How to Radically Improve Lack of Profits in Your Business

How you can
radically improve
the lack of profits
in your business

© Copyright One Sherpa Pty Ltd 2010

Have you started
your business
then found you’ve
got stuck and
can’t go forward?


When you start a
business there seems to
be so much to do and
so little time to do it
so….


Are you feeling like you’re
drowning in too much work?


Are you wondering
how to move
forward?


Are you wondering
what your priorities
should be?


Are you frustrated
at the lack of
progress?


Are you worried that
you’re running out of
money and there isn’t
any momentum showing
in your business yet?


In the early stages of a
business you must be
sure that ALL your effort
is in the right direction


Using your resources wisely at the beginning of a business
is so important because…
you have no room for error while you’re not making profits

It’s so easy to waste resources in areas that don’t matter and
find you don’t have enough to really help with momentum

Thinking like a
business owner
and NOT an
employee will
change your
priorities


The single biggest area
where we see small
business owners fail is
when they get their
business model wrong
and…
as a result push much
of their effort in the
wrong direction

It’s hard
enough
to get a
business going when
your effort is in the
right direction and…
IMPOSSIBLE if you waste it
on a flawed business model

PROBLEM #1

Has three measures which can tell you
whether you’re wasting your time with a
flawed business model


The first measure is
called Customer
Value


The first measure is
called Customer
Value

This measure makes sure you are making the right
margin on your sales

The second measure
is called Transaction
Flow


The second measure
is called Transaction
Flow

This measure makes sure you are bringing in the right
volume of sales for your business

The third measure is
called Money Flow


The third measure is
called Money Flow

This measure makes sure you are not leaving profits and
cash locked up in your business

These three simple
measures will tell
you whether you’re
wasting your time on
a flawed business
model and where to
focus to get things
right

Let me show you how to check these measures in One
Minute Business Checkup


PROBLEM #3


The first step in
addressing the Business
Model is to ensure that
you have the correct
margins flowing in
your business.

The best way to address this is to find out how much cost
you can afford for the CURRENT level of sales.


In the short term you
have more control over
your COSTS than your
SALES so let’s see how
to do that


PROBLEM #3

$10,000 off Annual Other Costs


Once you are getting the right margin on the sales
that are currently in your business
(i.e. Your Customer Value Measure is Correct)…


The next step is to make sure
you have the correct volume
of sales in your business

(i.e. Address your Transaction Flow Measure)

To calculate the correct The reason for this is that to
volume of business, take be sustainable your
the Administration Costs administration costs should
and divide by .12 not exceed 12 cents in each
dollar of sales.
i.e. $120,000 / .12 =
$1,000,000


Adding $200,000 of sales
will also require more
interaction costs such as
product costs , people costs
and marketing costs…

so we’ve added $160,000 to
other costs in the model


PROBLEM #3

$200,000 more sales

$160,000 more costs


If you are able to hold your working capital to the
same level with the additional sales then the model
looks fine


However with additional sales and costs of interaction
it is likely that both Accounts Receivable and Accounts
Payable will increase

To calculate the likely increase we ratio the increase as
follows:
Accounts Receivable

Original Accounts Receivable DIVIDED BY Original Sales MULTIPLIED BY New
Sales EQUALS New Accounts Receivable

$120,000/ $800,000 * $1,000,000 = $150,000


To calculate the likely increase we ratio the increase as
follows:
Accounts Payable

Original Accounts Payable DIVIDED BY Original Other Costs MULTIPLIED BY New Other
Costs EQUALS New Accounts Payable

$90,000/ $580,000 * $740,000 = $114,827 say $114,830


PROBLEM #3

$30,000 more Accounts Receivable

$24,830 more Accounts Payable

Checkout your own information now.


Make sure you have
checked the
measures for your
business


If you don’t know
where to find the
numbers then at
least take a guess


Using the sandbox
you can ‘play with
the numbers’ until
you get the right
shape to aim for


Go to
www.oneminutebusinesscheckup.com
and make sure you’re aiming for the right
business model TODAY


How to Radically Improve Lack of Profits in Your Business

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