You mentioned that the second part was money mastery, so how do leaders do that?
Well, the key to money mastery is budgeting and reporting. Interestingly enough, in the ActionCOACH system worldwide, there are about 15,000 businesses being coached on any one day. Prior to an ActionCOACH showing up, only about 7 percent of them have financial statements that are generated on a monthly basis that an owner is using to make decisions, which is a little scary. What ends up happening is decisions are being made without 100 percent of the knowledge that they should have about what is their current profit-and-loss situation, what is their cash flow situation. So the very first thing we do is encourage the business to begin to generate reporting of their statement of income, their balance sheet and cash flow statement on a very regular basis.
Once they have that, then we move forward with, ‘OK, now it’s time to learn how to do budgeting.’ Typically, I like to start with cash flow because in any business, whether you’re a multimillion-dollar business or you’re a few-hundred-thousand-dollar business, cash is king. In almost any good business book, you would find that the No. 1 thing someone will say in there is cash is king. I like to start trying to budget where the cash comes from and what kind of cash we’ll be generating, and forecasting what the cash is coming out of the business. The key to money mastery is budgeting and reporting, so we teach them how to do that. We also like them to try to understand what their breakeven point is. The purpose of understanding your breakeven point is since you need to know how many clients you have to cover your costs that are part of your business. So we like to get them to the point to understand where their breakeven point is and typically we will see a different level of effort to get to that level of breaking point. Then, when they get there, it’s like, ‘OK, I’ve got that covered. Everything there after is profit, profit, profit.’ It’s kind of an inflection point, if you will, for a business owner to kind of understand where do I go from here.
Then you said the third element is time mastery, so how do they do that?
There is an element where the business owner has to run their own productivity. Take five minutes and write down on a typical day what you do. Then I ask them to do a nine-box matrix and the upper right-hand corner is high skill, high value. For instance, let’s say we determine the business owner, just for argument sake, their worth — a highest value, highest scale — is $500. What you find on that list is a lot of stuff you could probably go into the market and pay $10 an hour or $50 dollars an hour. I say to the business owner, ‘So if you’re worth $500 an hour and you’re doing tasks at $50 an hour, there is a lot of money that you are not taking advantage of. You’re not getting the opportunity from that cost or from that business.’ Often the small business owner has to do some of those tasks, but what I ask them to do is think about your dime every day and how you get the most value out of it, by delegating some of those tasks. And then there is a whole area under time mastery about how is time mastery being used in your company. What we asked them to do is generate what we call key performance indicators — KPIs. With a key performance indicator we tell them how time is being used in your business. Are invoices being sent out on time? Are various activities that generate cash flow being done on a timely basis? We ask them to get their organization to identify, by their key performance indicators, and then get a business owner to manage those key performance indicators within their organization, so they leverage their own time.
Those four things we believe are absolutely critical for this foundation. That’s kind of where we begin to step back to get them to realize, ‘I need a really strong foundation if I’m going to have a successful business and grow.’
How to reach: ActionCOACH Solutions, (520) 505-4470 or www.actioncoachsolutions.com
