How business becomes like a bicycle
You may have come across a situation where business is conducted in the conditions of permanent loans and credits. This is such a bike: while you pedal – you go as soon as you release the pedals – you move by inertia for a while, but then you fall on your side.
I first encountered this situation in a distribution company where I was a director. Then we did not have enough money for the “turnover”. When we began to analyze our expenses, we saw that we spend their lion’s share: a) on the salaries of our employees and b) on the repayment of loans. And it turned out to be a heavy burden, because every month — take it out and put it — we have to pay people salaries, and also interest and a body on the loan.
If suddenly one of the months was given out by the so-called “off-season”, or for some reason the sales did not go, and even when it did not last one month, but several in a row – our bike began to roll on its side. Business was starting to eat itself. Because we had somewhere to get the salaries of employees and interest and the body on the loan.
When the company was bad, the staff did not feel it at all. Yes, we said something to them, but at the same time they received absolutely stable salaries. But there can be no good staff when a company is bad.
This is a very dangerous situation when two factors are included here – very large permanent payments that eat up your turnover. And if you do not calculate your expenses, if you do not control your income and do not compare one with the other, a catastrophe can befall you.
Introduction of financial planning
The first action that helped us get out of this situation was a regular comparison of our income with our expenses. We just started to analyze it every week. Maybe for you it will be a discovery, but every week it is necessary to compare your income and your expenses. This is done by standard financial planning. You can find more information on this at www.rb.tv in the section “Financial Planning”.
The introduction of standard financial planning just saved us. How? Very simple. We saw that our incomes would not in any way cover our expenses again … It was necessary to sit down and do something, very urgent measures were required.
Our employees at that time – it was the beginning of the 2000s – were simply receiving salaries, working in a distribution company. People were selling goods, but were not actually tied to the result and consistently received salaries – good company or bad. Yes, maybe everyone saw this as some kind of incorrectness, but no one did anything.
“Therefore, first of all, we introduced a variable part of the employees, that is, their salary consisted of a salary and a percentage portion. Well, as you understand, in such a situation when a company is bad, it becomes bad for employees as well. This, of course, spurred them.”
And here we have already ceased to be tied to the payment of a large expense in terms of the salary of employees. We paid salaries, but now they made up a small part – 30 percent is guaranteed, the rest should have been earned. This was the first unloading of that bondage when we paid very large salaries.
Now I had to do something with interest on the loan. In standard financial planning there is a method of payment on a fixed date. And if you go through our financial planning services, you will be offered solutions that will ease this burden. The simplest advice: the first thing you can do about it is to restructure this debt as much as possible.
If your lenders are your suppliers, you can negotiate with them some old credit and current debt. This is a little trick. So, we break our debt into current and old. And we pay in the mode of current time, buying goods and paying for it. And also we save some money for the repayment of the old debt. What is important for our supplier who credits us? Certainty is important. He sees that we are fairly stable and creditworthy, we are paying for current supplies and are gradually reducing our old debt. For him it is very important. Thus, your creditworthiness begins to grow. Your solvency also rises.
There are a lot of additional nuances and tricks that you will definitely learn by working with our consultants in the “Profitable business” – this is the name of our service.
Thrive and prosper!