Run a small business successfully

- I've worked with many entrepreneurs and avoiding financials seems to be the biggest problem. They start paying attention when there's a problem, when there's a big problem, and a lot of times that's too late. It might be three months or six months too late. The main reason for this is fear. Fear because of lack of knowledge. They don't really understand financials and how they work so, instead of embracing them, they avoid them. Instead of learning about them, they push 'em away. So I want to make sure that we fix this once and for all. I want to give you all the knowledge and all the tools that you're going to need to create a financially successful business. So let's start off by understanding the building blocks to actually building all of your financial plan. And really it breaks into two areas. One are the actual models that we're going to use. And then the financial statements. So we're going to break this down and make it pretty easy for you. The first one is the revenue model. This is very important because this is actually going to be your projections, your revenue projections. And this is going to drive the entire model. This is going to say whether your business is going to be successful or not, whether it's feasible or not. And when we're doing our revenue model, we have to make sure that we understand the inputs to that. What's actually going to drive our revenue? What's going to get our customers to buy? And how much is that going to cost? That all goes into the revenue model. So understanding that is really important. The second part, I actually break down staffing model and expense model. I actually like to break those into two different pieces. They both lead to the same outcome, which is expenses, understanding what your costs are. But staffing model, typically staffing is a very expensive part of most businesses. It drives a lot of expenses to the business. So we separate that out into a separate model. And in staffing model, we cover both employees and contractors. So that's great. And we've got a great model for you. You just plug in the people and we spread it out for you and we have it flow right into the financial statements. The third one is the expense model. And these are all the expenses from GNA expenses, the cost of actually delivering your product, product costs, marketing costs, executive costs, staffing costs, all go into this expense model. Again, we're going to walk you step-by-step through how to build an expense model. These expense models are actually pretty easy. So that's kind of the building blocks, the first set of building blocks, which are really the models that we use. And we use worksheets to actually get these things accomplished. The next three are what we call financial statements. And there are three basic financial statements in every plan. And the good thing about finances is they're all standardized and you don't want to vary from the standards. There's no reason to and people would think it odd if you do. So the first one is what we call the PNL statement or the profit and loss statement. This is a really important one. This tells you whether or not you're making money or losing money. So this is going to be a main one that everybody's going to want to see. Now, the great thing is all the models that I just talked to, the revenue model, the staffing model, and the expense model, all you have to do is fill out those three models and it will actually flow into the PNL from there. So there's really nothing you need to do to create the PNL but I want to make sure you understand what's in the PNL and how it's broken down line by line. Next thing is a cash flow statement. Wildly importantly because if you run out of cash you're out of business. So the cash flow statement says how your cash is actually flowing into and out of the business. So you make sure you never run out of cash. And there's something, a very important concept in cash flow statements, called max negative cash flow. Max negative cash flow is the number that tells you how low your cash will dip before you actually start to start making money. Now you say, "Well, wait a minute, you know, "when I'm losing money, I'm losing. "When I'm making money, I'm making." But max negative cash flow actually takes into account any investments that you've actually gotten or any money that you put into the business, right? This also tells you how much your business actually needs to be funded in order to get past that hurdle. Max negative cash flow is a hurdle that you have to get past. And then finally, the balance sheet. And the balance sheet just simply says it's just a summary of what we call your assets, your liability, and your owners' equity. So it's a pretty simple statement. It says, "What are my assets in the business, "things like cash, accounts receivable, "things that people are going to pay me "when they haven't paid me yet," as an example. Liabilities are things you have to pay out, like accounts payable, notes, loans that you take into the business. Retained earnings is a very simple concept that just says how much have you invested into the business? How much has the owners invested in the business? Who else is invested into the business? And then what equity have you actually created for the business? And the nice thing about a balance sheet is it balances out. Assets equal liabilities plus owners' equity. It's a very simple, very basic accounting principle. You add up all the assets and then you add up all the liabilities and your owners' equity. And the two numbers balance out. That's why it's called the balance sheet. We'll go into the details, not to worry. So before you even consider doing the financial plan you need to consider all aspects of your business plan. That means every strategy that we've been working on through all these different learning streams, all the things that are in your business plan to date, whether it's your positioning strategy, your competitive analysis, your pricing strategy, your marketing strategy, all feeds into your financial plan. This is very important. So all that work we did culminates right here, right? In fact, what I like to think about this is is that everything you've done up to point is kind of the journey and the financials are the destination, right?