Businesses often make the mistake of running overly-complex business models of operation. This is unnecessary and can be detrimental to the health of the organization. In essence, this is the organizational equivalent drug or alcohol abuse. It is a method of distraction. Is that because, if your business model were simpler, it would be obvious that your company is poorly managed and has weak operations? Sometimes, it is easier to lie to ourselves and distract from the main problems than it is to admit that the past few years have been only based upon survival, not success.
For your newer, simpler business model, you will need to divide a large sheet of paper into four square sections. One square will hold the various forms of income. Only put actual flow of money into this square and avoid things which may strengthen the income, but are not actually movement of money.
The next square will hold expenses. This included your advertising budget, your rental and buying expenses (office space, property management, paying the guys who cut the grass, etc.), traveling expenses, business lunches and dinners, etc.
The third square will show all of your company assets. Now, it is very important to designate what are actually assets and what are liabilities. Assets bring in income and put money directly into your business. Assets can be regular, repeat clients, rentals which you hire out, anything which brings money in.
The fourth square will hold your list of liabilities. This includes your office space (bought or rented), your company vehicles, and anything else which takes money out of your business. It does not matter if you own the building where your office is, if it is not an asset, because you spend money on upkeep and it does not bring money in, unless you have renters which more than cover the cost of upkeep and property taxes.
At this point, you have a very direct and honest view of your business and its operations. What needs to be cut back? What are the major expenses and are they more or less than the net income? Are business loans and other major fees cutting into your funds? If you run a large organization, it can be difficult to quantify everything in its proper place. Remember that each square stands for an inflow of money or an outflow of money, and be honest with yourself about the direction of flow.
One of the best ways of keeping your business safe, clean and on track is to implement regular pre- and post-employment drug and alcohol testing. Contact CMM Technology today for high quality testing equipment: +618-9204-2500.
Kiyosaki, Robert T., and Sharon L. Lechter. Rich dad, poor dad: what the rich teach their kids about money– that the poor and middle class do not!. New York: Warner Business Books, 2000. Print.