Financial Aspects of Running a Small Business

1. Financial Aspects of Running a Small Business Mr. Doug Frankiw & Mr. David Hall

2. Types Of Plans • Strategic Plan • Business Plan • Financial Plan • Management Plan Good planning is very important, but the end result can be very different. (Mini Golf Construction/ Motel Revenue Theory) 4

3. Where’s the Problem? What a great plumber has in common with surgeons, mechanics, and engineers. 5

4. Homeowner Vs. Professional Fixor As I Like to Call It “Operating on Myself” Pin-hole Leak/ Several Weeks 6

5. It seems that with plumbing, and roads, once they are built,someone else has to come along, and fix the problems. Why not do it right the first time?? What Is We never solve a problem from the same spot (or bend in the road) in which we created it. Vs. It’s always hard to go back to the same spot and figure out why/how we were wrong 7

6. Problem Solving. If you have a Problem (Business, or Personal). “A problem has its origins in the past. A problem is something that has gone wrong in the past and must be managed in the present and the future. It is more precise and objective than decision making.” 9

7. Decision Making “Decision making is rooted in the Present, with a look into the Future for resolution. A decision is a commitment to a course of action selected from several alternatives to solve a problem.” 10

8. Knowing When to Say NO Do you ever care about the, only to have/leave theon the table. No good deed goes unpunished (not true all the time, but unfortunately true many times) Story of the poor people with pump problems, or what comes up may not go down 12

9. Worldly Business Knowledge Leadership Employees Financial Structures Planning Computer Systems Customer Service Suppliers Inventory Marketing Products/ Services Legal Accounts Payable Accounts Receivable 14

10. What You Know You Know 15

11. What You Know About, But Don’t Know How To Do 16

12. Everything That You Don’t Even Know You Don’t Know. 17

13. Mark-Up Versus Margin: Clarifying the Issue Item selling price: $1.50 Item cost: $1.00 Does this price-cost relationship represent a 50% mark-up or a 33% mark-up? Regardless of your answer this example represents a Gross Profit Margin of 33% 18

14. Mark-Up Versus Margin Cont.. Gross Profit Margin = Gross Profit Dollars (GPM) Total Sales Since: Total Sales $1.50 - Cost of Goods Sold 1.00 Gross Profit .50 Gross Profit Margin % = .50 = .33 = 33 1/3 % 1.50 19

15. Mark-Up Versus Margin Cont.. Definition A (the common definition): Mark-Up = Selling Price – Cost Cost = 1.50 – 1.00 1.00 = 50% Definition B (as defined by retailers): Mark-Up = Selling Price – Cost Selling Price = 1.50 – 1.00 1.50 = 33 1/3 % 20

16. Standard (Definition A) Mark-Up/ Margin Table 21

17. Thoughts • Thought 1) -If you do what you’ve always Done, you’ll get what you’ve always Got • Thought 2) -The lessons of Life are repeated until they are learnt • Thought 3) -“Thinking is the hardest work of all. That’s why so few people do it.” Henry Ford 26

18. A Fishy Outlook On Life -The fish guys are aware that they choose their attitude each day.One of the fish guys said, “When you are doing what you are doing, who are you being? Are you being impatient and bored, or are you being world famous? You are going to act differently if you are being world famous.” Who do we want to be while we do our work? • Play -The fish guys have fun while they work, and fun is energizing. How can we have more fun and create more energy? • Choose Your Attitude From Fish! By Stephen C. Lundin, Ph.D., Harry Paul, and John Christensen 36

19. A Fishy Outlook On Life -The fish guys include the customers in their good time. They engage their customers in ways which create energy and goodwill. Who are our customers and how can we engage them in a way that will make their day? How could we make each other’s day? • Be Present -The fish guys are fully present at work. What can they teach us about being present for each other and our customers? • Make their day From Fish! By Stephen C. Lundin, Ph.D., Harry Paul, and John Christensen 37

20. Doug goes to school at UBC, and takes a writing course called “Say what you mean, get what you want.” Dave stays home, and takes some more life schooling. Education comes in many forms: $ School $ Life $ Business Finance, Fun & Freedom 39

21. Sometimes the best laid plans… 43

22. Banks & Money. What’s up with that? • Approval process (ie Dave Letterman) Vs. Order Taking • Who makes the decisions, and in what town? • Your ability to negotiate • Time & Costs involved (Fees, Investigation, Prepayments, Interest, Differential Fees, etc.) • If they think you have no other choice (Pasta Shop) • How long has your Banker been with that institution, and how long have they been in your community? • Banks goals & rates of returns • 3 C’s = Character, Capacity, Collateral (Environment) 2

23. Retirement Chart 10 20 30 40 50 60 How Much How Fast How Soon 80,000 + or- to Retirement IN Vs. ON Theory + or - + or - + or - (Right Place, Right Time) + (Helpers, employee’s, good or bad) + ( The harder I work, the luckier I get) + (Wrong Place, Wrong Time) + (Accountability) 3

24. Thank you, for watching this presentation. Any comments, questions, or concerns? 13