Financial Strength - Here's leverage - planning

I’m sure most of you are doing great in your financial progress as a company. I remember to the early days of our company when payroll was a stress and insurance was a major drain on our finances. Fortunately for me and for Trusted Window Cleaning and Pressure Washing for NJ, PA, and DE | Bethany Associates we operating Old School. Provident planning, thrift, saving for tomorrow, planning for the unforeseen, these all contributed to an ability to weather well the 2008 downturn and continue to grow into a stable large company. We provide medical coverage, paid vacations, retirement packages, good salaries, not to mention nice trucks with great equipment. It wasn’t always like this. We started with beat up minivans. We operated on a tight budget and the best we could offer was AFLAC, remember the duck?

Financial success and less stress takes a lot of planning and self restraint. There are a couple of approaches you can take but the following approach is how we organized corporately and personally. I think of all my recurring expenses. Everything…Insurances, materials, payroll, equipment, etc. I then break down these annualized expenses to what the cost will be per week. For example, I know we will spend $6,800 in materials based on last years numbers. So $6,800 means I need to budget $130.77 per week to meet this expected expense. IGNORE your check book balance! Just because you have money in the bank doesn’t mean you are in a good position. You know you have expenses that are coming down the road so plan and spend according to your budget not your check book!

I have helped several of our employees alter their personal finances with this method. It means shifting the focus to what you see in your checkbook, ignoring it to a degree. Focus on the future. Plan for what you know is coming. You will be less stressed and in a better position to grow without putting yourself in debt or risk. Put aside for the future, its coming. Hold off on spending unless you have it in your budget. We can’t print money like the government.

Good post!

that’s the thing about a cyclical business isnt it? the annualized averages are the only thing to work with since they cover the whole cycle, including the ‘downstroke’ as Greg calls it in simple numbers. (great term and visual)

a few years back when I started this, a rolling 52 week average, and along with expenses, annualizing revenue and margin also, great strides were made and each week standings for a whole year’s cycle is always known. Rained out a week? no problem, the 52 week avg shows you’re ok and right on track. It is the only way to go in the seasonal nature and revenue extremes high and low of our industry.

It was great to see Simple Numbers book validate that with his charts also based on a 12 month rolling avgs, using the weekly also.

Bruce, knowing how to plan for those challenges in business is part of benefit this forum provides. Business and finances follow principles that are knowable and repeatable. Discovering them and then submitting to them is the surest way of maintaining long term stability and growth if you intend to expand. What ever the case you need to know how to organize your data and know what to look at. If you watch the wrong indicator, like your check book balance, you will crash the plane. More businesses don’t survive because of lack of proper knowledge than for lack of effort. There are many good resources out there. You just need to learn the information and consistently apply it.

great analogy Jared

lots of talk in business media about lifetime customer value being among the best to know

Saw a picture of a place that had a dashboard visible for all to see on large flatscreens that showed key numbers and illustrated graphs of key metrics the whole company knew and were working to reach goals at. That’s some top of mind awareness for sure.

Great Post…

Great post Jared. In have to say that after I read simple numbers mid last year it has redefined my business and I have a stable company.

Great post!..and a timely one at that. I was just planning on doing this this week. This is the first time of really planning out my expenses and I was going to break it down into a monthly basis. Do you really feel breaking it down into weekly is better? And if so…why?

Damian, weekly is absolutely necessary. You need accurate information and the ability to make accurate decisions. Making your budget transfers and deductions once a month is far too slow. You will not benefit from this system if you allow so much time to pass. If you do your personal finances monthly you know how inaccurate you can be. Things get missed and mistakes happen. You over spend and yes even underspend simply because you do not have very accurate info. In part you have to trust that why I am stressing weekly is because I have made the error of stretching it. Save yourself the learning curve and do it weekly. Use the tools at your disposal as they are needed. Budgets need to be done weekly when runnin a business with any level of revenue or expense. If you are doing less than 30,000 annually maybe every other week is ok.

Awesome. Good info and thank you. You need to start prepping for a webinar. :slight_smile:

Thanks for covering this necessary subject.

+1, I’d tune in

Great idea. I’ll be watching for it.

Bring it on. I could use that for sure!

I enjoy columns vs last year to see week by week comparisons also (margin especially)

Also fun, is my chart showing the weekly amount cast over 10+ years (with one adjusted for inflation to see the real comparison over the years), well it would be the rolling 52 week average, the weekly just looks like a heart rate monitor screen, a rolling 52 week avg really shows trends. one is either trending up or down. To know that each week is to really know your business’ pulse for sure.

going weekly “changed my life”, lol

As my business grows in customers and employees, I’m finding that financial forecasting and budgeting is one of the most necessary and also difficult parts of the business. We have so much money coming in and going out on a daily basis, one wrong move can be debilitating. Add the seasonal nature to the business and it makes it even harder to plan for. Once you get over a million a year in gross income (not saying I’m there yet), it get’s almost chaotic and a focused CFO is necessary. I vote for another webinar.

Sounds like there is need here. I’m glad this information is helpful. Systems are great in the field but in the financial side they are a must. The real sign of good progress is the planning for the future. How are you saving for medical, IRAs, etc. You can make progress on these fronts as well. It takes judicious use of resources and self discipline. Having the long term in mind with clear data makes it possible for you to hit targets that are presently not on your radar. Small steps can become huge points of leverage. You may not be able to save a lot but over time you will make progress. This incentive then encourages further planning and a little more budgeting.

Here’s a real simple example that my niece used. Her family is poor so she couldn’t get a new Easter dress each year like she really wanted. Dad came up with the idea of saving $2 per month for her new dress. Doesn’t sound like much. With some wise shopping she now has a new dress every Easter and she’s even been able to find shoes, that’s at $24! Apply this to retirement or medical and you can see a little can go a long way in your business planning.

Great post Jared. what separates the elite from the pack is they simply do the basics better. I have grown in this area over the years but I have yet to set a system in place which I desperately need. My biggest challenge is having to work in the field because I need the revenue but it does not leave time for working the business, which is killing me. I have made some adjustments and put some systems in place to eliminate time needed in the office but the financial planning system is one that I have known I have needed for a while. What tools and systems do you use to monitor the financial planning side of the business?

For a small business business budget and family budget meet in the middle and inform each other. You gotta have a solid family budget as well as a solid business budget because owner draws are part of the business expense. You can’t know how much to expense your business as a draw unless you know your family spending plan. Having a weekly family budget you can help plan your business revenue targets so that your family budget doesn’t suffer significant down stroke. (I am the sole provider for our family, so perhaps this concept is more critical than if my wife made a salary?) My business and my family are making the transition to weekly expense/revenue cycles this year. The tough part will be not touching the growing cash balance in business and home checkbooks through one full annual cycle. This year our plan is to live lean through the fat season so we can live responsibly, and with less stress, during the lean season. Once we develop that cycle the hardest part is over unless business revenues tank. With decent planning, we can continue to enjoy a little extra spending, but only when there is room in the annual budget, not just numbers in the check book.

You don’t need to be a CPA to get started. As a single or two man operation your in house systems are going to be very different than ours. As a larger company with multiple spenders, etc our systems meet different needs. The principles are what you are looking to really learn. The particulars can be figured out by each company or individual.

The most important tool and the one key system to get the ball rolling is having spread sheet to track your budget transfers, income and expense. You don’t need detail of what you are buying or spending. You simply need the number. If your receipts are kept in good order, by budget, you can always find what you need. Depending on how you managed your expenses last year will dictate how easy or difficult and how accurate your first year using this system will be. You will need about 20 budgets to accurately track the various expenses you generate. You want to use recognizable easily understood budgets; materials, equipment, advertizing, gas, truck payments, general liability taxes, etc…Now take what you spent last year in each category and break it into a weekly transfer amount. Now you know what each thing is going to cost you per week. Each week you transfer that amount and deduct any expenditure. Your actual cash receipted is what you are drawing down to make those transfers, NOT AR balances. Any extra income you have for this time you can deposit in a fund named “hold” or something that helps you know you have not figured this money out yet. It may need to go in a “winter seasonal” fund based on what it costs you to make it through the winter.

ex. your figured you spend $520 in materials a year; rubber blades, blue antifreeze, WFP filters, etc. So you weekly transfer $10 into the budget. Now after two months you need to make a purchase check this fund and you see you have $80. Don’t spend more. Wait, plan for a sale to make your purchase. Think harder for another solution. If you have to and there is no way around it than you need to track the amount you drew this fund into the hole. You need to not overspend.

I hope this helps. This format has its limitations. Lol