Six secrets to small-biz financial security
How to draw the line between personal and professional
By Bob Rhyme
For a small business owner, it can be hard to draw the line between what’s professional and what’s personal. After all, you’ve used countless hours and resources of your own to build your business. But when the lines between your business and personal finances blur, there can be problems and confusion.
To avoid potential headaches, consider these important points when evaluating your financial position.
Be realistic about all of your finances. As with any financial matter, planning is of the utmost importance. Consider where you want to go in both your professional and personal lives and how you will get there.
You need a plan to grow your business, so set concrete goals for growth through the years. You’ll also need a plan for retirement to ensure that you’ll have the resources to live your desired lifestyle once you finish working. By employing a team of experts who are well versed in both the personal and business side -accountants, attorneys, bankers, financial planners-you will be more likely to realize your goals and maximize value.
Try not to overdo personal expenses at the expense of your business. Many business owners run personal costs through the company as business expenses to reduce taxes on their individual return.
Running the cost of cars, vacation homes or non-business travel expenses through the business can reduce the value of the business by showing less profitability. Remember, businesses are generally valued at a multiple of the company’s net-profit.
Avoid using your business as your personal piggy bank. Just as you should curb the impulse to run personal costs through your company, don’t use the company as a mine for your personal finances. Keep your overall compensation reasonable to make sure your business remains well-capitalized. This will help you grow the business over time and facilitate any future sale.
Think about diversifying your assets. For many business owners, the business is their biggest asset-possibly up to 80-90 percent of their net worth. But it’s important to diversify your assets.
Over time, try to build a portfolio with a good mix of assets by making the most effective use of qualified and non-qualified retirement plans as well as potential use of business real-estate. This will provide more security to your portfolio by reducing the likelihood that all of your proverbial eggs are in one basket.
Share your growth of profits with key people most responsible for that growth. Consider implementing a plan that retains and rewards the key management team for their role in growing your company.
Make sure the benefits in the plan vest at the same time you are prepared to exit the company. Benefits offered to key people can be informally financed with a variety of financial tools including Corporate Owned Life Insurance (COLI).
Use legitimate tax strategies within the business to help your personal finances. You can use a number of options within the business structure to provide for your personal finance needs and those of your employees, which in turn can help attract the best people and grow the company.
In addition to offering a qualified retirement plan, consider adding a non-qualified plan, for your top level people to attract, retain and motivate. Consider using benefits like long term care and life insurance as well. Long term care benefits for yourself, your spouse and key management may offer significant tax advantages due to recent legislation.
If you want to provide key employees life insurance, consider using specifically designed life insurance policies that contain both base premium and additional premiums as a method of accumulating tax-deferred savings for use in retirement.
If you take good care of your business, it can take care of you by providing a sense of freedom and accomplishment, as well as income and a strong asset on your balance sheet. And while your business is tied to your private life, maintaining a balance can be the best way to maximize not only your finances, but your happiness.
This article was prepared by Northwestern Mutual with the cooperation of Bob Rhyme, CLU, ChFC, AEP. Rhyme is a Wealth Management Advisor with Northwestern Mutual-Denver, a subsidiary of The Northwestern Mutual Life Insurance Company, Milwaukee Wisconsin.
Tuesday, October 20, 2009
Monday, October 5, 2009
Defining Your Prospecting System
Step 1: ____________________
This is usually your first opportunity to introduce what you do and schedule time to learn more about your prospective client. This will likely be a brief meeting where you present a basic introduction to your services and request an opportunity to learn about your prospect’s needs.
Step 1a: ___________________
Many people choose to add an intermediary step here. This is not quite “fact finding,” but more of a get to know you session, arriving at some acknowledgement of PAIN. More simply, the prospect indicates that there is indeed a problem and they are interested in allowing you to explore further via a more detailed discovery meeting.
Step 2: ____________________
The “All About Your Prospect” meeting. This meeting is often referred to as “Discovery” or “Fact Finding.” The purpose of this meeting is to determine whether you, your company and your services are right for the prospective client. You determine whether the prospective client is right for you and your business. If right for each other, the only remaining question is what if any services you might provide.
Step 3: ____________________
Once you have gathered sufficient data to determine the right product or service to present, your next step is often to prepare and present the solution you believe will achieve your prospect’s desired goals. This meeting is about getting a decision.
Step 4: ____________________
The prospect has acknowledged the problem. You have presented a solution and they agree that it is the right solution. You are engaged. Now you must deliver. This step is often called implementation. It is the step that is necessary if you are going to get paid.
This is usually your first opportunity to introduce what you do and schedule time to learn more about your prospective client. This will likely be a brief meeting where you present a basic introduction to your services and request an opportunity to learn about your prospect’s needs.
Step 1a: ___________________
Many people choose to add an intermediary step here. This is not quite “fact finding,” but more of a get to know you session, arriving at some acknowledgement of PAIN. More simply, the prospect indicates that there is indeed a problem and they are interested in allowing you to explore further via a more detailed discovery meeting.
Step 2: ____________________
The “All About Your Prospect” meeting. This meeting is often referred to as “Discovery” or “Fact Finding.” The purpose of this meeting is to determine whether you, your company and your services are right for the prospective client. You determine whether the prospective client is right for you and your business. If right for each other, the only remaining question is what if any services you might provide.
Step 3: ____________________
Once you have gathered sufficient data to determine the right product or service to present, your next step is often to prepare and present the solution you believe will achieve your prospect’s desired goals. This meeting is about getting a decision.
Step 4: ____________________
The prospect has acknowledged the problem. You have presented a solution and they agree that it is the right solution. You are engaged. Now you must deliver. This step is often called implementation. It is the step that is necessary if you are going to get paid.
Thursday, October 1, 2009
You Can Predict Your Sales Success!
The most difficult thing about our business is predicting the future. How much money will I make this week, this month or this year? How many prospects do I need in my “pipeline” to ensure that I achieve my financial goals? Where am I in the process with each prospect? Creating and managing a pipeline is integral to your continued success.
For those of you that use a CRM (contact management software), you probably have access to a pipeline management tool that will keep you on track. The downside of many CRM’s is that they make this process far more complicated than necessary. Let’s take a moment and talk about the important elements of an effective pipeline:
1. An effective pipeline allows you to define your sales process. Every business has a unique sales process:
a. Initial call
b. Fact finding
c. Sales presentation
d. Follow up
e. Close
Your process might look like this or have some variation. Take a moment and review your successful sales from start to finish. Identify the steps that got the business closed most quickly. Put them on paper.
2. Assign percentages to each step based on the likelihood you will close the business. An initial call might only provide you with a 10% likelihood that you will close the business. While I recognize that this might only be a guess on your part, it is a starting place.
3. Ensure that your pipeline includes at least three variables. Because a pipeline is initially an estimate of your likely sales success, it is important that you have variables that will provide a reality check. These variables should include things like estimated sale, estimated time to close and estimated percent likely hood of close. When you provide these kinds of estimates, you are making your pipeline more “real” or conservative. Conservative is good! It allows you to believe your numbers. Believing your numbers is a big step toward meeting your sales goals.
4. Your pipeline should provide you with data that you can use. There should be a calculation that allows you to see the total real value of your pipeline. This allows you to see the possibilities. Your pipeline should include a metric that allows you to see what your pipeline means to your business each week. In other words, my pipeline is worth $x.xx this week. In other words this is a strong estimate of how much money you will make on average each week over the next few months. Your pipeline should also provide a calculation that allows you to predict your sales over the next year based on the prospects currently in your pipeline.
5. It must be easy to move closed sales out of your pipeline and add new business to it. This information can also be very valuable. Understanding how long it takes to close business, what percentage of your pipeline does not close, and understanding how accurate your estimates of the total sale will allow you to finesse the percentages assigned to each sales step. The end result is an even more accurate estimate of your success week in and week out.
One word of caution, be conservative! If you lie to yourself about the business that is real in your pipeline, it will serve no purpose other than making busy work for you. As questions like:
1. Does this prospect belong in my email?
2. Is this estimate of the total sale too aggressive?
3. Do they really belong in this step of my sales cycle or am I dreaming?
4. Do I think it will really close in this amount of time?
Be tough on yourself and the result will be a very predictable business. I you would like us to customize a pipeline for your business, give me a call.
For those of you that use a CRM (contact management software), you probably have access to a pipeline management tool that will keep you on track. The downside of many CRM’s is that they make this process far more complicated than necessary. Let’s take a moment and talk about the important elements of an effective pipeline:
1. An effective pipeline allows you to define your sales process. Every business has a unique sales process:
a. Initial call
b. Fact finding
c. Sales presentation
d. Follow up
e. Close
Your process might look like this or have some variation. Take a moment and review your successful sales from start to finish. Identify the steps that got the business closed most quickly. Put them on paper.
2. Assign percentages to each step based on the likelihood you will close the business. An initial call might only provide you with a 10% likelihood that you will close the business. While I recognize that this might only be a guess on your part, it is a starting place.
3. Ensure that your pipeline includes at least three variables. Because a pipeline is initially an estimate of your likely sales success, it is important that you have variables that will provide a reality check. These variables should include things like estimated sale, estimated time to close and estimated percent likely hood of close. When you provide these kinds of estimates, you are making your pipeline more “real” or conservative. Conservative is good! It allows you to believe your numbers. Believing your numbers is a big step toward meeting your sales goals.
4. Your pipeline should provide you with data that you can use. There should be a calculation that allows you to see the total real value of your pipeline. This allows you to see the possibilities. Your pipeline should include a metric that allows you to see what your pipeline means to your business each week. In other words, my pipeline is worth $x.xx this week. In other words this is a strong estimate of how much money you will make on average each week over the next few months. Your pipeline should also provide a calculation that allows you to predict your sales over the next year based on the prospects currently in your pipeline.
5. It must be easy to move closed sales out of your pipeline and add new business to it. This information can also be very valuable. Understanding how long it takes to close business, what percentage of your pipeline does not close, and understanding how accurate your estimates of the total sale will allow you to finesse the percentages assigned to each sales step. The end result is an even more accurate estimate of your success week in and week out.
One word of caution, be conservative! If you lie to yourself about the business that is real in your pipeline, it will serve no purpose other than making busy work for you. As questions like:
1. Does this prospect belong in my email?
2. Is this estimate of the total sale too aggressive?
3. Do they really belong in this step of my sales cycle or am I dreaming?
4. Do I think it will really close in this amount of time?
Be tough on yourself and the result will be a very predictable business. I you would like us to customize a pipeline for your business, give me a call.
Subscribe to:
Posts (Atom)
