QuickBooks 2015 Makes it Easier to Track Unbilled Time

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As a QuickBooks ProAdvisor, I recently earned my 2015 certification, which involved a review of newly available features in 2015 release QuickBooks software, including a few important ones listed below:

  • The Insights Dashboard provides QuickBooks desktop users with insights about their business trends and margins with an easy-to-read, customizable dashboard or bar charts and line graphs, similar to the dashboard which has been available to QuickBooks online users.
  • Professional service providers who bill clients for their time will appreciate the improved Income Tracker report in 2015 QuickBooks software, which makes it easier to stay abreast of hours worked but not yet billed, on a client-specific basis.
  • And QuickBooks Enterprise 2015 has added a feature which will prevent users from creating a sales order or invoice for any customer who has an overdue accounts payable balance.

Wishing you a profitable 2015!

 

Financial Management Report Cards Available

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I spoke at an Urban Manufacturing meet-up group being held on. Nov. 19th at ITAC’s office at 39 Broadway in lower Manhattan.   The meet-up group will meet again in January, for more information go to http://www.meetup.com/Urban-Manufacturing/events/218594846/

November 19th attendees had the opportunity to rate how their business is doing in these four areas of financial management:

  • Budgeting
  • Management Accounting
  • External Fund Raising Capability (as applicable)
  • Cash Management/Controls

If you are interested in seeing the material we discussed, please email me at david@rudofskyassociates.com to request a PDF copy.

Pricing Strategy Made Easy for Fast Trac Students

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Last week, I was a guest speaker again at the Kauffman Fast Trac program, speaking on Pricing Strategy. As I told the twenty or so Growth Ventures students, the costs for your products or services typically are the basis for establishing a floor you don’t want to price your product or service below. It pays to know the gross margin which is typical for your industry, so you can set your pricing at a level sufficient to achieve the gross profit needed to make your business sustainable. How to have an accurate understanding of your costs is a big topic unto itself.   If you are including some allowance for material losses (for product manufacturers) and for unabsorbed labor during low sales periods (for both product manufacturers and service providers) these are good indicators that your cost analysis is fairly complete.

It also is important to have a feel for the ceiling which you should not price above. To some extent this is determined by the existing players in the marketplace for your product and service.   That said, if you have a clear edge in perceived quality, delivery, service or some specific product features, this will provide opportunity to price above competition. (For example, Terra Chips was first launched at a price of $8 for an 8 oz. bag, but it was a totally unique product.) But if you have a “me-too” product, and price much above the going rate,  consumers may feel your pricing is unfair and shun your brand.

So suppose you have determined your pricing floor, and your pricing ceiling, as discussed above, how then to decide on the exact pricing point for your product or service?  This was the balance of what I discussed with the Fast Trac class.

For businesses where there is a fair amount of uniformity in pricing, it is important to consider what is the gross margin being realized under the current pricing.   As two extreme examples, consider a business realizing 50% gross margin and a second one realizing 20% gross margin under their current pricing.   In most cases the 50% gross margin business should look to sales increases to drive profits, since any attempt at further pricing increases may be counter-productive, as customers leaving the franchise could offset any profit gains on those who stay and accept a further increase.   Conversely, the 20% gross margin business should typically look to increase prices; as it is rare for a business with such low gross margin to be sustainable.   In between these two extremes, the key is for business owners to know or determine the price elasticity of demand for their product or service, to make an informed decision on when and how much pricing to consider.

Finally, for businesses where there is little uniformity in pricing,  differentiation is a key to improving results.   This can be based on consumer demographics, location, time of purchase, purchase quantity, or many other attributes.

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If you are interested in receiving a PDF version of the Pricing presentation, send me an email at David@RudofskyAssociates.com, with a brief description of your business.

 

 

 

 

Here’s One Question Never to Ask When Seeking Funds

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“If a banker asks how much money you want to borrow, and you respond ‘how much will you give me?’ you’ve just disqualified yourself,” Madeline Marquez, VP at the Business Initiative Corporate of New York, told an audience of 200 at the Javits Center, as part of a panel discussion on how start-ups should access capital for their business.   It shows you haven’t done your homework, you haven’t prepared, Ms. Marquez explained.   She advised audience members who may be seeking SBA-guaranteed loans to start by filling out the SBA form 912 for key management, and the SBA form 413 if you are checking out different banks.

Moderator Steve Cohen, SVP with Empire State Development, led off the panel discussion with a review of various New York State programs and resources to fund and support entrepreneurship.  Programs mentioned by Mr. Cohen included the following:

Ed Lynch, VP and Credit Relationship Manager for Flushing Bank said that loan seekers need to submit a business plan which should address the following:

  • Sources and Uses of Funds
  • What % equity will they put in to purchase equipment, working capital, real estate
  • How are they going to repay the loan
  • If an existing business, what is the company’s history
  • What is the past background of the principals, and why are they going into this particular line of business
  • Detailed description of the product/service
  • What is the revenue model, what is the customer base, and the demographics

Finally, Dan Vacarro, VP of the NY Business Development Corporation rounded out the panel, mentioning that he pays special attention when loan applicants are passionate about their business.

 

 

 

 

 

 

 

Ten Watch-Outs When Launching a New Food Product (Part 2)

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Based on my experience helping numerous clients put together financial projections for the launch of their new food products, I put together a list of ten items you want to be sure to consider when pulling together financial projections for a new food business. Items 1 through 5 were covered in a previous blog post, this is the remainder of that ten-item list:

#6. Food Broker – A client of mine was using a food broker to service their sales to a well-known West Coast retailer, and was not getting any repeat sales. They switched to a different broker, who found the problem: the retailer had never pulled the product out of their wholly owned warehouse. So clearly you want to choose the right broker. But a good broker will go far beyond what your distributor is willing or able to do in terms of checking on your product at retail, and facilitating communications between you and your retailers. From a budgeting standpoint, plan on brokerage expense running at 5% of revenue.

#7. Credit card fees – This is an easy item to overlook, but if you do any significant sales on-line, fees you pay to credit card companies can add up quickly to become a significant expense item. Additionally, if you ship directly to smaller retailers, one or both parties may find it advantageous for payment to be by credit card, at a rate ranging from 2 to 3% of revenue.

 

#8. Liability Insurance – Even if you are operating as a limited liability corporation, or a C-corp, you still want to protect your corporate assets with the proper liability insurance. There are a lot of things that can go wrong in the supply chain and create potential liability for you. Put a line item for liability insurance in your business plan financial projections now, as a reminder to get in touch with an agent experienced in placing policies for food manufacturers.

 

#9. Taxes – If you’re not sure about all the various taxes which will apply once your business launches, invest the time now to ask someone with that expertise. In New York City, where I am based, unincorporated businesses have to pay an incremental 4% tax for the portion of their income which is allocatable to New York City. Plan accordingly, and you won’t get taken by surprise when the tax bill comes due, or worse yet, goes unpaid.

 

#10. Pay Yourself! – It is a surprisingly common mistake for entrepreneurs to forget to build a suitable salary for themselves into their initial business plans. This often goes hand-in-hand with pricing their products too low. Remember that the salary you draw compensates you for the time you put in the business, and if possible should be commensurate with what you would earn if you were doing the same type work on the open market, while any profits that ultimately come your way are a return on the capital you have invested in the business. These are two different things, and one does not substitute for the other.