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Know Where You Stand

Written by Vicki Powers

Knowing your financial numbers as a small-business owner and knowing where you stand is priceless, but sometimes it’s hard to keep track of on your own. Here are a few helpful suggestions to gain control of your finances:

Price Yourself for Profit
Are you making or losing money today? Knowing how to successfully price your services can be tricky business on your own. Tom Buckley, CFO of The Dwyer Group, teaches new franchisees the value of correctly pricing their services in his training class, Show Me the Money. Keith Packer, Glass Doctor franchise owner in Vacaville, California, says changing your prices can be nerve-racking at first but pays off in the end. “Before I became a franchisee, I did what most independents do: price according to whatever the competition is charging. Of course, you never talk to your competition, so you assume if you’re not making any money, they’re not making any money either,” he says. “Even though it takes you outside of your comfort zone at first to do the pricing that the Glass Doctor system teaches, you’ll find that unless you’re willing to get outside your comfort zone, you’ll pretty much stay wherever you’re at.”

Understand the Basics of Finance
Neil Eidel, owner of the Phoenix, Arizona-based Mr. Appliance franchise, stresses the importance for small-business owners to understand financial forms such as income statements and profit/loss statements, all things he learned his first week as a franchisee during Mr. Appliance’s Advanced Training School on Finance. He says it’s particularly important to pay attention to cash flow. “Running out of cash can put you out of business a lot faster than not knowing how much money you brought in last month,” he states.

Watch Your Priorities
For his first 15 years in business, Eidel tried to do everything in his business, and the financial side suffered as a result. His priority, he thought, was doing the work. He paid attention to the books only when he had time, which was about once a year. Eidel wouldn’t know if he made money that year—or even how much—until the “annual” review. You must make reporting cash flow and budgeting a priority, he says, over doing the work.

Track Your Progress
Working as an independent small business, you don’t have the measuring stick that larger businesses may have, such as a staff that tracks financial performance and sets goals. Do you have a goal next year? What do you need to do to reach that goal?

“As a franchisee, Mr. Appliance gives us an advantage that’s very similar to being a big business,” Eidel states. “Collectively, you can see how you do based on the experiences of other companies doing the same thing.”

Today, Eidel looks at his cash flow forecast on a daily basis, which  allows him to make small adjustments before they become a problem.

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