1. You can’t price your product from a disadvantageous position. Price based on margin and on the costs of customer acquisition 
2. Price is in the eye of the beholder. If you can create more value, you can charge more. Collect when your product is most desired, not when it is most diminished

Have a listen to Episode 9 of Sam’s Soapbox for tips on how to get your  pricing right.

Episode 9 transcript available to download below…

INTRO: Sam Polimeni shows motivated business owners how to make their business less reliant on them and worth more. When he gets on his soapbox, people listen. Now, here’s Sam!

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. Today I want to talk to you about pricing. What’s the right price for your service or your product? I think pricing is probably the hardest business decision you’ll ever make, right? And it should be, because pricing impacts everything you do. Pricing impacts your profit in your business, can impact the cash flow of your business, can impact the growth of your business or your ability to grow, and impacts the amount of capital you need to grow your business. Actually, pricing can even impact the type of people you attract to your business, because if your business isn’t profitable enough that would limit the type of people you can attract to your business. But how do most small business owners price?

Most small business owners that I talked to, when it comes to pricing and when I ask them the question how do you come up with your price in your business, and what they say is the price that I come up with is the industry average, that’s what the industry charges and that’s what I have to charge, because if I don’t charge that price, I won’t get any business. But what I say to them is, “How did you work that out?” Well, basically what they do is they go price their jobs out there in the marketplace and what they do is they pick up the price from their competitor based on the last job they lost. So if they lost the job and they lost it at X dollars, they then know next time they’re going to go for less, right?

Now, sometimes that’s right, sometimes that’s wrong, because the reality is if the competitor doesn’t know how to price and you’ve just copied him, it’s like the blind leading the blind. When it comes to pricing, we need to spend a fair amount of effort to make the right decision. And you need to protect your pricing decisions because sooner or later if you don’t, you could be out of business. You know, I always laugh at my trade-based clients. They tend to have a different price for everything. And what I always tell them about is that three prices that they normally go by. There’s the price they come up when they have no work, there’s the price they come up with for their regular customer, and then there’s the price that come up with when they’ve got too much work. And that’s what tends to happen in a lot of industries. And I guess when it comes to pricing; we become bolder and more confident based on the amount of work we’ve got.

So the key is put yourself in that position, but that’s a whole other discussion when we talk about your sales pipeline. But the first thing we need to know before we can make a pricing decision is we’ve got to know our numbers. We’ve got to know what are our costs really are, what’s our cost of labor, what’s our cost of materials. What’s our variable cost? And they’re the costs that go up or down; depending on how much we produce or the amount we manufacture or do. And then there’s the overhead cost. They’re the costs that stay fixed, whether we sell a thousand things or whether we sell nothing, we still got to cover those overhead costs. And then you’ve got your desired margin. And when it comes to your desired margin, we usually identify here’s all that cost and then we up price that product by a desired margin. And there are two types of margin. You can have what you call the gross margin and then you can have what I call your markup.

Now, they’re vastly different; it can produce you different results. We have a client of ours, who has a window manufacturing business. For over a year, we were discussing with them that their margins were too low. We set a target margin of 35-40 percent and we encouraged them to put in their pricing system in that margin and basically they had a very elaborate computer pricing model that they used. And they kept on telling me, “Yes, Sam, I’m definitely putting in the 35-40 percent margin on every job.” But the reality was when we had a look at their end of year financials or their quarterly financials, they kept on showing gross margins of even as low as 12 percent! And I said there’s something wrong with your pricing! And sure enough, when we had a closer look at their pricing model, they were putting in to their system a 35-40 percent markup rather than a 35 to 40 percent gross margin. And that had basically reduced their desired profit by nearly two-thirds.

So you’ve got to watch that in your business. I guess the question we ask ourselves, you know, what’s something really worth? When it comes to pricing, just the cost alone plus your margin aren’t what we’re about. What you need to do is you need to look at what’s something worth in your business? What’s the value to your end user? Now, I find 15 percent of people buy on price and 85 percent of people buy on value. So the key is look out there differentiating your value in the marketplace.

If we have a look at this, we’re looking at a simple example of a handbag, what’s a Louis Vuitton handbag worth? $2,000 or more? Can you go buy a handbag at K-mart for $20? And the answer is yes. I know a lot of the ladies out there will argue with me in terms of prevalent value, but the key question I’d ask, is the Louis Vuitton handbag worth a hundred times more than the K-mart handbag? And the answer is yes, but do they use a hundred times better materials? Do they use a hundred times better manufacturing processes? They might probably spend a hundred times more marketing but don’t necessarily spend a hundred times more on those other things I mentioned.

So value is in the eyes of the beholder. And we need to probably understand that when it comes to business. At the end of the day, when it comes to price, there are two types of pricing models that we have. We either price to solve somebody’s pain or we price for a delight that we’re offering. Now you look at your business. I guess in my business, I’m not offering too much delight. So we normally price to solve people’s pains. And that’s probably most business to businesses are like that. And so part of going out there to show that value declines and one of the things I go through in my workshops is what I call the value curve.

And the value curve, I guess, goes through 5 distinct stages, what we say to participants in the workshops is the first stage, I think, is you’ve got to educate your client base or your customer base or the marketplace on what you do. And if you’re going to educate the customers about the kind of pain you’re solving or can solve for them, I think they would then have a better desire to seek you out. So the second key value curve is you might have some of these clients out there that you’re starting to talk to might have perceived want: they think they need something fixed, they think they need something done. That’s when they then feel they need your services. That’s when your value starts to increase. Now, if you can educate your clients that you’ve got the answer to their pain and they’ve got an unfilled need at that point in time, that’s what I call the peak of the value curve.

Now, at that point in time, that’s the best time to negotiate your price with your clients or your customers. That’s the best time. Now, unfortunately, what a lot of us doing business, at that point in time, we might put in a price, we might put in a quote, we may not talk about the terms, we then go and often do the work and send them an invoice later on.

Now, once somebody’s got their need filled and you’ve delivered what you said you’re going to do and you’re unpaid because you now send them an invoice and waiting for payment, the value curve starts to diminish because they’ve got what they want, now you’re the problem because you’ve given them an invoice they have to pay! So what tends to happen is they start to delay the bill. Now once they start to delay paying you the bill, who’s got the problem now? Is it them or is it you? They key there is negotiate not only your price but also your payment terms early on. Now, I could talk about price and pricing, the value curve all day long, but hey, you go out there and go apply a couple of those things and looking forward to hearing your success stories. This is Sam and I’ll be back with you again soon! Bye!   

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam grow your business into a multi-million dollar company that’s far less reliant on you, then call in (03) 9355-0500 or visit www.sampolimeni.com. or www.spsol.com.au

 Download Episode 9 transcript here

But what happens when things change?

Listen to Sam Polimeni offer sage advice on how to correctly prepare  your business for sale.

Episode 8 transcript available to download below…

INTRO: Sam Polimeni shows motivated business owners how to make their business less relied on them and worth more. When he gets on his side box, people listen. Now, here’s Sam! (applause)

Sam: Hi, this is Sam Polimeni and this is Sam’s Soap box. Today, I want to talk to you about what are the top five things you would do to get your business ready for sale. I not only get small business owners come to me all the time saying, “Sam, I’m not ready to sell my business yet.” My advice to them is always the same, you should build your business to sell it, whether you want to or not. You should have this intention from day one, in my opinion. Start with the end in mind.

And I find the biggest challenge with a lot of small business owners, they only start thinking of selling their business when they get to the point that they’re tired, when they’ve had enough of their business and they just want to get out. And that’s probably the worst time to sell your business.

You know, if a business owner is tired, usually, the performance of their business reflects this and they’re not going to get anywhere near the best price that they can for their business. You know, the easiest business to sell is a good business so your goal should be to create a good business, a good profitable strong business.

The best buyer to sell your business to is what I call a corporate buyer. They’re always looking for good businesses. A corporation has an Acquisitions Manager and all they do is they look for businesses that are good and profitable. They want to buy because most corporations grow by acquisitions. So they are always looking for good small businesses to acquire.

I find a lot of my clients, depending what type of business it is, once they get their turnover to around ten million dollars, you’ll find that these guys from the corporation start coming out and talking to you. So your goal is get ready for them by having a well run and great profitable business.

The first key thing that you need to do—I’ll start up with what my key five steps are—step one is you have to make sure that you look and act like your potential purchaser, that you have a three-way cash flow and budget and run your business along corporate lines. The more you look like them, the more they will pay. So you have to have your business set up with an Advisory Board, have your management team, have your targets and KPIs in making your team accountable to achieve the business plan. The more you look like them, the more your business will be worth.

The second key point is you must have a five-year plan. There has to be plenty of upside to your business whether they buy it or not. I mean, I had a client come in the other day. He said he wanted to sell his business. He had enough. And I said, “Great! Why are you after?” They replied two or three million dollars, I asked ‘Guys, what do you think it’s worth?’

So we went and did a valuation on the business and the business was only worth $500,000. So I said, “If we want to sell a business for two or three million dollars, this is what it’s needs to look like. These are the kind of targets and numbers that you need to achieve.” So we then started to have a plan in place for us to get the business to the point that it was worth that much money.

You know, we did the same with one of our other clients a few years ago. He wanted to sell his business. He got to the point, we sat down and created a five-year plan and focused on tripling the business over a five-year period. He did and he got five times what he was previously offered for the business. And that’s why you need a plan that shows the scale and upside of the business. They don’t want a business that’s tired; they want a business that’s going to go somewhere.

The third key point is you develop an operational and marketing system that doesn’t rely on you, the owner. And you’ve got substantial contractual income as well. The less the business relies on the owner, the more the business is worth. So the key there is to make sure you’ve a got whole bunch of systems in your business and you’ve taken things out of your head to get the business to run better.

The fourth key step that you must do is you have to have a management team that can execute the business deliverables without you, right? And the more you do that, the more you have that team in place, the more valuable your business.

I’ve seen corporations pay, 25, 50% more just because that management team is in place. And let’s say you’re going to get your premium for the business because that’s what corporations are looking for, they’re looking for businesses that have a good business model, a good management team, good contracts, and the business doesn’t rely on the owner with plenty of upside in terms of growing the business. That’s what the top businesses are. So the better business you create the more valuable your business will be.

And the final step is you have to have a team of advisers that can position you and the business to accentuate those top five items we talked about to maximize your sale and exit prize and more importantly, exit terms, right? This will cost you money because to get a team of professionals together to work for you to achieve that can cost plenty, however, if you put together the right team, you’ll get a return many times over your investment. But what you want to be careful, if you go cheap here, it could cost you millions.

Get out there and go build a fantastic business and sell it for millions. This is Sam and I’ll talk to you again next time. Bye! (applause)

OUTRO: That was another episode of Sam’s side box. If you’d like Sam to help you drive your business into a multimillion dollar company that’s far less relied on you, then call in (03) 9355 0500  or visit www.spsol.com.au or www.sampolimeni.com. 

Download Episode 8 transcript here

How does this happen? Sam tell’s all in his 7th podcast ‘When Does a Business Fail?’

Episode 7 transcript available to download below…

INTRO: Sam Polimeni shows motivated business owners how to make their business less reliant on them and worth more. When he gets on his soapbox, people listen. Now, here’s Sam!

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. Today I want to talk to you about when does a business fail? Does a business fail when customers aren’t happy with it? Does a business fail when a product or service isn’t delivered on time? Does a business fail when there’s poor workmanship or there’s a lack of systems or excessive credit is given to customers or businesses just stopped paying their bills? In my opinion, a business fails where it runs out of cash. Lindsay Fox, the billionaire transport guru, says: “As blood flow is vital for life, so is cash flow in your business. Without it, you’re dead.” And that’s the key thing in business.

I guess the funny thing about business and cash flows, what impacts the business and the cash flow in your business, right? You know, I have had a lot of clients come up to me and say, “Sam, I’ve got a cash flow problem. Can you help me get a loan?” Then I ask, “What’s causing the problem in the first place?” They think, “Let’s go get the quick fix. Let’s go get a loan!” But 9 times out of 10 if they do get more money and they don’t fix the problem, as soon as that money runs out, they’re in a worse position than when they started off with. You’ve got to ask yourself what’s causing my cash flow problem?”

So the first thing we look at is your cash flow problem caused by a lack of profitability in your business. Is your profitability in your business so poor that it’s producing poor cash flow because there’s poor profits in the business? So you’ve got to have a look at that. And that poor profitability, is that caused by your price not being right? By your cost of sales not being right? By you not being able to buy your goods or your labor at the right price? For you not managing your jobs efficiently? For you having too much overhead for the volume you’ve got? Whatever it is, you’ve got to have a look at it. Is profitability your problem? Is that because your business growing? Most businesses that fall over and go into liquidations do cause of what’s called overtrading. They basically grow themselves to death, right? Is your cash flow strong enough and are your processes strong enough to cope with the growth of growing the business? More sales just cause more problems if you haven’t fixed them in the first place.

The other area that I find most small businesses have issues with when it comes to cash flow is just they’re basically inefficient. They’re inefficient at the way they basically collect their money, they’re inefficient in how they invoice, they’re inefficient how they manage their stock or their jobs or their work in progress, and they’ve got little to no debt collection procedures. They’re just basically inefficient. So the funny thing is, if you really want to fix your cash flow problem in your business, it’s got nothing to do with money! I believe if you want to fix your cash flow in your business, the key to that is basically improve your rules and improve your processes.

So have you got some cash flow rules in your business? Have you got a credit application? Have you got rules for giving credit? Have you got terms and conditions? Have you got a due date on invoices? Do you invoice properly? Have you got credit limits? Have you got a credit policy? The other issue is look at improving your processes. You know, the key thing to improving your process, I believe it’s a 3-step process. You’ve got to manage your jobs and manage your invoicing and manage your stock and debt collection processes. If you go do those steps, you’re going to really grow and develop and improve your cash flow in your business and your business can cope with anything. Go really strengthen your business by improving the cash flow. This is Sam, I look forward to talking to you again next week! Bye!   

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam to help you grow your business into a multi-million dollar company  that’s far less reliant on you, then call (03) 9355-0500 or visit www.spsol.com.au or www.sampolimeni.com

Download Episode 7 transcript here

But here’s the kicker. To an untrained eye, you might feel like you’re achieving, only to take a look at the numbers and realize you aren’t at all. Just because you’re busy doesn’t mean that your business is doing well. We call this ‘being busy staying broke!’

Part of the problem here is that many owners wait until tax season before looking over their financials and performing an annual health check. In this case, hopefully you have a good accountant that can help you do this, which is smart. However, once per year is certainly not enough….

Episode 6 transcript is available to download below…

INTRO: Sam Polimeni shows motivated business owners how to make their business less reliant on them and worth more. When he gets on his soapbox, people listen. Now, here’s Sam!

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. Is your business achieving what you set out to achieve? When we got started in business, we had all these grand plans of how we’re going to do it better, faster, and cheaper than our boss and make more money. You had plans to set up your business, build it, put in others to run it for you and then you count the money when you’re off on holidays and travelling around the world. And now what happened? I guess reality hit. It was harder to find the right customers and the right clients, harder to find the right team, and there’s all this paperwork that you had to get done what people wanted from you. From tendering the financials to loan applications, accounting, pricing decisions, marketing, and a whole bunch of other stuff that you didn’t have a clue what to do, right? And then you started running out of time because you were so busy working in the business.

I was talking to one of my clients the other day. And I asked him, “How’s your business travelling?” And he looked at me and he says, “I think I’m doing good, but I’m just a bit too busy to think about it. You tell me how I’m going.” We had a good look at Richard’s financials and we analyzed it over the last few years and I had to tell him he wasn’t doing that good! Even though the business had tripled in turnover, the profit was the same! He was making the same profit he was making 5 years ago! And that’s the challenge sometimes in business. A lot of small business owners just get too busy and they don’t stop and have a look at what’s really going on! And that’s the big message over, you need to sort of stop and look and ask and see how things are really going on in the business. Don’t stop getting—I’ve got some clients that are so busy staying broke! It just doesn’t make any sense! It’s ridiculous!

A lot of small business owners look at their financials is at the end of the year tax meeting, right? Hopefully, if they’ve got half decent accountant, then the accountant will do a bit of benchmarking and start analyzing their business and analyze their business whether their business is doing good, whether it’s doing bad or it’s just plain ugly, right? But even in my opinion, that’s just too light! You can’t wait to 3, 6, 9 months after the financial year. That’s just not often enough to work out whether your business is doing well, right? You’ve got to start thinking about how do I go create the kind of business that I set out to achieve? And when you start thinking about the kind of all the possibilities about how you can create a better business, that’s when you start to get on the road to achieving your goals again. And in my view, if you want to create a better business, it all starts with planning.

Unfortunately though, most small business owners’ idea of planning is what I call the idea of the week program. They come up with an idea this week, they go to their team, they go and implement that idea, the team starts to implement that idea and then next week they come up with another idea. And then the week after, another idea. And the week after, another idea. Sooner or later your team says what’s the point of starting implementing any of these ideas? He’s just going to come up with something different next week. And their eyes start to roll. And to me, that’s not planning. I believe there’s opportunities everywhere but you need to be able to discern what’s an opportunity and what’s a distraction. And I believe if we found a plan, it’s more difficult to work out the opportunities from the distractions. I believe that a plan can transform in business because I believe that a plan is like a map.

A few years ago, we took the family to New York and the first thing we did when we went to New York is we went and bought a couple of maps. And the reason why we bought a couple of maps is because New York’s such a big city; we’ve never been there before so we didn’t have a clue how to get around there so we bought some maps to figure out where all the attractions were and then I guess plan our few days that we were there. And I think that’s the whole key in your business. If you go out and take your business in places it’s never been before, you need to get yourself a plan. You need to create a map for where you want to take your business. And along the way, you probably need to put together a team of people to help you do that, because if you’ve never done it before, you need to go get some expertise and get some help and a bit of a coach or a guide or some advisers to help you get there quicker. I believe to be really successful in business, you need to get a plan and to be held accountable to that plan and make sure you get a coach or an adviser to keep you on track.

 Go out there and achieve the business that you deserve and the success that you deserve. Go focus on achieving your goals and create a better business by planning to have a business that makes a big profit. This is Sam and I look forward to talking to you next week. Bye!   

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam grow your business into a multi-million dollar company that’s far less reliant on you, then call in (03) 9355-0500 or visit www.sampolimeni.com    www.spsol.com.au

Download Episode 6 transcript here

So how does that happen? Well, what we have is a problem not necessarily with overspending, but with cash flow management.

Episode 5 transcript is available to download below…

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. Today, I want to talk to you about growth and understanding that growth costs money. Of course growth costs money. A lot of small business owners look at their financial statements and say, “Sam, I made a profit! But where’s the cash?”

The key thing to understand in small business is that profit and cash most of the time don’t correlate. What you find, is if your business is growing rapidly and it’s growing faster then what happens is that you need more and more working capital, which means you need more and more cash to fund the growth of your business.

During one of my workshops I exemplify a graph that shows an increase in sales & profit but a decrease in cash balance. You’ve got to understand cash flow, cash flow is vital. One of the best tools that we use to help our clients get over this hurdle is to develop what we call a three-way cash flow forecast. And a three-way cash flow forecast basically identifies the relationship between profit cash and sales and then shows to us what kind of levels of overdraft we need. Once we’ve got this model in place, we can then start using it for a little bit of what we call financial modeling. Just to give you an example, one of our clients (a wholesale business), doubled their business over a year period.

Most wholesale basically works a fairly long cycle. Their goods can take anywhere between 2-3 months to come from overseas, so they’re usually paying some kind of deposit and they usually have to pay for their goods before they land, and then what ends up happening, is those goods end up in stock. They then stay in stock for anywhere between 30, 60, 90 or 120 days. So what tends to happen, when you’ve got an importing/wholesaling business, you could basically be funding up to 6 months worth of working capital. So if you want to go double your business, you’ve also got to double your working capital. 

We developed a three-way cash flow and worked out that we needed to increase their overdraft from $250,000 to $500,000.

At the time, they knew they weren’t going to be able to get this from the bank so we had to come up with a few different strategies on how to grow their business and how to fund the growth. We looked at a couple of different things, we talked about potentially re-negotiating with suppliers, we talked about a few different strategies in terms of improving our efficiencies in terms of how quickly we collect our money, and we talked about potentially putting some low value customers on a COD basis. That means we’ve got our cash earlier. We talked about a whole range of different strategies. We basically worked at all these different strategies and, at the end of the year, we ended up getting less into overdraft than what we did the year before!

We didn’t get anywhere near the $250,000 overdraft limit, yet we had doubled our sales by implementing those strategies. We actually created a positive cash flow in the business as a result of doing that. The key is to always look to identify what the cause of your cash flow problem is, and then come up with some strategies on how you can improve that cash flow in your business. Don’t look for the quick fix. Don’t just go and borrow more money because 9 times out of 10, borrowing more money might be a quick fix in your business but it won’t be the best fix and it could be the cause of grief later on.

So understand growth costs money, understand your cash flow, and understand that the best way to fix your cash flow problems is to look at your rules and your processes. By developing better rules and better processes in your business, you will be able to really maximize your cash flow. So this is Sam, I look forward to talking to you again next week! Bye! 

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam grow your business into a multi-million dollar company that’s far less reliant on you, then call in (03) 9355-0500 or visit www.sampolimeni.com or www.spsol.com.au

 Download Episode 5 transcript

Growth won’t fix your problems. You’ve got to fix the business first. If you want to grow your business, you’ve got to embark on a three-step process, start at the beginning and end at the end. Sounds simple doesn’t it? Successful growth is simple: if you know what your doing…

Episode 4 transcipt is available to download below…

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. I want to talk to you about growing your business. The amazing thing is a lot of clients have come to me in the past to say, “Sam, I want to grow my business.” But, looking at the business, we always seem to find that it isn’t trading that well or isn’t operating that well. So this is my big thing, if you’ve got a crap business and you want to grow it, all you’re going to end up with is a bigger crap business! Growth won’t fix most of those problems. You’ve got to fix the business first. I believe that if you want to grow your business, you’ve got to go through what I call the three-step process. And the first step of that process is you’ve got to get better. You’ve got to get on top of things. You’ve got to make your business a bit better.

I had a client a few years ago, who wanted to go grow his business quite significantly and basically, the business just wasn’t ready; it didn’t have the right financial processes in place, the systems were very poor, the management system was very poor, he was just running around, working obscene hours trying to keep it all afloat. In the end, he just couldn’t keep the whole thing together and it fell over. I don’t like my clients to go through that. So the first step, I believe, is you’ve got to get better.

As always, you’ve got to know your numbers. You’ve got to get on top of your financials, have a strong financial system. Get your financial system operating so you’re on top of the invoicing, you’re on top of your debt collection, you’re on top of your job management. You just got to get to know all your numbers and develop your systems so your business can cope with growth. Get your profit right. What’s the point of going into business if it’s not profitable? Growth won’t make it more profitable. You’ve got to grow your business profitably. You’ve got to get your pricing right. You want to get your people right. Can your own people cope with the growth or do you need to put in a little bit of a management structure to cope with the growth? Is your business efficient? Your business has got to have sustainable cash flow to grow.

So the first step is you just have to get better.

Once you’ve got better, you can go move to the second step. Now you should have some capacity. If you’ve got the right capacity because you’re focused on the right things, you’ve improved your business, now your business can grow! So what you want to now do is focus on the right things that will improve your efficiency even further and create more capacity from the existing resources. Now you’ve got some time to really look at improving your business.

By improving your business, you’re then going to create further capacity.

Once you’ve done this, the third step is to start to grow.
You’ve got some capacity, you’ve got some better systems, you’re now going to start focusing, and because you know your numbers, you can now start focusing on the right areas to grow your business, to go find the ideal customers to grow your business, to go work on the more profitable areas of your business. That’s what you should be focusing on doing. That’s what I believe should be the most effective three-step way to grow your business.

We teach the growth strategy to our clients in our workshops as well as in our plan to profit programs. Once our clients have gone and developed a good, strong business and they’re on top of things, their growth just gets out of control. And that’s what I want to achieve for my clients because the key thing, as a business owner, if you’re spending all your energy and effort on trying to keep your whole business afloat and trying to touch every single area in your business, your business just won’t grow, it’ll only grow to the level of your capacity

Your focus as a business owner, should be growing your business.

You should be the force behind the growth strategy in your business, and you should delegate every other single job out of your business, but you can’t delegate the growth strategy of the business. That’s your responsibility. This is Sam and look forward to hearing your success stories. Bye!

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam grow your business into a multi-million dollar company that’s far less reliant on you, then call in (03) 9355 0500 or visit sampolimeni.com. or spsol.com.au

 Sam’s Soapbox – Episode 4 – click here to download and print transcript

Want to know where to spend your marketing dollars? Yours numbers can tell you. Thinking about streamlining and dropping some products or segments? Listen to your numbers to discover which ones to let go. Thinking of increasing your prices, or investing in new equipment and what the impact on cash flow or profit will be. Your numbers can tell you the impact on cash flow and profit. Business is about making decisions: the right decisions.

Episode 3 transcipt is available to download below…

SAM: Hi! This is Sam Polimeni and this is Sam’s Soapbox. Your numbers are screaming at you, are you listening? Your numbers are trying to tell you something about your business. I find most small business owners just aren’t listening. The problem is year-end financial statements; they’re very valuable to the small business owner because without them, you’re never going to get a loan. The first thing a banker asks a small business owner is “where’s your financial statements and tax returns?” Most small business owners know by now, without them, they’re never going to get any money from the bank. But, in terms of providing financial information, financial statements are pretty useless.

If your business isn’t going that well, chances are, you’ve just blown the best part of another year before you can try to correct it. And I think the key thing with a lot of small business owners is that they don’t run their business by numbers because they run their business with what I call instinct or touch. And the reason why small business owners do that is because they touch everything in their business from the quote to the invoice to getting the job done to checking the invoices from suppliers. They basically touch everything in the business. And whilst that’s fine when your business is small, as it gets bigger, that’s just not a great way to manage your business. So, what tends to happen is as the business grows, if they hadn’t developed a system to manage their business, basically the business is a bit of a free-for-all. What I find is if you have looked at successful businesses in business and other successful organizations, you’ll find most of them go on the adage whatever you can measure, you can manage.

Let’s take AFL football for example. Today, they’re measuring everything! From footballers running around, to the blue vests on in pre-season, measuring how many K’s they’ve travelled, to what their heart rate is, what their blood pressure is, and all these other things that measure everything. They’re measuring all these KPI’s in football from inside 50’s to tackles to all these other various things. A successful business understands or a successful organization understands. You may not be able to get 100 percent improvement in one thing that’s going to give you major competitive advantage. But if you can do a hundred things 1 percent better, you’ve got basically want to improve your business, right? I find if you’ve got better information, you can make better decisions.

A few years ago, we had a client who ran a window manufacturing business and the profitability in the business just wasn’t right. We kept on talking to the clients and looking at their numbers: they just weren’t achieving the gross margins that we expected. We started to look closely at it and we said “your pricings just got to be wrong!”

“No, it’s not wrong because we’re putting the pricing in this computer system that we bought, we put in all our costs, we put the margin, and basically it comes up with the price.” For a little while they argued with us that they couldn’t be wrong. We had a closer look at it we were giving them a gross margin target but they would put in a markup in the computer system.

There’s a big difference between the margin and the markup hence their profitability was low.    It doesn’t matter how good computer systems are, if you put garbage in, you’re going to get garbage out. My key thing is don’t run your business blind; you’ve got to know your numbers in your business. And one of the key numbers you need to know in your business is your breakeven point. Your breakeven point in your business is the point where you’re not making money but you’re not losing money, hence it’s called breakeven. Most small business owners should know what their breakeven is per day, per week, per month and per year. You should have a good idea at what point you start to make money and profit in your business and at what point you’re recovering your costs in your business.

Now, I have a client who a few years ago started an architectural business. I said to him, “What we need to do is we need to develop 3 breakeven points in your business. And we’ve got to get your costing right.” So one of the first things we did was to get to the first breakeven point where the overhead expenses create what we call a minimum salary. What’s the minimum salary you need for your business to survive?

The second breakeven point we have to get to is the point where you cover your overhead expenses and pay yourself a market salary. I said to Joe, “What’s the market salary that you would be on if you work for somebody else?” And he said about a hundred grand a year (back then). So what we did was we worked out our pricing as if you’re getting paid the market salary of a hundred grand a year. You should always base your pricing on market salaries. Because if you don’t base your pricing on market salaries and you do base your pricing on minimum salaries, what will happen is your business will get stuck, right?

You’ve got to pay yourself a market salary because if you don’t pay yourself a market salary, the only way you can grow your business is go employ other people that want to work for less than the market salary. I don’t know about you, but that is just really hard to do, right? Just about impossible to do. You always have to price as if you have a market salary even though you don’t pay yourself one, the extra profit will be used in the business to build up the working capital (it’s what I call ‘sweat equity’).

The third breakeven point to target is what’s going to cover our everyday expenses plus our market salary plus getting a return on our investment, a return on the funds we’ve invested in the business and a target return on the turnover that we’re doing in the business.

We need to know what that third breakeven point is. Best to know what your targets are then use a bit of benchmark to figure out what other top profitable firms in your industry are doing, that’s what’s going to put you on the right track to develop a profitable business.

I challenge everybody not to be a labor hire business. Be a business that’s going to be profitable, be a business that makes profits and understand that your breaking even will change all the time, that’s something you’ll always want to look at. So go know your numbers and go make some better decisions.

OUTRO: That was another episode of Sam’s Soapbox. If you’d like Sam to advise you on how to grow your business into a multi-million dollar consume that’s far less reliant on you, then call in (03) 9355 0500 or visit www.sampolimeni.com

 Sam’s Soapbox – Episode 3 – click here to download and print transcript

In this episode, Sam Polimeni explains how a business comes to be stuck on a level that is so static there seems no hope of growth or change let alone an increase in productivity and profitability. However, it’s not all doom and gloom for the business owner that’s in such a postion, after all, with Sam – where there’s a problem there is always a solution and on such a sensitive subject as Business Growth – you will want to listen hard to learn how to become ‘unstuck’.

Episode 2 transcipt is available to download below…

Intro: Sam Polimeni shows motivated business owners how to make their business less reliant on them and worth more. When he gets on his soapbox, people listen. Now, here’s Sam!

Sam: Are you stuck in your business? Is your business stuck at the same level? Same level of profit? Same level of growth? Have you ever asked yourself why you’re stuck? In my experience, the key reason a lot of small business owners get stuck is because they get stuck doing the same job over and over again. Most small businesses start in what I call a high performance, cheap labor business.

Now, four out of five small business owners don’t get past the owner making a wage in their business. They don’t get past what I call the job stage of the business. And the major reason they get stuck is because the owner keeps doing the same things over and over again.

In Australia, there are over 2 million small businesses and over 85% of them employ less than five people. And it all happens because we all start off as a one-man band where we do everything. We make the promise and we deliver on that promise. And yes, I agree that no one can do it better than you. But the trouble is you’re not only just doing one job – you’re doing five jobs! You cannot be the part-time manager and the part-time salesperson and the part-time sales consultant.

The key to getting your business to the next level is to ‘get off the tools’. Whether you’re a trainee, a consultant, a professional or are in sales, you need to get off the tools. You need to get off the productive thing you’re doing in your business. If you’re a plumber, you’ve got to get off the tools. If you’re a salesperson in your business, you have got to get out of the sales. I was talking to one of my plumbing clients a few years ago; his business was stuck, he sort of employed two or three people at the time.

His business had been stuck at the same level for probably the last ten years. Where was he stuck? He was stuck on the excavator. He wanted to grow his business, but he goes, “Sam, I cannot grow my business if I’m the only one that can get on the excavator.” I said, “Mate, let’s go find somebody else. I’m sure we can find somebody else.” So we went and worked out the type of person we were looking for and we went out and found that person.

Today, he’s got an apprentice on that machine, his business has tripled and quadrupled over the last couple of years. More importantly, the business is making substantial profits, which is probably the most pleasing thing that happened.

I have another client of mine who runs a very successful telecom services business, and basically, he was the major sales troubleshooter in the business. He was always a high-level sales person in the business. He’s got over 40 people working for him now, he was basically the CEO. But what was happening was always getting dragged into the sales and the more he got dragged into the sales, no one was left running the company. So what he did is he sacked himself from sales. He now manages the business and the sales team to go after and achieve what they got to achieve. So he basically sacked himself from the job.

I think the key thing in business is that you eventually need to stop being a one-man band and become the conductor. You’ve got to start moving from being the star in your business to the coach in your business. You’ve got to learn new skills; you’ve got to change your role in the business. Don’t keep doing the same thing over and over and over again. That’s how you’re going to create a fantastic business.

So the key message today is ‘get off the tools as fast as you can’ so you can develop a larger, better, more profitable business. Go out there and get it done!!

Outro:That was another episode of Sam’s Soapbox. If you’d like Sam to help you grow your business into a multi-million dollar company that’s far less reliant on you, call (03) 9355-0500 or visit sampolimeni.com or spsol.com.au

Sam’s Soapbox – Episode 2 – click here to download and print transcript

In this episode, Sam Polimeni discusses the importance of experience Vs. achievement. You might have been in business for X number of years but that doesn’t mean you’ve got the same amount of years experience. You see, we are all good at what we do but that doesn’t make us good at running a business. Just because we have a profession doesn’t mean that we are equipped to manage a business effectively and efficiently.  To be a success, to stand out from the crowd; we need to focus on continual improvement whilst learning new and better ways to run our business. When we’re working in the business, we’re working on today’s income. When we’re working on the business, we’re working on tomorrow’s income.

Episode 1 transcript is available to download below…

Intro: Sam Polimeni shows motivated business owners how to make their business less reliant on them and worth more. When he gets on his soapbox, people listen. Now, here’s Sam!

SAM: One of the things that we’re talking about to small business owners is that when it comes down to experience, a lot of them think that hey!  I’ve been in business 10 years, I’ve got a lot of experience. I know what I’m doing. Not true! If you’ve got 10 years experience, well, you’ve just got 1 year repeated 10 times. Why? Because when we start a business, we learn a professional skill, we start doing it for somebody else, we think we can do it better, but we get sick and tired of doing it for them, so we think we can do it better for ourselves. So we go off and start a business. But the thing is no one ever taught us how to have real training and how to run a real business. We think we have experience – but we don’t.

I was talking to a couple of clients the other day who’ve been in business for over 10 years. Even though they’re installing kitchens in multi-million dollar homes, the business, when we analyzed it, wasn’t making much more than basically a wage. It wasn’t making any real profit. They looked at me and asked how the heck they improve the situation.
My reply: ‘Okay,  if you change what you’ve been doing over the last 10 years, as your business kept on improving, you keep on doing the same thing this year that you did last year. Now, you know, one of the definitions of insanity is if you keep doing the same thing and expecting a different result, nothings going to happen. What we need to do in business is focus on how we can do things better. How can we do things faster? How can we do things cheaper? We’re going to focus on improving our business all the time, while learning new and better ways to run our business.

I went to a seminar a few years ago; Alan Weiss was the guest speaker. He said that he couldn’t believe how stupid he was two weeks ago. I think that the key to a successful business is that there’s always something to learn. When you get to the point where you think you know all the answers, your business is going to start going downhill. So I always encourage myself and everybody else to continually learn how to improve their business. Always coming up with better systems, always coming up with how we can get customers. How to get better people and how to improve on our sales and marketing processes.

What did you work on this week to improve your business? What did you work on today to improve your business? If you didn’t work on anything last week to improve your business, you wasted the week! If you didn’t work on anything new last month to improve your business, you probably wasted the month. And sadly, if you didn’t do anything to improve your business last year, then you just wasted the year!

Some of you will be screaming at me saying Sam, you don’t know! You just don’t know how busy I am! The point is: you might be busy, but are you busy doing the right work that’s going to get your business better today than it was yesterday?
If you’re busy and your business isn’t any better today than it was yesterday, you just wasted the day. Do the right work, start working on your business rather than just in your business. When we’re working in the business, we’re working on today’s income. When we’re working on the business, we’re working on tomorrow’s income. So, if you spend too much time working in the business, you’re not going to have a good business tomorrow.

The key is to get the right balance. You have got to get that balance right. Once you get that balance right in the business, the key starts to turn.

I believe in focusing on learning and doing the right things in your business. And when you go learn and do the right things in your business, your business is always going to improve.

Outro: That was another episode of Sam’s Soapbox. If you’d like Sam to advise you on how to grow your business into a multi-million dollar consume that’s far less reliant on you, then call in (03) 9355-0500 or visit www.sampolimeni.com

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