Helping Small Business Owners Understand Finance

“Clients in financial strife
– innovative ways of
helping them help
themselves”

© Copyright – One Sherpa Pty Ltd 2010

In today’s presentation we will cover

An introduction to a new way of
thinking


An introduction to a new way of thinking

Tips on getting into a small business
owners world


Tips on getting into a small business owners world

1. Think Simple


1. Think Simple

2. Think Visual


1. Think Simple
2. Think Visual

3. Think Story


Let me ask
you three
questions
on numbers


1. Why is it
some people
just don’t ‘get it’
when it comes to
the numbers of
a business?

2. Why is it that the finance people seem to
have a different way of looking at things?

3. Why is it that finance people make
some things seem very complicated?


Most small business owners feel like
they’re chasing the money ALL THE TIME


They have no
financial context
from which to
make their
decisions


As a result they have
no way to make
clear cut decisions
nor measure how
they’re really going


They understand words and
can use them quite forcefully

But for many,
numbers look like ants walking up a page

Many small business owners walk around in a
fog financially

So how can
accountants help them?


We have to
jump into
their world
rather than
expecting
them to jump
into ours

Most small
business
owners hate
numbers
and will do
anything to
try and
forget them

They normally trust their accountant but often
have no idea what the numbers really say


This is a golden opportunity to put that trust
into effect and get them to help themselves


However most small
business owners see
accounting as a cost
and not a benefit so
they’re always
looking to minimize
the accounting cost

So they appreciate
advice about helping
themselves
Particularly because
they often have no
training in being a
business owner

They often ‘fall into
a business’ with
little knowledge on
being a business
owner


They may be excellent
at their trade

Or have great technical
skills
BUT does that make
them a good business
owner?

They may know the operational side of their business well
BUT this is not enough to succeed as a business owner

Business owners need a broader range of skills


One of those broader skills is:

FINANCE


Three tips on how
to help small
business owners
with finance

1. 2. 3.
Think simple Think visual Think story


1.
Think simple


One of the
most famous
advertisements

What was the
tag line?


Keep numbers
really simple
because …..

Small business
owners usually
only focus on a
few numbers


The single
biggest reason
why small
business
owners fail is
NOT because
they fail to do
a business
plan © Copyright – One Sherpa Pty Ltd 2010

It is because the business model
which the plan is based on is
completely flawed


So helping business owners to understand
the financial part of their business model
makes helping themselves possible


There are many ways to think of business
model but the simplest and best we’ve
found is to think of three parts


Customer Value

Does the business earn enough margin after
including a market wage for
the business owner

Transaction Flow

Is there enough sales volume
flowing through a business

Money Flow

Is the working capital (inventory, accounts receivable
and accounts payable) the right size for the volume
of the business

Presenting these in
a simple way will
help small business
owners because they
can SEE what’s
going on in their
business

Easy simple dials that can be
understood intuitively


There is a FREE tool available to do
this at
www.oneminutebusinesscheckup.com


2.
Think visual


Remember .. most small business owners
see numbers as ants walking up a page

Pictures , graphs
and analogies help
them understand
what the numbers
mean


Presenting lots
of graphs does
not show the
WHOLE business


One way of doing this is using a tool called


It presents a profit and loss account,
balance sheet and cash flow in the analogy
of a fence


This tool helps small
business owners
understand why they
can be making great
PROFIT but have no
CASH to pay their TAX

Traditional Reporting

OPENING



FOR THE PERIOD



CLOSING


BALANCE SHEET BALANCE SHEET
“AS AT” “AS AT”
THE FINANCIAL FENCE ®
WORKING PROFIT & LOSS ACCOUNT WORKING
CAPITAL “FOR THE PERIOD” CAPITAL

COST CONTRIBUTION INFRASTRUCTURE NET
SALES EXPENSES PROFIT
OF INTERACTION MARGIN
FIXED CASH FLOW STATEMENT FIXED
CAPITAL “FOR THE PERIOD” CAPITAL
MOVEMENT MOVEMENT
NET OPERATING NET
IN WORKING IN FIXED
PROFIT CASH FLOW CASHFLOW
CAPITAL CAPITAL
DEBT DEBT

EQUITY EQUITY


A online version is available at
www.onesherpa.com with FREE
bronze membership


3.
Think story


The numbers
of a business
always tell a
story


Getting a business owner to understand the
story gets far more benefit for them than
being ANAL about the exact numbers


Filing a TAX return on behalf of a client
is completely different to telling a story
about what’s happening in their business


Business owners
are most likely not
worried about the
last cent EXCEPT in
relation to the
accountants bill


They want to
know what’s
going on so
they can be
more
successful


More
successful in
SALES
their eyes is
often just
more sales


Tell them the
story about
their business
model


Customer Put it in the three
Value easy pieces

Transaction Flow Money
Flow


Then they can help themselves by knowing
WHERE to focus

Remember
you’re
succeeding
when they ask
you questions

not the other
way round

The best measure
of whether they’re
helping themselves
is the quality of
questions they ask
you when you are
talking to them

To access a copy of this presentation go to

www.onesherpa.com/presentations


This presentation has been brought to you by:

An online global resource centre and membership
community dedicated to helping small business owners
succeed and prosper
www.onesherpa.com

Helping Small Business Owners Understand Finance

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