Ten steps to more money

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Atipical Holdings, Rowlett, Texas, has been formed to help carriers, logistics companies and private fleets control costs and improve productivity through four separate business units. Diversified Capital Resources supplies transportation equipment financing. Trailer Asset Management Solutions provides acquisition, disposition and finance services for used equipment. Mobile Maintenance Services delivers on-site equipment maintenance and repair solutions. And Integrated Services and Solutions provides outsourced productivity solutions for carriers’ back-office operations.

National Accounting & Finance Council’s annual conference June 26-28 in Nashville will focus on maintenance, safety and financial trends of revenue equipment. Sessions include discussion of emission-compliant engines, in-cab safety technology, pros and cons of leasing and equipment disposition. Visit this site.

Central Freight Lines has obtained a $70 million revolving credit facility from Bank of America Business Capital. The asset-based loan will be used to refinance existing debt, purchase new equipment and provide for working capital needs. The Waco, Texas-based regional LTL carrier operates in 20 states in the Western, Southwest, Northwest and Midwest regions.

Wright Express (www.wrightexpress.com) has added an online payment feature to its Internet-based account management tools for fleets using the company’s private label and cobrand partners as well as its own Universal Card.

Business executives often ask what one or two things they should do to be financially successful. It probably won’t surprise you that a couple of big steps aren’t enough. Rather, it’s a hundred little ones that make all the difference. Even so, I have found that most financial successes are built around a framework, process or set of methods. The following is a brief outline of 10 actions my firm, Tidwell DeWitt, addresses in a seminar on effective financial management.

Check and increase your “on/in ratio.” According to noted author Michael Gerber, successful businesses require three sets of skills: technical, managerial and entrepreneurial. Doing the technical and day-to-day managerial work is working in your business – dispatching, scheduling, preparing the financial statements, hiring, training, etc. Doing the entrepreneurial part – seeking new business opportunities, for example – is working on your business. Many underperformers have an on/in ratio of zero to 10 percent. The best business builders are 50 percent or more working on the business.

Commit to real changes. One of the best business clichés is the definition of insanity – doing the same thing again and again, and expecting different results. To build a successful business, you must be willing to make real changes and to invest time and money in those changes. For most business executives, this is the most difficult of the 10 steps.

Know and perform the “real” role of management. Management’s job is to simultaneously increase net profit, cash flow and return on investment (ROI) as a business grows. But nine out of 10 managers know little of how to accomplish the last two of these.

Understand cost behavior and control. With a focus solely on profit, many managers seek to cut costs with little regard to the longer-term consequences. Understand that costs are – and should be – investments in your business, and that investments should be made with an expectation of a return.

Continually analyze margins. Companies that exercise effective financial management are meticulous about segmenting their business into different activities and analyzing the profitability and ROI of each segment. This might be by customers, customer groups, lanes, company drivers vs. owner-operators and so on. Executives correctly conclude that if each of the smaller parts of their businesses makes money, then the whole naturally will.

Implement sound profit improvement strategies. Not all strategies make sense. One of the most dangerous is, “I’ll lower prices and make it up in volume.” Well-run companies recognize that the volume required to make up for lower prices often is far bigger than is realistic.

Target your results. What-if scenarios, budgets, forecasts and projections, key performance indicators – all these tools should be used to model your future success according to your business plan. This is much like preparing, filing and following a flight plan for a cross-country airplane trip.

Diagnose problems systematically. As we discussed at the outset, each company has dozens of “moving parts” that require constant monitoring. Companies need systems to ensure they are monitoring and measuring each piece of their operations regularly.

Forecast cash flow. Successful companies and executives generate and analyze rolling forecasts of their business profit-and-loss, balance sheet and cash flow. And they invest in software and other technological tools needed to help them do it.

Monitor progress monthly with a “navigator.” Finally, something – or someone – is needed to help the business stay the course. This “navigator” is a partner to the business owner and managers – someone there to remind people regularly of the course they have charted together, where they are, and what corrections they need to make to continue the rewarding journey.

There’s obviously much more to success than just these 10 steps, as we haven’t even touched on the foundations of spirit, mind and body and the closeness of relationships with your spouses, partners and friends. If those are not in place, then no 10-step process will help.


Resources

Financial Management Training Center – “Fast free learning in Business Finance” online and downloadable courses in three formats: www.exinfm.com/training/.