As anyone who has run a small business will tell you, the secret to success is managing cash and managing it well! But how do you get to good cash management? Greg Crabtree writes about these secrets in a short but very useful and informative book - Simple Numbers, Straight Talk, Big Profits!. Greg writes about the four secrets of making a small business financially successful:
--Calculating and paying yourself an owner's salary without fail.
--Keeping pre-tax profits above 10%.
--Making sure that the labor you hire is productive enough to justify their numbers.
--Managing the four core cash-flow forces: taxes, debt, core capital and distributions.
Greg raises and discusses some very important points in this book regarding these topics (along with others about reporting numbers, etc.). Many small businesses are run on blind trust and faith.The numbers may be telling you a different story and you may not be listening to them properly--especially in terms of making sure that the numbers add up enough to justify paying yourself a decent salary and ensuring that the people you hire are justified in being there.
Sweat equity is great if the payoff is certain in the future and large enough to justify all the sacrifices you make. Greg is not against it, but once you take investment money from others, you will have to make sure that everybody's time and effort, including yours, is rewarded appropriately. Taking too much money away from investments to pay yourself is not fair to your investors, but not taking any is not fair to yourself.
The levers of taxes, debt, capital and distributions are critical to managing cash since you could run out of cash even if you are profitable on the books. Greg does a terrific job identifying and talking about numbers in a business. Passion is good and necessary, but, unfortunately, passion doesn't pay the bills.
This is a great book that ever small business owners should read and have on the bookshelf.
Ah, take the cash in hand and waive the rest. - Edward Fitzgerald
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