“Has anyone ever felt like they’re not where they should be financially with their business? At some point we’ve all been there but we first need to understand what shape your business is in,” said Justin Krane, president and founder of Krane Financial Solutions, as he spoke to Auto Glass Week (AGW) attendees in Indianapolis earlier this month.
For just over a decade Krane has worked with small business owners to help improve their financials with some of his “simple formulas.”
“Most of what I’ll tell you will be a reminder, but ask yourself how often you think of the following things,” said Krane.
He was referring to net profit, which he defined as: gross profit – expenses (overhead) – owner distributions. Krane mentioned “your net profit needs to be 10% or more of your gross profit.” Your company’s gross profit is: your sales – the cost of your glass + your labor costs, according to Krane. All of which he said are things most of the attendees should already know.
“If you don’t deal with your money, eventually your money is going to deal with you. It’s better to get a good understanding of where your business is at financially at all times. I would recommend getting QuickBooks to help you figure out your personal expenses as a guide. But be sure to stay consistent. So basically you shouldn’t be mixing personal and business expenses because that can cause issues for you down the line during audits,” Krane said.
Employees get generally 40% of sales for a business, according to Krane, who also mentioned business owners can’t wear 62 hats in their businesses.
“When I asked your peers what’s the smartest investment in their businesses do you know what they said? The majority of them said they’re making the decision to hire the right people,” Krane said.
“When you want your business to make more money you don’t wanna think about getting a loan or raising the money,” said Krane.
He gave an example that instantly resonated with the crowd. He asked if anyone had ever seen an episode of Shark Tank where people did not get investments from the moguls hearing their proposals. He then asked the audience if they had any ideas on why certain ideas weren’t giving the financial backing their creators had hoped for. Audience members quickly responded with ideas that included:
– Having a poor business plan;
– Lacking confidence in the product or themselves; and
– Not enough capital of their own.
Although Krane agreed with the crowd’s examples, he mentioned you have to get more profitable based on where you are at right now, which means you must have:
– An accurate set of books;
– Additional help (a bookkeeper that is not yourself);
– A CPA;
– Fractional CFO; and a
– Financial advisor.
“Do you want to know how you find extra money from your business? Well there’s a few simple things you can start doing today and they all involve inventory,” he said. “You have to be smart with what you have, it’s so much better when you know this versus guessing.”
First, he stated it’s imperative to track your inventory and mark it, because from there you can create a balance sheet and have weekly reports to ensure you’re aware of how long your inventory will last.
“The theme here is clarity, you have to break down your sales on your profit net loss. You do this so you can see where the money is coming from. I know that you know this I’m just reminding you to do it,” said Krane. “You have to take personal responsibility in order to advance your financial life. It’s not about return on investment, it’s about return on life, it’s about being smart and having clarity and believing you can be the best,” he added.