Mindset Shift & Business Money Mindset Improvement

Mindset Shift & Business Money Mindset Improvement

by | Feb 12, 2018 | Coaching

BUSINESS MONEY MINDSET SHIFT

Part 2 of the series “6 Quick Ways to Improve Your Business Money Mindset”

 In the first part of this business money mindset series, we looked at a couple of typically personal elements of where a mindset shift is often required.

Money mindset mastery is a key part of the puzzle when looking to create business success. Getting your mindset right when building wealth relies on you having both your business mindset and commercial mindset ‘in the zone’ and fully focused on the business growth non-negotiable of making profit. That means that for many of us, we need to embrace a mindset shift so that we feel comfortable with money.

Mindset issues we looked at in part 1 covered:

  • Why we need a growth mindset to promote mindset development when it comes to addressing the financial needs of your business {PS – remember: your business relies on you}
  • Why when we have a simple framework to work to, it is easy to create the mindset shift that we need when it comes to making a profit intentionally
  • Why a positive mindset shift occurs when we realise that we don’t have to understand all of the numbers in our business, or how they were put together

Let’s now look into the next two business money mindset issues, and think about how we can create the mindset shift that is required.

Number 3: You and Your Business Money Mindset –

“Break. It. Down.”

Mindset issue number 3 is all about the feeling of being overwhelmed (which tends to create a negative mindset) by trying to answer a business finance question that is ‘too big’, but it seems like the right question to ask.

The question:

“How do I make more profit?”

Trying to answer a question that is ‘too big’ is generally indicative of not knowing where to start, and consequently not having a structured plan because you don’t know how to break down the ‘big question’. It presents itself effectively as not understanding the wider subject, which consequently leads to feelings of overwhelm (at least to some degree) and maybe even inadequacy (more negative mindset feelings). Sounds a lot like that ‘fixed mindset’, doesn’t it?

This then typically leads to inefficient and irrational behaviour which is generally followed by a negative feeling around the subject as a whole, which often manifests itself as “I don’t understand any of this”…and a deepening of a negative mindset ensues…

Self-recognition

Do you recognise any of those patterns and symptoms when thinking about finance in your business? If you do, you’re not alone – far from it. The upside however, is to remember that you have your own zone of genius too (positive mindset time) – by definition we have to accept that we can’t all be good at everything. There’s nothing wrong with not being a ‘numbers’ or ‘finance’ person first and foremost, but as the CEO in your business, we do need to get you into a positive mindset space and create the mindset shift around 2 things:

  • That it is ok to not know everything about numbers (less pressure to be an expert in this area means a more positive business mindset overall)
  • That you do need to take responsibility for knowing how to make a profit in your business (accepting the overall responsibility of being a CEO means an improved leadership mindset)

That just means having a framework that you can relate directly to the process of making a profit with ease and simplicity, ie a simple framework to depend upon in the first place {PS – I’ve lost count of the number of ‘freebie’ downloads I’ve taken in for a ‘formula for this’ or a ‘formula for that’ – some of which I have used, some of which I have adapted to suit me over time, and with experience – the point is we have to start somewhere and wilfully engage with the topic}.

So, let’s get back to that question – the one that all business owners and entrepreneurs feel compelled to answer day in, day out – “How do I make more profit?”

A quick task for you right now – stop reading and grab a piece of paper, or open Notes on your phone – whatever you have to hand, and jot down the first 3 to 5 things that come to mind for you when answering that question…

OK – got your list? Great… {You can post them in the comments below – I’d love to see what you came up with!}

Here’s the thing – every single person reading this who has written down or thought through a list will probably have a list that could be wildly different to the next person.

How Do I Make More Profit?

Here’s the reality:

There are a ton of ways to make more profit. The key is focusing on the right options that are in context for you and your business – and having a framework on which to focus on in the first place.

For those of you that did actually stop and write your list down (I know there’s plenty who will have ‘read ahead’ looking for the answer without doing the work ?), I suspect that you have written down what effectively amounts to ‘tactics’, ie ‘sell more widgets’, ‘spend less on office stationery’ etc.

It is also likely that everything that you have written down will be valid, have merit and be a part of a bigger plan – but as you can probably see from your list, it has more than likely been curated randomly – ie you wrote down the first things that came to mind, followed by the next thing and the next thing…and as a result, you have  a pretty eclectic list with not much structure attached to it.

If that’s you, then know that you won’t be the only one! This has happened because you have tried to answer ‘the big question’ all in one go, and not focused in a more structured manner on some specific higher level strategic ideas, which can then be broken down into tactical actions – because you haven’t found a suitable structure to work against…yet (go grab that download here – it will get you started for sure).

To make the process more efficient therefore, we need to channel that energy and desire for growing profitability into some smaller building blocks to make the task:

  • More manageable
  • More focused
  • More achievable (with less unnecessary effort, ie greater efficiency)

We need to focus on the right things that will actually make a difference, rather than trying to do #allthethings in the hope we’re doing the right things that will improve our profitability.

[ctt template=”11″ link=”z3TMY” via=”yes” ]We need to focus on the right things that will actually make a difference, rather than trying to do #allthethings in the hope we’re doing the right things that will improve our profitability.[/ctt]

Break It Down

Think about it like this – I’m sure you’ve heard this analogy before – “How do you eat an elephant?”

The answer…One bite at a time…

It is just the same with profit – how do you make more profit? By getting clear focus on the only 3 things that will ever influence your profitability – sales, margin and overhead.

I’ll repeat that for you:

  • Sales
  • Margin
  • Overhead (Expenses)

Now we just need to apply the structured thinking around each element – create a separate strategy for each that is in context to how your business operates and functions, and then list the tactical actions that will help you to deliver the strategy. It’s no different to how you probably plan out your marketing campaigns, right? It’s just about applying that planning skill to a different business discipline.

Make sure you grab the download below, and you’ll see just how easy it is to create a more structured answer to the question “How do I make more profit?”

So, despite the fact that there are a *million* ways to make a bigger profit, you’ll see that the strategic principles that underpin the answer to the question can be boiled down into one simple concept which can be applied to any business (including yours, guaranteed), regardless of where the business is geographically based, whether it operates online or from premises, whether it is service or product based, and regardless of the size of the business – be that trying to get your first 6 figure year under your belt, or whether you’re aiming for 7 figures plus doesn’t matter – the framework is exactly the same and the technique can be applied in the same way.

 

Number 4: You and Your Business Money Mindset –

“The money in your business doesn’t belong to you”

Business money mindset issue number 4 is all about the conflict between personal and business money, and why the money in your business doesn’t all belong to you…

So that’s a disappointment isn’t it – “The money in your business doesn’t belong to you”. Makes you wonder who you’re doing it for then really, doesn’t it…

Separate yourself from your business

Yes – you are doing it for you (and all of those great clients that you’re positively impacting of course), but the mindset shift that we need to create is one where you learn to separate yourself as a private individual from your business.

So, first and foremost:

The money in your business belongs to your business. You need to detach yourself from it, and yet create a bridge to it.

[ctt template=”11″ link=”gbjt1″ via=”yes” ]The money in your business belongs to your business[/ctt]

mindset shift bridge

Sounds obvious, I know – but this is likely to be a mindset shift for anyone in the early stages of their business, or who has been carrying on a side-hustle alongside their regular job where it was ‘all just money going into the pot’. The original objective may have been just to ‘earn something extra’ to clear down personal debt for example.

This may also be a mindset shift for anyone who is growing a business where there has always been ‘sufficient cash’ to draw upon up to this point, but now the business is consuming cash as it grows – this just means that we have to start acting more like business owners looking for capital growth, not just looking for short term income.

Think bigger

If you’re struggling with that idea, think about what it would be like if your business was 100 times bigger than it is now – you’d be thinking about the business, not yourself, wouldn’t you? Mindset development relies on being able to detach ourselves from what is right in front of us and apply a new mindset approach.

Positive mindset time – you need to take that mental leap now…

  • So, the tip here is to start thinking bigger about your business – stop thinking about your business servicing your own personal financial needs.
  • Get the big picture right, [ctt template=”11″ link=”CTni4″ via=”yes” ]Focus on building a business where you are intentional about the level of profitability that you want, and the personal side of finance will look after itself[/ctt]

 

The Business comes before You

Thinking about your business as being a personal income generating machine is clouding your judgement (you’re thinking about it like an individual income, not like a business #realtalk), and the emphasis is on the wrong place and on the wrong things. Business success relies on creating a profitable business model first and foremost – then look to that to provide you with your income, not the other way around. That’s mindset development in action – putting your business before yourself.

When you start out as a new business owner, it’s all about ‘earning the income’ for sure and covering your essential personal costs – rent / mortgage / food / car etc. Maybe you left a corporate job and you know you used to maintain a lifestyle based on a salary – and you’re understandably desperate to cover that off as soon as possible again. It is no coincidence that the ‘first financial aim’ for most people as they set off into the entrepreneurial world is to earn their corporate salary working for themselves. It’s good for the soul and a positive mindset after all – validates the reason you left, doesn’t it?

You knew you had it in you to make more for yourself in money terms, rather than just making more for everyone else. The ‘salary matching mindset’ will only get you so far though because it represents a personal mindset, not a business mindset in operation because you’re still thinking about it as if all the money belongs to you.

You need to transition to a more commercial mindset with far bigger goals than that – you will necessarily incur additional expenses as you grow and you need to allow for that so get that into your business mindset now, because it will stand you in great stead in time.

Why the money doesn’t belong to you

Even if you are just starting out on your entrepreneurial journey, it is important that understand why the money doesn’t all belong to you – there are a couple of simple categories to consider here, dependent upon whether your business is service or product based, and ultimately what your overall business model looks like:

They can be summarised as:

  • Direct Costs (also referred to as ‘Cost of Goods Sold’)
  • Expenses (also referred to as ‘overheads’)
  • Taxes

In all of the above instances, when you get paid by your client, you are effectively collecting money on behalf of your suppliers, labour force (employed or sub-contracted) and the tax collecting authorities. You may not have to pay these people immediately, and so the money may well sit in your bank account for a while – that doesn’t mean the money belongs to you, you are just the temporary guardian of it for all of those other people.

Disappointing I know…but that’s running a business for you.

The irony of it all if you have now left the corporate world behind? You’re now an employee within your own business…

Action points:

  • transition from an ‘it’s my money’ style mindset to ‘my business generates money…and I have to ask my business to pay me for what I bring to it’ style mindset. In this respect, you work for your business, not the other way around.
  • Be accountable to yourself – [ctt template=”11″ link=”u9tFR” via=”yes” ]Make such a success of your business in profit terms that you never have to think about your personal financial circumstances ever again[/ctt]
  • Create a ‘flow’ of money from your business to you in a structured way – the flow derives from money entering the business first, and the business then releasing money to you. You need to see this as two separate transactions, not just one where the money your client pays comes straight to you.

 

Business Finance to Personal Finance Venn Diagram - Mindset Shift

If you look after yourself first, then your business will suffer or more than likely, fail to grow – at the very least you will starve it of the working capital that it needs to be nurtured and positioned for growth. Give it the best opportunity to grow – don’t starve it. Work it hard to make sure that you don’t starve yourself!

Business finance and personal finance are undoubtedly linked, but it is important that you understand that money belongs to your business first now – then you can take your share. Focus hard on the profitability of your business first, do the work, and the personal financial side of things will take care of itself.

 

Here’s A Download Link to help you with the simple profitability system details –

The #profitlevers system – how to an earn an efficient profit, simply: http://bit.ly/improveprofitabilityweb

 

Related Articles:

Business Money Mindset Improvement (Part 1)

How To Increase Profit In Your Business In 3 Easy Steps

Here’s to focusing on business money mindset mastery!
Jason

 

Jason A WithersHi there Profit Seeker, I’m Jason!

I help online entrepreneurs and owner managed brick & mortar companies to build profitable businesses through the application of easy to understand business strategies.

I show you how to apply and implement the strategies, take the ‘fear’ out of the numbers and help you to become more confident about the financial aspects of your business that you really need to know about.

That means less stress for you so that you can focus on making the impact that you want to make with your clients and customers, safe in the knowledge that you know how to make your business more profitable for ever more.

You can run a very profitable business with ease and simplicity. I’m here to help you make it happen and keep you accountable to your goals, providing commercial and financial support and advice to help you on your way.

Learn more about the great work we can do together here:

https://jasonawithers.com

Or you can book a call here:

https://jasonawithers.com/schedule-a-call/

 

 

Join 'The Profitlevers' Facebook Community here
How To Increase Profit In Your Business In 3 Easy Steps

How To Increase Profit In Your Business In 3 Easy Steps

by | Jan 22, 2018 | Profit

HOW TO INCREASE PROFIT IN YOUR BUSINESS IN 3 EASY STEPS

A profitable business is what we all crave. As entrepreneurs and business owners, enough is never enough. How to increase profit in our businesses becomes a skill that we have to become adept at – fast!

What we do know is this :

We hustle hard to earn profit, when what we actually want is a neat and simple system to help us increase profitability in the most efficient way possible. So that is exactly what we’re going to demonstrate here – how you make your business more profitable by applying 1 simple, universal concept.

We’re going to see that there are only 3 things that will ever influence how to make a business more profitable, and we’re going to see why the system holds true for anyone looking to create a very profitable business.

[ctt template=”11″ link=”956XK” via=”yes” ]There are only 3 things that will ever influence how to make a business more profitable[/ctt]

You might be wondering at this stage:

  1. Will this work for my business?
  2. Will it be difficult to understand?

So let’s answer those two questions now:

This will work for any business, regardless of:

  • Geography – it doesn’t matter where in the world the business is located
  • Size – turnover, staff number or office size (office, ‘factory’ or home based)
  • Whether the business is product or service based

The actual concept around how to make a company profitable is as simple as it gets:

It is essentially based around 2 images that you need to remember (no numbers!)

We’re going to outline how building a profitable business needn’t be as tough as we had come to think. The 3 easy steps will provide you with a ‘skill for life’ that you can take into any business that you ever start or are involved in – it will show you how to create a profitable business, and diagnose where the profit is leaking.

So how can a business increase profit?

We need to start with a basic understanding of how to make profit in business:

At it’s simplest level, a business will make a profit if its revenue is greater than its expenses.

This is normally summarised in a ‘profit and loss account’. Whilst you may ordinarily be used to seeing a whole bunch of numbers on a page as presented to you by your accountant, it can actually be broken down into 8 words…well 7 actually as one of them is repeated – see it’s easier already ?

Let’s take a look at it in image format (no numbers required here, it is the principle that we need to understand):

How to increase profit - the 8 word Profit & Loss Account

The 8 word Profit and Loss Account

Before going any further we need to make sure that we have a clear understanding of the words used in the image above:

  • Sales – Also often referred to as ‘turnover’ or ‘revenue’

This is the amount invoiced to clients for your goods or services

  • Direct Costs – Also often referred to as ‘Cost of Goods Sold’

These are the costs that relate specifically to a sale – this typically can include a ‘direct labour’ element as well as a cost attributed to materials, or production costs

  • Gross Profit – This is a calculation and is expressed as an amount

Sales – Direct Costs = Gross Profit

  • Gross Margin – This is a calculation and is expressed as a percentage

Gross Profit / Sales = Gross Margin {where ‘/’ means divided by}

The Gross Margin expresses the amount of Gross Profit earned as a percentage of Sales. {This allows us to track and compare our gross profitability from month to month / quarter to quarter / year to year etc              on a comparable basis (so that as we grow our businesses we can ensure that we are not becoming less profitable, or less efficient about how we make that profit}

  • Expenses – Also often referred to as ‘overheads’.

These are the ‘everyday’ expenses incurred in the running of the business, that do not relate specifically to a sale. Examples would include rent, utilities, travel, bank charges, stationery etc

  • Net Profit – This is a calculation expressed as an amount

Gross Profit – Overheads = Net Profit

That’s it. All the classic ‘complex accountant speak’, all the ‘but I’m not a numbers person’ commentary – 8 words in a picture. Earning a profit in business is about that image.

But it gets better:

These 8 words are all that we need to tell us what the 3 easy steps are going to be – I call them the 3 #profitlevers:

  1. Sales
  2. Margin
  3. Overhead

That’s right, this is all we need to tell us how to make a business more profitable. Want to see how to increase profit in business with just these 3 words? At the end of the day, we want to make business easy, don’t we?

How to increase profit and run a profitable business

We’re always on the lookout for simple ways to do things, especially when we feel out of our comfort zone (and many business owners and entrepreneurs don’t feel comfortable with ‘the numbers’, so know that you’re not alone if that’s you ?). We want to find the techniques that resonate and are easy to grasp – we need to make business as simple as possible. Running a profitable business is no different…and here’s the proof of just how straightforward it can be…

We take our three #profitlevers and we line them up as follows as outlined in the diagram below:

How To Increase Profit - moving the 3 #profitlevers for increased profitability

The 3 #profitlevers – preferred direction of movement

So if we are looking for ways to improve business profitability, we need to focus on these three areas – sales, margin and overhead. These are the only 3 things that will ever increase profitability. Moreover, each single element can improve profit if we focus on it and taking the right actions appropriate to that #profitlever. We’ll take a look at how to maximise profit in business a little later.

Let’s break down that image above and check through the logic:

  1. If we increase our sales, whilst keeping our direct costs and our overheads at the same level, we will make more profit
  2. If we decrease our direct costs (ie increase our gross margin), whilst keeping both our sales and our overheads at the same level, we will make more profit
  3. If we decrease our overheads whilst keeping our sales and direct costs at the same level, we will make more profit

This is the single image and concept that every business owner and entrepreneur needs to keep at the forefront of their mind when trying to make your business more profitable – it doesn’t get any more complex than that.

This image will become your profitability compass:

When you’re short on profit, or need to proactively generate more profit, this is the go to model. It is the simplest model to understand, and it makes it easy to implement because we can break things down into simple strategies and tactics against each #profitlever which will keep us more focused on the task at hand – which in turn will help us to achieve our business and profit goals!

Let’s see the theory put into practice:

We can see from the example below, that just by changing each #profitlever (Sales, Margin, Overhead) by ‘2 units’ we can improve profit by 20% in this particular business model. A 20% uplift for such a small change is an amazing return.

It also helps us draw three conclusions:

  1. Increasing the profitability of a business can be done using a very simple concept
  2. A small change in the right direction for any one of the #profitlevers can have a dramatically positive effect on our profit, proving the fact that we don’t need to over-complicate things to create a high profit business.
  3. The concept and the maths is so straightforward, anyone who considers themselves to not be a ‘numbers person’ can see that this is not difficult to understand – consequently, there is no reason to hide from it any more!

How to increase profit - increasing profitability with small changes for disproportionately positive profit impact

The disproportionately positive profit effect of small changes to each #profitlever

Here’s how to make your business more profitable

Step 1 – Sales

  • Review your current sales and break them down into sales channels (type of client / customer etc) that you sell to, or into product and service types
  • Consider how you could increase the sales any one of those categories
  • Put your sales plan into action

Step 2 – Direct Costs & Expenses

  • List out all of your expenses into simple categories (I tend to use the following as a guide – admin wages and support, rent & rates, utilities, banking & finance charges, office costs including stationery, postage etc, premises expenses, professional and consultancy fees, travel & subsistence, phone and IT costs, marketing)
  • Now take that list and isolate any costs that are direct costs (ie relate directly to a sale, eg manufacturing or production costs, any labour cost that is dedicated to sales specifically (could be a sales rep, could be an ‘installer’ etc), and marketing costs that are dedicated to a sale (eg Facebook advertising costs as part of a sales funnel that leads directly to a sales page)

Step 3 – Review & Implement

  • Take the overheads listing first and review to see where you could reduce any expenses. Remember your objective here is to recognise the expenditure which is not adding to the effectiveness of running a profitable business – it is likely for example that there are subscriptions being paid for that are not being used (surprisingly common), along with other costs where expenditure has been ‘discretionary’ rather than ‘necessary’.
  • Remember not to discount reviewing any area – remove the costs that are unnecessary – or at least recalibrate them. The cumulative savings will add up. For example, you only need to save $50 on $2,500 of expenditure every month to recognise a 2% decrease – that’s worth $600 of extra profit every year…
  • Now review the direct costs and determine where you could make some savings – could you ask a supplier to reduce their prices by 1%? Could you pay closer attention to your Facebook advertising metrics to see where you might be wasting some money on adverts that aren’t converting? You could save 2% ($0.40) on a $20/day ad spend ($600/month total spend) just by stopping an underperforming ad one day sooner than you normally do, perhaps (ie get closer to the analysis piece sooner and make the decision!)

Steps – Summary & Comment

You can see that the key to all of the steps above is breaking things down into manageable pieces. This makes it easier for us to focus on how to improve net profit, because we can take a series of smaller but more focused actions to create a positive cumulative effect. Unfortunately this does mean that you have some work to do initially, but your bottom line will thank you for it for ever more!

How to maximise profit in business

Following on from what we have already seen above, extending the logic of the concept we can increase profit most effectively when we move all three of the #profitlevers at the same time, ie we will develop and work with each one of the #profitlevers as individual strategies, but we can run all three strategies at the same time so that we can create the following scenario:

Increase sales, decrease direct costs (increases gross margin), decrease overheads

[ctt template=”11″ link=”9dl44″ via=”yes” ]Increase sales, decrease direct costs (increases gross margin) and decrease overheads at the same time = most efficient profit growth[/ctt]

All of these can be happening concurrently. This compounds the positive effect on our overall profitability, so instead of making one change whilst leaving the other two #profitlevers constant, we are working towards moving all three #profitlevers together at the same time, thus multiplying the positive effect on our profitability.

Here’s the truly brilliant part of it:

We find out that we only need to make small changes to each #profitlever to create a relatively huge increase in profit and thus it makes it much more straightforward to see how we can create a very profitable business much more easily than we may have thought.

Action Point

Create an overall strategy for each one of the #profitlevers, and break each one down into a series of smaller tactical actions – then work against each tactic to create the benefit in a simple and manageable way (ie reduce the feeling of overwhelm). Remember that every action you take will help to compound the overall positive effect in creating a more profitable business.

How To Increase Profit In Your Business – Conclusion

We set out to show how to make your business more profitable – and we have also now seen that it only relies on three factors – sales, margin and overhead.

We have also seen why the concept is both simple to understand and universally applicable to all businesses. Every business will have some level of sales, direct costs and expenses – consequently, it has the three variables that we can influence to see how to make a company profitable.

We can also now see and understand why the concept is therefore geography neutral (it doesn’t matter where the business is based (including ‘at home’!), it is size neutral and it doesn’t matter whether it is service or product based.

  • I’d love to know which #profitlever you will be tackling first and why – please tell me below in the comments where you think you can make the most impact in the shortest period of time.

I’ll be cheering you on!

  • Click here to sign up to make sure you receive future posts about how to make your business more profitable.

Future topics will include:

  • Why business owners overcomplicate increasing profit
  • The mindset that you need to adopt in order to become a truly great ‘Profit Maker’
  • Why your accountant may not be the best business advisor for your business
  • Top money and accounting mistakes that entrepreneurs and business owners make
Here’s to focusing on efficient profitability!
Jason

 

Jason A WithersHi there Profit Seeker, I’m Jason!

I help online entrepreneurs and owner managed brick & mortar companies to build profitable businesses through the application of easy to understand business strategies.

I show you how to apply and implement the strategies, take the ‘fear’ out of the numbers and help you to become more confident about the financial aspects of your business that you really need to know about.

That means less stress for you so that you can focus on making the impact that you want to make with your clients and customers, safe in the knowledge that you know how to make your business more profitable for ever more.

You can run a very profitable business with ease and simplicity. I’m here to help you make it happen and keep you accountable to your goals, providing commercial and financial support and advice to help you on your way.

Learn more about the great work we can do together here:

https://jasonawithers.com

Or you can book a call here:

https://jasonawithers.com/schedule-a-call/

Join 'The Profitlevers' Facebook Community here