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UNDERSTANDING WHAT YOUR FINANCIALSARE SAYING ABOUT THE HEALTH OF YOUR COMPANY

By Max Gregorich

Understanding what your financials are saying about the health of your company is the foundation of successfully running any business. In fact, continually measuring your company’s performance and making operational, organizational and strategic corrections is the most important responsibility for any business owner. Yet, many owners pay very little attention to this aspect of their business. The reasons vary, but the results remain the same; ignoring or not understanding your financials can, and usually does, mean losses that you’re not even aware of, month after month.

Business owners who understand this simple fact have more control over their business strategies, which in turn allows for better financial decisions and ultimately a more profitable business.

Believe it or not, it’s not rocket science. It’s just knowing what to measure and how to measure it. Without that knowledge, the stronger competitors (those who know how to measure and manage performance) can and will inevitably drive you out of business.

On average, small to mid-sized companies usually don’t capture about 10 to 30 percent of their revenues as profit, but only earn approximately 10 percent or less in profit. The math is simple. Say a company does $1,000,000 in sales with a profit of 10 percent or $100,000. Add 15 percent of the sales to the profit and you have $250,000. Without making one additional sale, the company has increased its profit line 250 percent. Knowing where to look for the cash leakage, and then knowing how to plug the leak, is of utmost importance for any business owner. Once the measurement is done, low hanging fruit generally presents itself, and initial corrections are fairly painless. On-going measurement offers the opportunity for a business owner to plug cash leaks, prevent future leaks and to create a continuous improvement process, which always leads to maximizing profits.

Now, the average business owner believes that if he/she increases sales, it will naturally increase profits. However, if there is a cash “leakage,” the more revenues the more losses. When a company begins growing their revenue, or top line, it typically causes certain internal costs to rise. Over time this becomes a cash leak – usually a very small leak at first. It’s so subtle that it usually goes unnoticed to anyone who’s not measuring it. It begins to add up and one day the company finds itself in financial trouble. So, the fallback solution for the average business owner, who isn’t measuring performance, is to increase sales – which in turn causes greater internal costs – or larger leaks. The spiral continues. One of two things will happen at this point: the owner brings in a reputable (and at this point – usually expensive) consultant to help turn the company around or the company goes out of business. Hopefully it’s the former and the owner realizes he/she needs to learn a new skill: measurement.

The need for this basic, yet essential, skill came to light during my consulting days when I realized the majority of business owners didn’t understand the implications of their company’s financials. With the help of financial friends and many reference manuals, I developed a software application that I called CFO Genie, which quickly performed the measurements. Because the software was so easy to use and understand, my clients kept asking if I would sell them a copy of the software. I eventually realized I would be serving a larger number of business owners by offering a professional development course, called Detox Your Business, on the fundamentals of measuring performance and the formulas used. Now, these aren’t my formulas. Any trained financial expert uses these formulas every day. All I did was to package it in an easy to use format for the financial lay person – so to speak. The workshop simply shows business owners what to measure and how to measure it.

Max Gregorich is CEO of CEO1Stop, is the host of KBZNZ’ Business Genies, author of Understanding Your Financials for the Small Business Owner, and creator of CFO Genie, an affordable, easy-to-use performance software tool for small and mid-size businesses, and created specifically for the financial lay person, which produces easy to understand reports that clearly identify why your hard-earned revenues are not reaching your bottom line and shows you the obvious implications of ignoring those financial “leaks.” To learn more about CFO Genie or to download a free copy of our e-book: Understanding Your Financials visit www.ceo1stop.com.

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The Slow Birth of Sales Enlightenment

By Max Gregorich

I was not a born salesman – as my grammar school magazine foray and my first sales job as a “door to door” encyclopedia salesman records will attest. Both were dismal failures. Most of my life, however, I’ve been self employed and therefore, whether I liked it or not, in sales. I can tell you – I didn’t like it at all. Why? Because my perception of salesmen was like most in our society – generally, very low. Later on, this perception became pivotal in turning my so called sales career around. But, long before that happened I knew that educating me about the sales process beyond what the encyclopedia company had taught me was going to be key. So, I purchased every book I could lay my hands on and followed the steps precisely and only found failure again. The few successes just had to be anomalies. So, more books plus something new – cassette tapes I could listen to while driving. Wow. The problem was – I had no better results.

One day, back in the early 70’s, while working in my racing engine business, a friendly competitor from a few blocks away stopped in to buy all the engine oil I had in stock at my retail price. He told me that he keeps running out of it. My reputation as an engine builder brought me five times his customers. Now, we sold the same brand of oil but he charged twice the price! Yet, no one was buying my oil. Worse yet, people were bringing me parts purchased from his shelves and asked me to use them while building their engines. Weeks later after raising my prices, oil and parts started selling like crazy. It just seemed counter-intuitive to me that discount pricing wouldn’t help sales levels. What I did know though, was that the new sales level I was achieving had nothing to do with the products or my competitor’s marketing or sales ability. It had something to do with the thought process of the prospect.

More books and more tapes. But this time a few on psychology too. Years later, a glimmer – and I mean a slight glimmer – of an understanding of value and perceived value. I thought I had found the holy grail … but no. It was impossible to incorporate this one piece of understanding into a sales presentation with any repeatable success.

Back to the drawing board. More books … more tapes. This time I included live courses. Some courses were so inspiring that I couldn’t wait to get in front of a prospect because I knew I could now outsell anyone. Well, after that balloon deflated I found other courses so complex that I was sure I wasn’t smart enough to be a salesman. Trying to remember all those tactics and techniques and in which order they were to be executed was mind numbing. My only motivation to continue came in the mail – relentlessly – bills that needed to be paid.

Just so there’s no misunderstanding. I did earn a fair living and I did develop what I would call a “sales charm” that brought reasonable success. But what I didn’t have was real repeatability.

You guessed it: more books etc. etc. etc. Because of this so called “sales charm” I was offered a project to help a company involved in the telecommunications industry break into military and international markets. After preparing budgets and resource requirements I was informed that that level of resources wasn’t available and was asked to penetrate the US market to raise the capital needed for my project. Forging ahead, I connected with a major US Telecom that had an interest in my products and proceeded to schedule appointments with their senior staff. I spent two months preparing a presentation for their senior vice president and almost a dozen of their top engineering department heads. I studied it; memorized it; reviewed it on the flight to their headquarters and again in the hotel. When I showed up the next morning at their corporate offices, ready with my three hour presentation, my gut told me that the presentation wasn’t going to work. So as any good salesman would do … I panicked. Ten people in the room, 2500 miles of travel, two months of preparation, millions of dollars at stake, and I drew a blank. But I was about to learn something incredible. I emptied my sample case on the conference table by flipping it upside down. Samples scatted everywhere. I watched their expressions go from bored anticipation to not-so-boring shock. They were waiting for me to speak: “Gentlemen, I would not presume I could tell you a thing about how these products are used. But if you’re interested in the quality and craftsmanship that go into their manufacture, I would be happy to answer any specifics. What’s for lunch?” They simply applauded and took me to lunch.

A seven million dollar sale in under 45 seconds. How great was I. After I got my head out of the clouds and stopped patting myself on the back for doing such a fantastic selling job, I realized I didn’t have a clue about why that sale even happened! After all, everything I prepared for never occurred.

More books, more tapes … still no clue.

But I tried similar techniques with other prospects with a high rate of success. One international prospect was about to close a $200 million deal with me (in under 3 minutes) when the company that hired me for the project informed me they couldn’t finance that kind of top line growth and this deal would bankrupt them. So, after 18 months on this project and increasing their top line by almost 700%, I moved on.

These sales made me certain I was on to something. And I was. More research was on my “to do” list. Little did I know it would take another ten years of research, trials and errors, successes and failures before clarity would finally come.

Why so long? Why did it take 40 years for clarity? I simply kept looking in the wrong places. I truly believed that we are all independent thinkers. I truly believed it was my job to sell. I truly believed in my beliefs. And why not? I was programmed to believe them. The truth? That we are, for the most part, robots. Automatons, if you will … programmed to respond identically and predictably to stimuli in a repeatable manner. Surely some of us are different, but most fit the category. Once I understood these phenomena, sales became as easy as having a quiet conversation with a friend.

In the end, my colleagues have convinced me to create a course. So, here it is. “The Psychology of Sales” – the culmination of 40 years of research and has nothing to do with anything found in sales books, tapes, CD’s or other courses. It’s about the psychological reasons (the six laws that people can’t break) that cause people to make a buy decision and creating the right psychological reasons for sales professionals to become sought after super sales professionals. The course also includes a segment on ethics and how it affects longevity in the profession and a session with management on sustaining and improving the understanding.

Since then, I have never spent more than 3 months achieving an annual sales goal and have helped numerous companies achieve significant and serious increases in their top line.

Visit this column again for specific client success stories. And thank you for your indulgence.

For more information about the “Psychology of Sales” course, contact us.

Max Gregorich is President of CEO 1 Stop and host of KBZNZ Talk Radio’s Business Genies. As a successful business owner, consultant, software creator for small and mid-sized business performance analysis, and former race car team owner, Max has an immense array of business and life experience which he uses to bring practical knowledge and usable tools to his audiences through both his show and his immensely interactive signature presentations and workshops “Psychology of Sales” and “Detox Your Business.

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