarding your goals, you will be more likely to succeed. See the Coaching options Coaching Options – OC Growth Advisors
Marla J Noel

Marla J Noel can be your accountability partner

What Goals?

If you have not developed goals at the beginning of the year, no problem. Start now to develop goals for the rest of the year. If you need to know what this looks like, break your goals into components like money, people, training, or outreach. There are many ways to develop goals, both personal and business. Take time to think about what the year should look like if you accomplish a few more goals. What can you do to make a difference in your business or personal life? What are your goals? If you don’t have any, start making them now.
For the best way to develop an accountability process, go to Traction by Gino Wickman – Get a Grip on Your Business (eosworldwide.com) My most successful clients follow this process. The Best Executive Coach
 

CEO Responsibilities- Set the Strategic Vision

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CEO Responsibilities

Whether you are a CEO as a matter of promotion or because you are an entrepreneur trying to figure things out, the job is the same, and it’s hard. I know. I have been in your shoes. You have many responsibilities and, usually, very little time. However, if you focus your efforts, you can run your business and enjoy it.

Set the Strategic Vision

As a CEO, one of your primary responsibilities is to set the strategic vision for your organization. Setting the strategic vision involves identifying the company’s goals, values, mission, and overall strategy. Your vision should provide a clear direction for the organization and guide decision-making at all levels. Creating and communicating a compelling vision can inspire and align your team toward a common purpose. Include your team in decision-making around the values and mission, and you can obtain better buy-in to lead the rest of the organization.

I had a very long discussion/argument with one of my Vistage buddies about who is responsible for the vision when you have a Board of Directors. He said the Board was responsible. I emphatically disagreed. The CEO must drive the bus, and the direction must come from the person who knows what the road looks like.

Know the Road

To effectively set the strategic vision, you must have a deep understanding of the market, industry trends, and the competitive landscape. Thorough research, analysis of data, and insights from key stakeholders help to inform your decision-making process. You must understand the long-term implications of your strategic choices. They must align with the core values and mission of the company.

Communicate the Strategic Vision

Communicate the strategic vision to your team in a clear, engaging, and inspiring manner. Effective communication from the executive team is where they can support you in driving the strategy. With the executive team’s input and involvement and their commitment and understanding of the strategy, you will successfully implement the vision. Regularly revisit and refine the strategic vision as the business landscape evolves to keep your organization agile and adaptable. An excellent executive coach who understands what you are going through can help a good team with this process.

Board Service by Marla J Noel June 6, 2023

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What does it take to serve on a Board?

Board service is the oversight of a business, whether the company is non-profit or for-profit. A Board seat is a privilege to serve for the betterment of a business. The critical distinction between management of an organization and the Board is perspective. Clearly, management is responsible for the operation and financial success of the business. The Board is responsible for the oversite and should not be involved in the daily operations.

Board Responsibilities

What does a Board Position look like? I will break down the typical Board function and what to expect as a Board member.

Albeit there are many similarities between for-profit and non-profit Board operations. Both follow Board guidelines relating to meeting functions, meeting minutes, and voting policies that are supported by the business’s Operating Agreement or By-laws. Because most Boards require service on a committee as part of Board service, your business background will help determine the appropriate committee for you. Committee work will help you to understand the operations and how you can help to improve the business, which is a key element of Board participation. Attend meetings, ask questions relevant to the topics being reported on and provide input. Again, this is at a high-level and not on day-to-day issues.

Committee work

If you are on a committee, provide input and support for the committee, as required. Therefore, a CPA can serve on the audit committee. An HR specialist can be appointed to the executive review committee. A communications specialist can serve on the marketing committee. Certainly, the committee chair will provide you with the time required and the compensation commensurate with the time input.

Both For-Profit Boards and non-profit Boards are management oversight. Basically, they do not include managing the day-to-day business. Board members must review reports and ask questions of the CEO or CFO during the meetings. If the questions are sensitive in nature, let the CEO know what you plan to ask in advance. Your job is not to make running the business more difficult, but to help, with your area of expertise, at a high level.

Non-Profit
Service on a non-profit board generally requires a commitment of funds as well as time.

Financial:
Non-profit Boards typically require a give or get expectation. The amount of funds depends upon the Board and the organization. Some organizations have two levels of Boards, the voting, which requires the donation of funds by the Board member, or the ability to get funds from friends and family. The secondary level of Board members is non-voting and a lesser expectation of give or get. An excellent example of this is the Alzheimer’s Association, where the non-financial Board participates in advocacy or volunteer functions to support the organization but has no voting rights.

For-Profit

On a For-profit Board, businesses pay Board members for their service. There are a variety of ways this happens. Sometimes the payment is via a funding event, the company goes public and the Board member receives stock. Sometimes the pay is per Board meeting, and sometimes the pay is in both money and stock. The amount of committee work typically dictates the pay a Board member receives. The compensation varies from company to company.

Financial

Financial compensation or the give or get is primarily the difference in serving on a for-profit or non-profit Board.

A board member will be required to attend board meetings. The number of meetings on an annual basis varies and may be monthly, quarterly, or semi-annually. In addition to Board meetings, a board member should participate in committee work. Committees include the audit, the marketing, the compensation committee, or other committees to help the business operations.

Be Prepared: What does it take to serve on a board?

Each Board member must review the information provided by staff before the Board meeting. Typically, the reports require of time and effort by management, and no questions or comments about the information can be disappointing to the management staff.

What is expected of you as a board member?
Before the Board meeting, every board member is responsible to read the reports provided in advance. If I have a question that may embarrass or confuse a staff member, I will wait until I can ask the person responsible or the CEO for the answer privately. I learned this practice from one of my best board members in my company. When he questioned something he thought to be wrong in the financials or the marketing or operations report, he broached the question with the executive team before the board meeting. Then, when the question came up at the board meeting, the executive could respond appropriately. If there was a mistake, the executive had time to determine how to remedy the error.

On the Board versus In the business:

A vital component of any Board service is the distance a board member maintains from the business’s overall operation. Therefore, a Board member must not participate in the day-to-day operations, which is management’s responsibility. Basically, a board member who attempts to participate in the day-to-day operations will undermine management. Learn what it takes to serve on a board. RRO | Versions (robertsrules.org)

Board issues

When the Board feels there are serious management issues and that management is not performing, it is the Board’s responsibility to act and to replace management, if necessary. Therefore, if the Board must replace the CEO, the Board must find a replacement and ensure the business’s operation until a replacement is found.

Ask Questions; What do you need to serve on a board?

Board members must ask questions during the board meeting because it is vital for the oversite process. Of course, the questions should be respectful and appropriate for the Board room. It is frustrating for the executive team for the board members to be void of questions or comments on the material presented. Typically, the board reports require effort by the staff to put together the information, so read the information and provide feedback or questions.

Even experienced people say they have no value for a Board. However, those who have business experience can provide significant value. Every Board can benefit from good business experience, whether the business is for-profit or non-profit.

Roberts Rules of Order
Anyone who wishes to serve on a board can read Robert’s Rules of Order. Although it is boring, it provides important information about how a Board meeting is typically run. To learn the basic rules, order any of the books offered. See www.britannica.com/topic/Roberts-Rules-of-Order. There are a variety of options on https://www.Amazon.com

According to Wikipedia, the manual was first published in 1876 by U.S. Army officer Henry Martyn Robert. He adapted the rules and practices of Congress to the needs of non-legislative societies.
In 2005, the Robert’s Rules Association published Robert’s Rules of Order Newly Revised, In Brief. A third edition of the brief book was published in 2020.

Liability

As I have said, as a board member, you must know what it takes to serve on a board to assist in managing a non-profit or for-profit business. Unfortunately, when something goes wrong, and it is not addressed correctly, you can be liable as a board member. Ensure that your organization is covered by D & O insurance. An individual can also obtain insurance to protect themselves from claims. Because I am not an insurance expert contact your insurance broker if you have questions about your liability.

For more information about Board Service, please contact me at noel@ocgrowthadvisors.com. See: OC Growth Advisors – Your Partner for Success in Growth

Guidance For Becoming a Better Manager

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Guidance For Becoming a Better Manager

by Marla J Noel

What are the Expectations?

For all staff at a clerical or beginning level, create a day-to-day set of expectations or tasks. Describe what the job looks like. Indicate what do you want out of the work on a daily basis? Don’t negatively judge employees for poor performance if you do not provide expectations, both written and verbal.

One of my team, John, became frustrated with an employee who was a sharp individual, but failed to meet John’s expectations.

“I told them what I wanted,” John said in disgust when he didn’t get results. “I gave them the instructions last week. Why are they messing up now?”

John gave the employee the instructions verbally. However, he did not write down instructions or remind them, verbally and in writing. Shame on John. People typically learn by hearing, reading or seeing a demonstration. John neglected to put instructions in writing.

“I expect them to take notes while I’m training them,” John complained. However, taking notes, for some people takes them away from understanding the instructions while they are listening. Think about it. Can you understand instructions and write notes at the same time? I cannot, and I’ve been told I’m fairly smart. Before telling a person how to perform a function or task, provide written instructions for the employee to follow while they listen to you or an instructor.

Put It In Writing

Even experienced individuals need a good clear understanding of the task. Also, t

Teaching Management Topics

hey also need a reminder of policies, procedures, and expectations, both verbal and written.

Putting instructions in writing is time-consuming. However, if you document step-by-step procedures for a job function, it will be a good training tool and will be available for others in the same role. Written instructions are a good set of procedures for your business. Therefore, a set of written procedures for every role or function is a great business practice.

Methods of Learning

Everyone learns differently. People learn by hearing, reading, doing, or some combination of the three. Someday, we will identify other ways people learn. If I “tell” employees my expectations or describe how to do the job, and they learn by reading, I will be frustrated at their inability to learn and perform the job.

Provide a list of tasks, along with a clear definition of what to expect from employees daily. Give them a step-by-step set of instructions on how they perform each task. Instructions or procedures must be step-by-step. Train on the task occasionally to remind the employees for how each task is performed.

One of my clients provides training videos to all employees. What a great resource. This client learns by hearing, not reading. The instructions are not written for those who do not learn by hearing. As a result, the business owner is consistently disappointed by the employees’ inability to perform the work. This client experiences significant turnover. The frustration in this environment is tremendous. Document all procedures and give instructions both verbally along with a demonstrated to your staff.

Train on procedures

Find a good Executive Coach/ Trainer in your area to train on procedures you want followed. Do this monthly or quarterly for good results.

See:OC Growth Advisors – Your Partner for Success in Growth

 

Why financial statements

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Understanding financial statements is essential for small business owners. They are critical for a business owner to keep the business profitable and growing. Financial statements provide a comprehensive look at a company’s financial health. They will help spot potential problems before they become too big to handle. In this article, we’ll go over what financial statements are. We will learn why they are important, and how to use them to increase profitability.

What is a financial statement?

A financial statement is a document that provides an overview of a company’s financial position. It includes information such as assets, liabilities, income, expenses, and cash flow. Financial statements are typically prepared by an accountant or a financial analyst, and they are used by business owners, investors, and other stakeholders to gauge a company’s financial health.

Financial statements are typically prepared on an annual, quarterly, or monthly basis, depending on the company’s needs. I encourage my clients to prepare and review their financial statements monthly.

The importance of understanding financial statements to small business owners

Small business owners rely on financial statements to monitor their company’s performance. Financial statements provide useful insights into a company’s financial health, and they can help identify potential problems before they become too big to handle. Additionally, financial statements can be used to benchmark performance against competitors, track trends, and make more informed decisions. Financial statements also help small business owners better understand their financial position and make decisions about how best to allocate resources.

The four basic financial statements

There are four basic financial statements: the balance sheet, the income statement, the cash flow statement, and the statement of changes in equity. Each of these statements provides a different type of information about a company’s financial position.

Balance sheets

The balance sheet provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time. It is important to understand the balance sheet as it provides insights into a company’s financial position.

The assets section of the balance sheet includes information on cash, accounts receivable, inventory, and other assets. This helps to identify any potential problems with a company’s assets. For example, if a company has too much inventory, this could be a sign of inefficient operations. If a company has a high accounts receivable balance, this may be due to ineffective methods of collections or sales to risky customers.

The liabilities section of the balance sheet includes information on loans, accounts payable, taxes, and other liabilities. This helps to identify any potential problems with a company’s liabilities. For example, if a company has too much debt, this could be a sign of financial difficulty.

The equity section of the balance sheet includes information on capital contributions, dividends, and other changes in equity. This helps to identify any potential problems with a company’s equity. For example, if a company is not making enough money to cover its expenses, this could be a sign of financial difficulty.

Profit and loss statements or income statements

The profit and loss (P&L) statement is an important financial statement that shows a company’s income and expenses for a given period of time. It provides insights into a company’s profitability and helps identify areas where a company is not making enough money.

The P&L statement includes information on sales, cost of goods sold, operating expenses, and taxes. It also includes information on non-operating income and expenses, such as interest income and interest expense. By understanding the P&L statement, small business owners can make informed decisions about how to increase profitability.

Cash flow statements

The cash flow statement is an important financial statement that shows how much cash is flowing in and out of the business. The business owner can identify any potential problems with cash flow, such as not having enough cash to cover expenses or maintain equipment necessary for the business operations.

The cash flow statement includes information on cash inflows, such as income from sales, and cash outflows, such as expenses and taxes. It also includes information on non-cash items, such as depreciation and amortization.

Statement of changes in equity

The statement of changes in equity shows the changes in a company’s equity over a given period of time. This includes information on capital contributions, dividends, and other changes in equity.

Analyzing financial statements – key ratios

Financial statement analysis involves looking for trends over time and identifying areas of improvement. To do this, small business owners can look at key financial ratios, such as the current ratio, debt-to-equity ratio, and return on assets ratio.

The current ratio is a measure of a company’s ability to pay its short-term liabilities. A high current ratio indicates that a company is in good financial health, while a low current ratio indicates that a company may have trouble paying its bills.

The debt-to-equity ratio is a measure of a company’s debt relative to its equity. A high debt-to-equity ratio indicates that a company is highly leveraged. A business owner must understand the impact of using debt versus the influx of cash by the business owner.

The return on assets (ROA) ratio is a measure of a company’s profitability relative to its assets. A high ROA indicates that a company is generating a lot of income from its assets, while a low ROA indicates that a company may not be generating enough income from its assets.

Strategies for increasing profitability.

Once a small business owner understands their financial statements and key financial ratios, they can develop strategies to increase profitability. Here are some strategies to consider:

  • Increase sales: Focus on marketing, increasing product or service offerings, and explore new markets.
  • Reduce costs: Streamline operations, improve efficiency, and negotiate better deals with suppliers.
  • Increase cash flow: Increase collections, reduce accounts receivable, and improve inventory management.
  • Optimize pricing: Analyze customer data, track competitor prices, and adjust pricing accordingly.

With these strategies, small business owners can increase profitability and grow their business.

Conclusion

Financial statements are an essential tool for small business owners. They provide a comprehensive look at a company’s financial position and can help spot potential problems before they become too big to handle. Additionally, financial statements are used to benchmark performance against competitors, track trends, and make more informed decisions.

Understanding financial statements is essential for small business owners. By understanding and analyzing financial statements as well as key financial ratios, small business owners can identify areas of improvement and develop strategies to increase profitability.

If you’re a small business owner looking to get to the bottom line and unlock the secrets of profitability, understanding financial statements is essential. Learn about your money and start taking control of your business’s financial future. Contact Marla Noel at OC Growth Advisors for more information. Go to the UCI extension course UCI Division of Continuing Education (Homepage) for Marla’s class to learn more about financial management for your business.

Management and Leadership

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The Difference Between Management and Leadership

What is the difference between management and leadership? We want our executive teams to be great with both management and leadership. I probably made every mistake in the book as a manager.  However, I never wanted to do anything poorly. Therefore, I took it upon myself to read business books, get an MBA, and join peer groups to learn from others.

My distinction between the two is;

1) Management is the control of work or processes. A good manager puts procedures in place to drive the processes and then measures the outcomes.

2) Leadership motivates, coaches, and develops people to complete the processes or work efficiently. In addition, it involves the ability to create or improve job satisfaction. You can be a manager without being a leader.

How does one improve?

How does one improve their skills as a manager or a leader? I spent many years in management doing just that. I focused on how to be a better leader, hence the years of reading business books and studying leadership skills. Did I achieve my goal? To some, yes, and some will say no. You will not be a great leader to everyone. Remember, egos are a part of human nature, and some people will look for excuses for poor performance instead of accepting responsibility.

Develop your people as both managers and leaders.

You should develop your people as both managers and leaders. As a manager, I want the staff to understand their jobs. A good manager can articulate the expectations of the job. Then define tasks to complete the job, as well as the measurements that define success, KPIs. Go to https://www.eosworldwide.com and got the book Traction, a great business book for companies of any size. Part of management is to understand timing with any job function. We must plan the job, step-by-step, and help employees execute.

If work is incorrect or not completed timely, the manager must find out why and fix the problem. A good manager will look for better ways to get the job done and improve efficiency. Is there equipment to help the processes? We must evaluate the practicality of purchasing the equipment. Part of what made my business better was training. This involved an annual plan for training on procedures, management, and leadership.

The art of leadership is not natural for many.  A good leader must constantly teach, coach, and develop people, which includes training on delegation and listening skills. We must remind managers about coaching to help their staff get to the next level.

Training for Culture

In addition, training for culture is a component of good leadership. Both excellent internal and external customer service are critical. Therefore, I assist CEOs in creating a vision for employees. And, I help them have conversations about the employee’s part in that vision. Good leadership is finding a way to have employees work for the organization’s vision, not just for the pay or benefits. See ocgrowthadvisors.com for services or email noel@ocgrowthadvisors.com.

Make Hiring Easier

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Hiring is so difficult these days

We need the right tools to help us to make hiring easier. Predictive Index is one of those tools. The assessment only takes about 15 minutes and provides reasonably accurate results. My clients who use Predictive Index tell me that using Predictive Index simplifies the hiring process.

How many times have you hired someone just like you?

They share your vibe, and you can relate to them. The problem is that they are not the right person for the job. You are innovative and agile, looking for the next best idea, and good with change. But the type of person you need can do the steady work, the same thing every day with great accuracy. That is not you. But that is the type of position you are looking to fill.

Many of my clients experience the same frustrations.

They hire someone they like, only to find out the new employee cannot do the job. They go through the hiring process so many times. They spend a lot of money on training people that will not be part of their team. See https://ocgrowthadvisors.com.

Use a Behavioral Assessment Tool to make hiring easier

With Predictive Index they see where the person is compared to the type of work they need. It is much easier to determine who to interview and hire. The right person in the right position is a great way to grow your business properly. Predictive Index can help.

How can using Predictive Index help you to make hiring easier?

If you are interested in learning how Predictive Index can help you, please send me an email, and I can help you understand how this excellent hiring tool can work for you. My clients use Predictive Index to determine which candidates to interview for the job. They also use Predictive Index to see how their current employees align with their strategies. It is such a great tool for running a business. see https://app.predictiveindex.com/ or send me an email to noel@ocgrowthadvisors.com.