Steve LeFever sets the scene for his presentation with a bit of background on his small business experience. He has been a small business owner himself as well as a diverse range of roles in the banking industry including trust and credit approval.
Steve is big advocate for small businesses, explaining that small businesses create jobs.
During his time at the bank he asked the one question that would change the way banks and business’ relationship worked: What could banks do to help business owners? The answer: educate them on how money flows through a business.
Traditionally if there’s two people involved in a business there’s someone who knows how to make money and someone knows how to sell it, and the financial side is often left to financial expert (banker or accountant). In the USA only 14 per cent of businesses make it to a second generation only. That means 6 out of every 7 businesses will fail.
“Be honest to yourself about your financial situation”.
Steve shares his formulas for a successful small business with the concept of ‘Profit Mastery’ – not profit mystery. The concept of Profit Mastery describes financial performance as a three legged stool – all three areas need to be working and in place for a business to be successful.
Steve’s seven steps to business success are:
1. Plan properly before you start up
2. Monitor financial position
3. Understand the relationship between price, volume and costs
4. Manage cash flow
5. Manage growth
6. Borrow properly
7. Plan for transition
“what gets measured gets managed what gets managed gets done”
It is important to manage the key drivers in your business which are your net profit and your cash flow. There is no one magic thing to be successful – don’t ever stop trying to get better – education, benchmarking and performance groups (accountability model).
Steve also offered another tip about communication. When communicating with your clients try to put as many number and figures in a format with is easier to read and understand such as images and charts.
Understanding the financial operating cycle will help you understand your business’ finance. The economy is healthy when money moves so reinvesting in your business a good way to spend you profit.
“A journey from profit mystery to profit mastery – just do it.”