By Gary Pittsford, CFP®
President and CEO, Castle Wealth Advisors, LLC
Most closely held business owners are able to fill up every day working in the business, doing all of the paperwork, helping customers, and doing everything necessary to keep the company running. Unfortunately there are still many tasks that do not get touched. Have you ever considered how many days last year you worked “on” the business, and how many days you worked “in” the business?
By taking a day every two or three months and working on important items for the company you will undoubtedly improve the company. Once in a while it is a good idea to step back, take a hard look at what needs attention in your company, and work on that important item for a few hours. Listed below are eight ideas that you might want to review which may ultimately help your company down the road.
Number 1 – Take a hard look at your gross margin for the company and see if there is any way that it can be increased by one or two percent. If you can increase your gross margin on products being sold all of that improvement will probably drop to the bottom line. Also, at least once every year review your inventory and if you have slow moving or obsolete items have a tent sale. Remember, $1.00 in your pocket today is better than $1.50 invested in something sitting on the top shelf in the warehouse.
Number 2 – Over the years I have met hundreds of business owners who have not updated their corporate minutes in the last 20 years. At least once a year you should spend an hour updating your corporate minutes for the previous 12 months, update contracts, and most of all update your buy-sell agreement between stockholders if you have more than two or three stockholders in the company. That buy-sell agreement should have a current price and terms to buy stock if one of the stockholders dies, becomes disabled, divorces, is terminated, or retires. At my office, I have several filing cabinets filled with information about stockholders who were going to have a meeting in the near future but one of the stockholders died or became disabled before they could get together.
Number 3 – Review your company cash flow and see if there are ways that you can improve it by monitoring more closely your accounts receivable and accounts payable. Improved cash flow can also come from better tax management. Talk to your accountant quarterly about assets that have been purchased and changes in your financial statement. Ask your accountants every quarter if there are any new ideas that you can use to help reduce state or federal taxes which will improve cash flow.
Number 4 – Spend part of a day looking at payroll and employee benefits, which are probably your single biggest company expense. Once a year make sure that the salary and benefits for each person fits the job description that they are in. For example, if you have a position in the company that should receive a $50,000 salary, and that person is being paid $80,000 you are only hurting the future of the company, profitability, and the morale of other employees that work there. Every position in the company should have a job description that is written down and that position has a salary range which you can find by digging into national records pertaining to your industry.
Number 5 – Take a few hours per year to review all of your equipment in the company, maintenance records, and discuss possible upgrades. Perhaps there are one or two computers that are old and need to be replaced. Also there may be one or two delivery trucks that should be traded in rather than spending money on maintenance. This is an area that you should review with your accountant, perhaps you should consider taking higher depreciation to write-off new equipment rather than repairing the old items.
Number 6 – Something that most business owners do not spend enough time on is discussing the business with children that work in the company and your key managers. Take part of a day and spend it with those key people that are very important to running the business. Talk with them about any new strategies that you or they may have.
Number 7 – Take a day once a year to talk with your bankers, attorneys, vendors, business insurance agents, and other professionals that help you with your company. Let those advisors know how the company is doing and what new ideas you are implementing and what new types of equipment you have already purchased or you plan to purchase. If these outside advisors are better educated about you and your company they will be able to supply you in the future with better advice and new ideas.
Number 8 – Spend some time each year developing training programs for every employee in the company. Your senior key employees would obviously go to more complicated training programs, but every employee should receive some new training. Better trained employees will help you improve corporate profitability. Also, if you are thinking about selling the business, the second or third question that any buyer asks pertains to a review of all of your employees and how qualified they are and what their training has been.
These are just eight of the many ideas that you should be thinking about. Once a month or perhaps once a quarter take one full day and concentrate on working “on” the business rather than “in” the business.
Gary Pittsford, CFP®, is President and CEO of Castle Wealth Advisors, LLC. Castle specializes in helping families and closely held business owners with valuations, succession planning, estate and income tax analysis and retirement income security. Castle’s senior partners work with clients throughout the country in making logical decisions that help them fulfill their personal and business financial goals. For more information visit www.Castle3.com, call 1-888-849-9559 or e-mail Gary directly at .