Measuring Business Success in Real Terms!
Your small business is up and running and things seem to be going well. You have grown steadily the past few years and managed to survive the worst of the downturn. So now what do you do? Common wisdom would suggest that you focus on revenue and maximising sales. This means borrowing money, hiring more staff, take every order/customer that comes along. As long as money keeps coming in everything is hunky dory! What’s wrong with this path?
Well firstly its the money that’s going out that’s as important as the money coming in. Sales means nothing if you are spending more than you earn. Profit is king and Cash Flow is Queen! We will discuss a few of the key issues to hand including:
- Why every business leader should pay themselves what they deserve;
- Why you should avoid debt wherever possible
- Why you should pay your staff like a winning sports team would.
Business Owners Should Always Pay Themselves The Correct Wage!
Here’s a surprising figure: 90 percent of small business owners pay themselves less than a fair market wage. In many ways this is a reasonable thing to do. After all, by lowering their own wage costs, business owners can make pre-tax profits look much healthier. But despite this, business owners should always pay themselves the correct market wage. There are two reasons why this should be the case.
- First, not paying yourself (or your employees) a market-based wage actually undermines your business. Pre-tax profits and labor expenses are key figures which affect important financial measures such as labor productivity or the percentage of pre-tax profits to revenue.
Artificially altering profit levels could affect your ability to grow your company. Also underpaying wages can be viewed as a tax evasion measure which Revenue have been more closely looking at in recent years. Revenue is increasingly choosing to audit firms suspected of employing this practice.
- Secondly paying yourself a market-based wage is crucial when it comes to selling your business or making an exit. That’s because a firm’s profitability is a key factor in determining its fair market value. So when an outside party looks at your books prior to purchasing your company, artificially lowered wages could cast doubt on your company’s value in the eyes of a potential buyer.
Also, paying yourself a market-based wage from the start will spare your business cash flow problems (and the nasty surprise of diminished profits) if you decide to make an exit and replace yourself with an outside CEO who’s expecting to earn market wages.
Contact Us at Avid Partners on 0818 303087. Email us at firstname.lastname@example.org. We love to hear from small businesses and how they are doing!
Extracts from Simple Numbers, Big Profits. Blinkist Blog
"A breath of fresh air. Your firm demonstrated enormous commercial understanding in turning around negotiations with a potential target vendor. I admire your style and ability to drive the deal forward. Many thanks."
"I would like to say I'm very happy with your service, especially the audit team, your staff are always friendly, helpful and a pleasure to deal with."
"Your business approach to clients is very impressive. I have always found that when explaining the types of service on offer, it is always concise and straight forward. The level of trust that clients place in your company and its staff speaks volumes."
"I would like to take this opportunity to say how much we are impressed with your company's professionalism, it has been a pleasure working with you all and we look forward to working with you in the future."
"Avid Partners - Accountants & Business Advisors are an excellent firm of accountants, their quality ethos is outstanding."
"I have dealt with Jamie O' Hanlon, of Avid Partners - Accountants & Business Advisors Chartered Certified Accountants, for a number of years as he is auditor to one of my clients. I have always found him to be professional and responsive in his approach."
"Service is second to none; there is always someone at the end of the phone for any business advice. The staff are very easy to get along with, very approachable and know exactly what they are talking about"
We at Fitzies Bar have worked with Avid Partners - Business & Financial Advisers for over five years. We find that the advice and support offered to us in addition to all of our book-keeping requirements to include payroll, VAT, etc. is invaluable and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
Jamie and his staff are a pleasure to work with. They respond promptly to any queries we have and are critical to our financial planning and the future needs of our business. I would highly recommend them to anyone interested in accounting services.
We at Stillorgan Cycles have used Jamie and his Team at Avid Partners – Accountants and Business Advisers for over five years. We have found that the retail advice and support offered to us is second to none and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
I met Avid Partners through a local business networking group. We had been using the same accountants for years and found that in these harsh economic times that we were not getting good enough value or service. We were very impressed by the company's professionalism and enthusiasm and genuine interest in helping us get the most out of our business. As a result we are now clients of Avid Partners and are thrilled with our decision.
After meeting Avid Partners with a view to changing our accountants, we came away with a better deal financially and a feeling that we were in capable hands. We feel that Avid Partners has a personal interest in the welfare of our business. Avid Partners have given us great advice, help and support and respond to our day to day queries with speed and efficiency. We feel it was a great move for us to change to Avid Partners.