Tag: Mike Michalowicz

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Finding Your Financial Sweet Spot

Growing a business is hard but it shouldn’t be impossible. Read on to find your company’s sweet spot and accomplish your financial goals.

The Sweet Spot

According to “The Pumpkin Plan” by Mike Michalowizc, there is something called the sweet spot that helps you grow your business. Just like growing a large pumpkin requires the right seed, growing a company requires the right strategy. That’s where the sweet spot comes in.

There are three elements of the sweet spot including top customers, unique offering, and systemization.

Customers

As you know, top customers aren’t the people who buy the most. Top customers are the people you want to work the most with. Make it a goal to find top customers. Then work feels like helping a friend.

Unique Offering

Your unique offering sets you apart from competitors. Michalowizc refers to it as your AOI or Area of Innovation. The Area of Innovation consist of three things: quality, price, and convenience. Try to focus on one. If you focus on two, it can cause you to fail.

Note, focusing on price is a slippery slope. It’s a long, uphill battle and can be very difficult. So ask yourself, do you want to be BMW (quality), Walmart (price), or Amazon (convenience)?

Systemization

Last but not least, systemize. This means optimizing your employees, technology, and processes to be as efficient as they can be.

Inspiration for this post came from “Finding Your Sweet Spot” by Jacob Curtis, CPA published in the June 2022 issue of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Payroll Made Easy: Part Two

payroll

Last week we learned how to calculate payroll as well as how to pay yourself an owner’s salary. In part two of Payroll Made Easy find out if you can afford additional employees and how your payroll can be covered through cash flow management.

Managing Cash Flow

To alleviate the stress of wondering if you have enough money to pay yourself and your staff, we revisit the term real revenue.

First, open a separate payroll bank account and fund that account with a percentage of real revenue. To calculate the percentage, determine the percent of real revenue to payroll costs you’ve used in the past.

For example, a company determines their real revenue is $600,000. Their payroll costs were $120,000 (less than the the suggested payroll costs). Since $120,000 is 20% of $600,000, 20% of your revenue should be contributing to the payroll account each pay period. Since revenue fluctuates each month this number will be lower some months and higher others, but the extra cash flow should cover future shortfall.

Payroll for Additional Employees

According to “Profit First,” by Mike Michalowicz, your business should generate real revenue of $150,000 to $250,000 for each full-time employee.

This metric is great to determine if you’re overstaffed or understaffed. Additionally, another good test for hiring is to set the projected salary aside for a few months. By the time you’re ready to hire, you’ll have enough salary saved to afford time for adequate training.

Inspiration for this post came from “Meeting Payroll” by Marcia Donaldson published in the April 2022 issue of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Payroll Made Easy

payroll

Paying yourself and your staff shouldn’t be a struggle each month. Read on for how you can manage payroll.

Calculating Payroll

Payroll is the largest expense your business is going to face. Just because it’s expensive doesn’t mean you don’t need the help. If you’re struggling to pay your employees every month, you might just not have enough real revenue.

According to Mike Michalowicz, author of Profit First, real revenue should be four times your total payroll (including benefits). Real revenue is defined as top-line revenue minus material and subcontractor costs.

For example, a business owner could have top-line revenue of $600,000, materials and subcontractor costs of $200,000, totaling $400,000 in real revenue. This means payroll should be $100,000.

Payroll: For Yourself!

Yes, you really can afford to pay yourself a business owner’s wage. Your payroll also happens to be determined by real revenue as well.

For business’s with real revenue of $250,000, the owner’s compensation should be 50%. For real revenue of $250,000 – $500,000, the owner should be paid 35%. Real revenue up to $1,000,000 should have owners seeing 20% of that back.

If you aren’t able to pay yourself the salary you deserve, check out your operating expenses and see where you can cut. This change won’t see results overnight, but it’s a start.

Inspiration for this post came from “Meeting Payroll” by Marcia Donaldson published in the April 2022 issue of American Quilt Retailer. Stay tuned next week for how to manage your cash flow and knowing if you can afford additional employees.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.