Every week, I get dozens, maybe even hundreds some week, of questions about small businesses. In good times, the questions go something like, “How can I pay less tax?” I still get those. But a lot of the questions these days are more like, “How can I make more money?”
In 2008, we hit the bottom with a failed business partnership and crashing real estate prices. From that financial bottom with a business gone and passive cash flow decimated, we went on to create passive income that was triple our monthly expenses in 20 months. And that income has come in each and every month since we started cashing in during August 2010.
I suspect that’s why so many people are asking how we did it and what they can do to make more money. Yes, we bought some real estate. How could you not buy real estate at these crazy rock bottom prices? But we paid cash and we were very careful to make sure there were tenants in place with fair market rents and not a lot of market competition.
The real winning strategy, though, was to build businesses. We built those from the beginning with one big focus: passive income. We did create active income right away, too, because, face it, we had to live on something.
Along the way I realized there were three questions we asked about our business that made all the difference. To be honest, we didn’t work that hard at rebuilding. I bet we could have done it in half the time if we did.) Here are three questions to ask yourself, just like we did:
- When does my business get a seat at the table?
If you’re like most small business owners, your business started because of a financial necessity and/or passion to do something different. As the business starts, though, it takes on a life of its own. Are you letting your business have a say in decisions? Or is your business about what you want or need?
Give your business a seat at the table at your next meeting. You’ll be surprised what happens as you focus on what your business wants and not just what you may want.
Remember the purpose of business is to make money. We give other meanings to it which is fine, but don’t forget what your business needs too.
- Do I fix what’s broken?
Or maybe a better way to say it is “Do I fix ONLY what’s broken?” As the saying goes, “If it ain’t broke, don’t fix it.”
The problem is that many small business owners look for the solution for all problems inside themselves. So, if you have great sales skills, and you want more money, you’ll probably first think you just need to sell more. But the problem might not be sales, it could be an inside embezzlement, it could be runaway costs, it could be excess tax, it could be a bad price point, or any combination of 100’s of other issues. Fix ONLY what’s broken.
If all you have in your tool box is a hammer, everything looks like a nail.
Find advisors, mastermind groups, employees, contractors, in general, OTHER people to round out the skills you need to make your business a success.
- Do I Know My Numbers?
At Cash Flow Accounting , our new bookkeeping with a twist service, we say “Know Your Numbers. Change Your Life.(tm)”
First step: You need accurate and timely financial statements. You should always have a financial statement within 30 days of month end. If you don’t, you’re trying to run your business with a blindfold on. You don’t know what’s working, what’s not working, where the low hanging fruit is or what you need to cut quick.
Second step: You need to be able to read the story of your financial statements. That’s just one of the twists that makes Cash Flow Accounting unique. We will teach you how to read your financial statements to spot embezzlement, spot high costs, spot where you are making lots of money and where the hidden treasure is.
Third step: You have to be able to take action. If you’re too busy mired in the day-to-day grind of working IN your business instead of ON your business, you will just get tired.
Remember: Most small business owners get started because they feel the desperation of being at just over broke. Problem is if you do this wrong, you’ll go from just over broke just to under broke. Plus, you’ll wear yourself out doing it.