Increase Your Paycheck While Drinking Coffee
January is a great time of year to make the decision to take control of your pay and the financial results of your business. Most of you started pet centers to make money and follow your passion for working with pets. So The Dog Gurus could not spend a month focused on working on versus in your business and not talk about finances.
Some of you may be surprised to learn that my degree is a Masters of Accountancy. My business career began as a CPA so I am very comfortable with the financial side of business management. You may be even more surprised to learn that even with my background there were many stressful days owning my pet center caused by cash flow management issues.
A good understanding of accounting and finance is important for all business owners, but that alone does not ensure success. One big mistake I made was spending the time “doing the accounting” (working in) versus analyzing accounting results and financial planning (working on my business).
Based on my fifteen years in the pet industry there are some other common financial mistakes that you should avoid:
- My accountant manages my business finances – along with 100+ other small businesses that comprise their client base
- Discounts – too many and too much
- Pricing – based on competitor rates
- Financial Management – is an annual tax preparation event
- Budget – sounds good, but who has that much time?
You must wear the financial management hat.
No one else cares as much about your pay or the financial success of your business than you. It’s time you accept this fact and make sure you have the foundation required to effectively serve as CFO, chief financial officer of your business. Start with maintaining a separate bank account and bookkeeping system for your business income and expenses from your personal finances.
I am a proponent of creating a financial team comprised of a bookkeeper and CPA for your business. Let these professionals complete the daily financial tasks and serve as your tax advisor and financial experts. As CFO your time will be spent analyzing financial reports and planning; more about that in #4 below.
Rethink Discounts
The pet industry offers crazy high discount rates on services. Can you think of any other service business that comes close to offering 40-50% off regularly? These discounts usually apply to multiple dogs, but does any child-care provider discount that much? Large discounts for second and third dogs really do not make sense for group play services. Each dog takes up a limited space in your center for safety in both physical space and staff management. Plus dogs from the same family are often more difficult for staff to manage during play so you spend even more time with these dogs.
Discounts need to make sense for your clients and your business. Offer discounts to increase your occupancy during slower periods, to gain new clients or target a specific demographic group (military, police, senior citizens, etc.). Set 25% as your maximum discount rate offered.
Price Services for Profit
Every business has a unique financial picture and you need to set prices based on your cost structure. Competitor rates can be one consideration as you set prices, but most importantly you need to know that your effective rates cover the cost to provide the service and contribute profitably to the business.
For key services that comprise 25% or more of your revenue calculate the cost of providing the service or your break-even point (or have your bookkeeper/accountant do this for you). Key service prices need to be set greater than your cost at a minimum regardless of your competitors pricing.
Financial Management is a Monthly Task
Require your bookkeeper to stay up-to-date with your accounting and send you a monthly reporting package. You should have the package no later than the 10th of the following month. The most important report in the package is a Profit & Loss statement that compares actual results to your budget (or same period of prior year if you don’t have a budget, yet – see #5).
Every month on your calendar you should have a financial review meeting scheduled by the 15th of the month. Go to your local coffee shop and turn off your phone and email. Spend the next three hours enjoying your favorite beverage and analyzing your business performance.
Most importantly, what action will you take to improve financial results going forward? More marketing, reduce discounts, raise rates, improve staff productivity through training, reduce expenses? Make a list of three action steps you will take to increase profits and your pay-check at each meeting.
Your Budget is Your Financial Roadmap
Creating a budget is an annual financial event and should be a task on your calendar to do between Labor Day and Thanksgiving for the next calendar year. To serve as an effective tool you need to compare actual results to your budget each month and determine reasons for significant variances (10% or more). Quarterly make changes to your budget if you find out your assumptions were in error so you have a revised roadmap of your current year financial plan.
It’s not too late to create your annual budget. If you want help, check out the Budgets Made Easy Premium Planning Workbook.
Finances and numbers may not be your favorite aspect of being a business owner. Unfortunately, it is one of the key responsibilities you have so it’s time to change your mindset and take control. Every business owner can learn financial basics, interpret their financial reports and oversee preparation of a budget. The best way to increase your pay is to be proactive in financial management so schedule your monthly coffee shop meetings today!
