Have you ever gone into a doctor’s office and received a prescription without talking to a doctor? Of course not! A doctor’s role is to ask you a series of questions and run some test if applicable before giving you a diagnosis. Well it works the same in the business world.

You have to run a series of tests, do some analytical work and hopefully you will come away with a prescription for success. One of the best tests you can do is to benchmark your company’s financials against a comparable set of peers. Benchmarking also helps you in determining where to get financing. Banks will run the same type of analysis to determine the viability of your business if you are looking for a loan. Most businesses conduct a comprehensive audit once or twice a year. Like health care it is good preventive medication.

Understanding Your Financial Statements

The three most important financial documents for most businesses:
*Income Statement or Profit and Loss (P&L)
*Cash Flow Statement
*Balance Sheet

Income Statement

Use the income statement to compare sales and expenses to previous periods as percentages. By viewing numbers as percentages, you’ll have a better perspective on what’s actually taking place over time. To get the percentage, divide expense items by total sales. This will help you compare your business and expense items to others in the same industry. Your lender will look for these percentages.

Cash Flow Statement

Every business must be profitable to last. Cash flow can be more important than a profit on the Profit and Loss Statement. You may be profitable at the end of the year, but if you don’t have cash when you need it during the year, you won’t make it. You can’t pay payroll taxes with accounts receivable.

Use the cash flow statement to record actual sales revenue received and expenses paid out during the month. Do this over the past year and you’ll be able to project next year’s, or next month’s cash needs. This will help you know cash shortfalls, and when and how much financing you’ll need, and when the money will come in to pay back the loan.

Balance Sheet

This will give you a picture of your business’ financial condition at a specific point in time; as of the date of the financial statement. It will show assets, liabilities and net worth. Lenders like to see a business with solid net worth.

In addition to the financial statements you should also consider reviewing some financial ratios. Here are some of the ratios that are widely used:

Liquidity ratios measure the ability of a business to meet its obligations as they come due.

Current ratio (current assets/current liabilities) measures the firm’s solvency by indicating its ability to pay current debts from assets. Typically banks like to see at least 2.0.

Quick ratio (current assets — inventory)/current liabilities) measures how the most liquid assets can be used to meet current debts. For a sound business bankers want this to be above 1.0. Leverage ratios measure how much of the company’s financing is supplied by the owners and how much by creditors.

Debt ratio (total liabilities/total assets) measures the percentage of company assets financed by its creditors. The higher the ratio (1.0 would mean 100 percent of the assets are financed by debt), the greater the risk of default. Owners like this number to be high, but bankers want it to be moderate or low.

Debt-To-Net-Worth Ratio (total liabilities/net worth) compares what the business “owes” (total debt) to what it “owns” (net worth). If it is below 1.0, the firm owns more than it owes, and vice versa above 1.0, at which point creditors will be hesitant to lend more without an infusion of equity.

Operating ratios help evaluate performance and how effectively the company is employing its resources.

Average Inventory Turnover (cost of goods sold annually/average annual inventory) indicates how fast merchandise is moving through the business. A number in the 6-12 range is probably adequate (for example, a value of 9 would indicate your entire inventory is “turning over” nine times a year).

Average Collection Period Ratio ((Accounts receivable x 365 days)/ annual credit sales) is an indicator of how many days your business is taking to collect its accounts receivable. If you give terms of net 30 days and this ratio is 58 days, you are providing interest-free loans to your credit accounts. Since you probably can’t afford to do this, try for less than 45 days.

Performance ratios indicate how efficiently your business is being managed and how successfully the firm is conducting business.

Return on Assets, or ROA, (net profit after taxes/average total assets) is probably the single most widely used measure of business success. It indicates the productive use of business resources. Compare this to your industry average.

Return on Equity, or ROE, (net profit after taxes/stockholders’ equity) measures the return earned on the owners’ investment. Compare yours to the average for your industry.

Return on Sales, or ROS, (net profit after taxes/net sales) measures the profit earned as a percentage of sales. If your ROS is below the average for your industry, your prices are too low and/or your costs are too high.

Word of Caution

We highly recommend that small businesses run a financial comparison against their peers at least once or twice a year. Otherwise how do you know whether or not you are doing well? Many small businesses think they were doing well because they had growth and were well compensated, but when they reviewed their relative performance they learned that they could be doing so much better.

However, comparing yourself against a group of peers has its limitations. Even companies in the same industry and about the same size can be so different so do no shut down plants or close a store because you see some troubling information. This analysis is meant merely to provide you some data points that help provide you with some ideas on where you could potential improve.

Albert Einstein

Albert Einstein wasn’t a business person but you would not know it looking at this quote. As any professional knows by delivering value to your clients and exceeding your client’s expectations, you will be paid dividends. The dividends we are going to discuss in this newsletter are referrals.

Referrals remember them? Too often we spend time worrying about blogging, using autoresponders, ezines, advertising, and we forget about the best way to build your business – through referrals. This is one of the best and most effective ways build your pipeline. Below are 7 quick tips to give your efforts a jump start:

Turn the Tables
Develop your referral sources by turning the tables. Don’t call or write potential sources to set up an appointment with the objective of asking them to refer business your way. These valuable sources will avoid you like the plague, instead, set up an appointment to solicit their advice and counsel on an issue of relevance to your practice or intellectual/professional development. People are flattered when asked to influence your thinking. In the course of your meeting you will obviously get around to explaining what you do and how you obtain business. You can plant the most subtle suggestions about your receptivity to their referrals (or direct business) and harvest the benefits later.

Want Referrals Sometime Don’t Refer

Never refer another professional to a client or others in whom you don’t have complete trust and confidence. One of the surest ways to hurt your own referral opportunities is to be seen as a person whose judgment is less than entirely appropriate and capable of being relied on.

Cultivate and Grow the Relationship

Unless specifically requested or encouraged to do so, the first communication (and perhaps the second and third) following the meeting of a new referral or direct business source should not be a solicitation to provide you with business or professional advantage. The best and most meaningful referrals come from having established a professional relationship. Don’t jump on potential opportunity to fast. You could hurt your future opportunities.

Now is the Time

Don’t postpone the development of a referral marketing system and strategy because you are too busy or too successful. Time and energy expended on developing a strong referral base will pay off handsomely, but the best results will accrue over time. The time to build a solid source of referral business is not cwhen you need business, but when you don’t need business.

Become a Man or Woman of Value

Join one or two professional or trade associations comprised of your prospective clients and referral sources. Do so only if you are willing to become active, noticed and powerful in the association. Work your way up the power structure and contribute generously to be noticed and seen as a resource. Avoid wasting
valuable time simply being an unnoticed member of many organizations.

Contribute to Your Success and Your Referrals

Referrals are made to those who are perceived as giving and not just taking. You should be perceived by others as a meaningful contributing member of the profession, not just someone seeking to profit. Meaningful, generous and significant contributions in the form of publishing information, participating in industry and/or professional educational and research endeavors, assisting the less fortunate in ways appropriate for your abilities, etc. help create an environment which encourages referrals.

Above All

To be effective, a referral must be both compelling and enthusiastic, in motivating others to refer, you must not only engender an almost religious zeal about your abilities, but an equal faith in your ethics, standards and values. Avoid any activity which detracts from your professionalism or which suggests that you are in need of the business which results from referrals received.

Is it too easy to leave your site?

What does your site look like? If it isn’t pleasing to the eye, then most vision-weary web surfers will go for the mouse and click away fast. There are a lot of visual turn-offs you have to consider in designing your site.

You’re not saying what they want to hear.

If the front page of your web site is just an advertisement for your product, you will lose the 95 percent of visitors who come to your site because they’re interested in your topic (and not necessarily your product). In order to attract and keep visitors, you need more than just sales copy. You need substance. Most research shows that you have less than 5 seconds to convince a user to stay.

Looks Aren’t Everything (But They Sure Don’t Hurt)

A successful web site combines appealing looks with meaty content that keeps potential buyers exploring your site. The longer they stay in your domain, the more likely they are to buy! Follow these tips for hanging your web site in the stratosphere of success.

Go easy on the graphics

Sure, images and flash presentations look great-but in most browsers a graphics-heavy page takes a long time to load, and buyers won’t hang around to wait when there are plenty of other options available.

Choose a font style that’s easy to read If you’re selling a book on relationships, putting all your web copy in Edwardian Script ITC will not get the romance juices flowing. It will, however, cost you sales

Teach them something

Provide more than just thrilling monologues about how great your product is. Write articles on your topic or reprint articles from internet databases. After spending half an hour reading through exciting and informative pieces of your topic, they will want to learn more.

Show your marketing savvy by providing a sign-up box or link for your newsletter, e-zine or autoresponder.

Keeping in Touch with your Virtual Assistant

You need to get your marketing message out there in front of the customers multiple times. Other than getting them to come back to your site every day, how can you do this? Use an autoresponder. These are perhaps one of the most powerful internet marketing tools available. With autoresponders you can send a series of messages to people who are interested in your topic, by simply adding their e-mail address to your list. The process is completely automated; the messages go out by themselves at preset intervals you determine.

Shakespeare was a master at telling stories.  He knew the two most important parts of every story are the beginning and the end.  These are the times that people are listening more closely and tend to remember. The play Macbeth starts with a scene in a desolate place with raging thunderstorms where the Three Witches meet to predict the future.  Three witches and a thunderstorm – that should get your attention.  As the play concludes MacDuff enters the castle with Macbeth’s decapitated head and hails Malcolm as the new King of Scotland – not an ending one would soon forget.

Whimper or Bang it’s your Choice

A mistake that is often made in business speeches is that they often end with a whimper instead of a bang.  That is because the speaker often ends their speech with,“Are there any questions?”

There are two problems with this question.  The first is that you never want to end a presentation on question since the beginning and the end of the speech is where your audience pays the most attention and you should use that time wisely.  After you finish with the questions, take the time to reiterate your key messages or say something like, “There is one thing I want you to remember when you walk out that door today ……”  The second problem with the question is that it is a closed question. Someone can answer yes or no to it.  You need to ask an open question like, “What types of questions do you have?”

If you have the dreaded silence after your speech try saying something like, “There are no questions about my speech? Ok then, I’ll start taking personal questions.”  That usually get the audience to relax and people begin to raise their hands.  Another way to get questions started is saying things like, “The last time I gave this speech I got a number of questions about ……. let me take a few minutes and share my views on that topic.”

The Prior Speaker just Stole your Speech:  What do you do? 

Sometimes it is hard to avoid saying many of the same thoughts and ideas the previous speakers shared.  However, here are some comments you can make which will add a little humor to the situation.

• I think I should just take your questions because _______ stole my remarks. I was going to give you a long presentation on _________, but you just heard a better articulation of it than I can possibly give

• As I sat here and listened to _______   presentation to you I thought of the time when a Senator had to appear on the same stage as Mark Twain. Mark Twain got up and gave his presentation, and there was warm applause for that. The Senator frankly didn’t know what to say at that point. So he got up and he said, “Mr. Twain and I had an agreement before we came here. We swapped speeches this evening. He has just given you the speech that I wrote which was so warmly accepted, and he has given me his, but unfortunately I have lost his and I can’t remember a word he was going to say.”

The above information is an extract from The Business Speech book, written by one of our principals, available at Amazon.

Pay-Per-Click is a simple type of paid advertising that most search engines, including some of the largest ones, now offer. It requires a bid for a “per-click” basis, which translates to your company paying the bid amount every time the search engine directs a visitor to your site. There is the added bonus that when a per-click site sends your website traffic, your site often appears in the results of other prevalent search engines.

As with all marketing campaigns, there are advantages and disadvantages. If you understand the process and monitor your pay-per-click campaign frequently, it can be very effective. One of the greatest advantages is that you never have to tweak your web pages to change your position in search engine results, as you must do in a typical SEO campaign. What you do have to do in a pay-per-click campaign is pay a fee.

Another advantage is the simplicity of the pay-per-click process. You just bid and you’re up and running. It doesn’t demand any specific technical knowledge, though the more you know about search engines and keywords, the easier - and more effective – the process will be.

The downside is that pay-per-click is essentially a bidding war. A higher bid than yours will lower your position on search engine results. This means that you will have to raise your bid to regain your position – which can obviously become quite expensive, especially if you are
bidding on a popular keyword.

In order to determine if pay-per-click is a cost effective form of marketing for your business, you must do some computing to figure out how much each visitor to your site is worth. You can compute this value by dividing the profit you make on your website over a given period of time by the total number of visitors for that same time period. For example, if your site made $5,000 in profits and there were 2,5000 hits, each visitor would be theoretically worth 50 cents. The basic formula is profits divided by visitors.

The figure of 50 cents per visitor is the point at which your business breaks even. The idea, of course, is to show a profit, not to merely cover your costs. Therefore, you are aiming at a figure less than 50 cents per click.

Be aware that the most popular keywords often cost considerably more than 50 cents a click. The only way around this is to bid less for these phrases or you will be paying too much for each individual hit.

The key (pun intended) to success is to learn everything you can about search engine keyword research. The good news is there isn’t a limit to the amount of keywords you can add to your bid because additional keywords do not add additional cost. This translates into a lot less hassle for you because there is no need to optimize your site to index a particular set of keywords.

Obviously, some keywords are much more effective than others are, but they will not cost you anything except time to set-up your account in your pay-per-click bid. Of the popular search engines that offer pay-per-click, one called Overture provides an online tool that will give you the data on how often particular keywords are entered into their search engine. They also offer suggestions for keywords after you enter a description of your site.

In pay-per-click, this written description is crucial. You must understand that the object of your description is not to generally attract visitors, but to be as specific as possible so that only those visitors who are likely to buy your service or product go to your site. You must use expert marketing copy to guarantee that your description is both precise and enticing to attract the most ideal candidates to your site. This description is your most powerful tool to insure that your bid is profitable.

Another essential element of pay-per-click advertising is that you constantly monitor your bid. It is very important that you bear in mind that the results of the top search engines providing pay-per-click advertising, which are Overture and Adwords Select, usually appear on other popular search engines. Because of this, the competition for top ranking is intense, and very often you will find that the bidding price balloons too high for pay-per-click to yield a profit.

If this happens, it is advisable to withdraw your bid on that particular keyword and try another one. Remember: when you pay too much per click to make a profit, you are in essence losing the bidding war.

Since losing is not acceptable, you must have a plan in place to closely track the effectiveness of your keyword. It is advisable to monitor your keywords on at least a monthly basis.

Not only is careful monitoring important, but the analysis of visitor behavior can produce invaluable knowledge about consumer motivation, habits, and trends. Expert monitoring and consumer analysis is essential to your overall business needs, and will also insure that your pay-per-click campaign is a success.