Gary Pittsford | Castle Wealth Advisors, LLC
Most owners of closely held businesses are able to fill up every day working in the business – doing paperwork, helping customers, and anything else 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 versus 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 will undoubtedly improve business overall. Once in a while it is a good idea to step back, take a hard look at what needs attention in your organization, 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.
No. 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. Increasing your gross margin on products sold will improve your bottom line. Also, at least once a year review your inventory and hold a tent sale to reduce any obsolete or slow-moving items. Remember, $1 in your pocket today is better than $1.50 invested in something sitting on the top shelf in the warehouse.
No. 2 – I have met hundreds of business owners who have not updated their corporate minutes – some not in the past 20 years. At least once a year, spend an hour updating your corporate minutes for the previous 12 months; update your contracts; and most of all, update your buy-sell agreement between stockholders if you have more than two or three investors in the company. The 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. I have several filing cabinets filled with information about company stockholders who were going to have a meeting in the near future, but then one of them died or became disabled before they could all get together.
No. 3 – Review your company cash flow and see if there are ways to more closely monitor your accounts receivable and accounts payable. Improved cash flow can also come from better tax management. Talk to your accountant quarterly about asset purchases and changes in your financial statement. Ask if there are any new ways to help reduce state or federal taxes to improve cash flow.
No. 4 – Payroll is probably one of your biggest company expenses. Once a year, spend part of a day making sure that the salary and benefits of each employee is proportionate with the job description for their position. 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 hurting the future of the company, profitability, and the morale of other employees. Every position in the company should have a written job description and a definitive salary range which you can find by digging into national records pertaining to your industry.
No. 5 – Take a few hours per year to review all the equipment and maintenance records for the company and consider possible upgrades. Perhaps there are computers that are old and need to be replaced, or a delivery truck or two that should be traded in rather than continue to be repaired. This is an area you should review with your accountant. You might want to take a higher depreciation to write-off new equipment rather than repairing the old items.
No. 6 – Something that most business owners do not spend enough time on is discussing the business with key managers and your children who work in the company. Take part of a day and spend it with those key people who are very important to running the business. Talk with them about any new strategies that you or they may have.
No. 7 – Take a day once a year to talk with your bankers, attorneys, vendors, business insurance agents, and other professionals who help you with your company. Let your advisers know how the company is doing, what new ideas you are implementing and what new types of equipment you have already purchased, or plan to purchase. If these outside advisers are better educated about you and your company they will be able to supply you in the future with better advice and new ideas.
No. 8 – Spend some time each year developing training programs for every employee within the company. Senior key employees would obviously go to more complicated training programs, but every employee should receive some new training yearly. 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; how qualified they are and what their training has been.
These are just eight of many ideas that you should be thinking about. Once a month, or perhaps once a quarter, take a 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. For more information visit www.Castle3.com, call 888-849-9559 or e-mail Gary directly at [email protected]
This article was republished with permission from Castle Wealth Advisors, LLC; 9820 Westpoint Drive, Suite 200; Indianapolis, IN 98256; 317-849-9559 www.castle3.com ©2018.