Set Your Business Up for Success: Three Important Things to Do in the New Year

Goal plan success

Happy New Year! As we turn away from 2020, we take many lessons into 2021.

I’m going into the new year with confidence that we will see life improve, in part because of the intense growth many of us had to go through while navigating uncharted territory in 2020.

Hopefully, we’ve all become stronger and more resilient and can apply these freshened skills and attitudes to our business and lives this year. Here are three important things to do in this new year.

Year-End Books

For the business owners, controllers, and finance staff, it’s year-end. It is vital to get your year-end books closed quickly and accurately. And get your CPA audit started as soon as possible. This will position you to make more informed decisions this year. Speed is essential because the longer you procrastinate, the less value this report card has.

I have a current client where we are having trouble getting the CPA audit completed – we are 12 months later than expected. This delay was initially due to sloppy bookkeeping, but now it’s a delay due to CPA scheduling and some subsequent event issues (COVID, PPP, etc.) that now need to be disclosed in the footnotes. If we would have gotten these completed on time, we would have avoided major headaches, extended time – and more professional fees.

Don’t let that happen to you. Banks generally give you 90 days to submit your financial statements, but earlier is best (and if you happen to need a covenant waiver due to ratio misses, the sooner you address it with your lender, the better.) It all starts with a disciplined approach. Get your year-end checklist out and assign expected dates and who is responsible. Push to get your year-end reconciliations done and the books finalized. Do your planning with your CPA and if appropriate schedule the review/audit now. Get it on the calendar. Do the following to have a quicker, more accurate year-end close:

  • Use a month-end checklist – see my resource page for a downloadable sample.
  • Delegate as appropriate and assign expected completion dates and deadlines – don’t leave this to chance.
  • Meet with your finance staff now and review progress often.
  • Make sure all reconciliations are done early. Some could have been completed prior to year-end.
  • Prepare the roll-forward schedules with fixed assets and debt now.
  • Review your leases and know lease accounting (ASC 842) is changing for all companies after this year. This change needs to be considered with bank covenants. Consult your CPA in your year-end planning.


For us smaller LLC companies, update your QuickBooks. It’s a discipline of successful companies. It’s a pain for us smaller businesses, but you need to update and look at your QuickBooks.

Income Taxes

Your final tax estimate for 2020 is due January 15th.

I hope you have an income tax problem. That means you’ve had a profitable year. Yes, we want to keep our tax liability as low as possible, but having an income tax “problem” is a good thing because it means you’ve had a steady income. The “problem” surfaces because we’re inclined not to think about taxes until it’s time to pay them. I’ve seen clients scratching on April 15th to come up with the $40,000 in taxes that they owe, (plus the Q1 estimated taxes for the following year.) Ouch. So let me give you a word of important advice for 2021 – if you don’t already have a plan in place to handle estimated income tax, make that a priority this year. Here’s a practical way I do this for my business. It’s a model you could follow, too.

Based on the “profit first” concept, have a separate bank account for owner’s compensation, operating expenses, income taxes and profit.

I take a percentage of each of my revenue sources and physically fund my income tax account. My income tax account is fully funded which works for me.

Those employed by others are already familiar with taxes being taken out of each of their paychecks. Those in business for themselves need to do the same thing. I have colleagues that do essentially the same thing with their small businesses. And every time estimated taxes come due, guess what? None of us lose any sleep over taxes. We simply draw from the set-aside money, pay the taxes, and move on with our business lives. No panic, no frustration, no stress.

PPP Loan

Many of us thankfully received PPP loans in 2020. These were essential for all the companies I’m dealing with, helping them through a period of emergency. My clients have applied for loan forgiveness, but unless and until this is approved by the SBA, these loans are reflected in the books as a liability and will be recorded as revenue when the forgiveness is approved. I was glad (and relieved) to see that PPP is going to be deemed tax free. That was the initial intent, and I feel Congress made the right decision to stick with that. Also, PPP Round 2 is here. If you qualify, contact your bank, and apply! Here are some details on my resource page.

Bonus: A Professional Development Tip

If you’re looking to start 2021 off on the right foot, I suggest all business owners read the book Profit First by Mike Michalowicz. This is an extremely helpful book for getting into the proper mindset as a business owner. There is nothing wrong with making a profit—a priority.

Contact me if I can help you in any way. Here’s to starting strong and seeing 2021 be one of your best business years, ever! Cheers!


Turnaround of the Year


I am super excited to announce that I was awarded turnaround of the year by the Global Turnaround Management Association.  What an honor to be recognized by the TMA and to work with this team of professionals saving this ailing manufacturing company.

My work was initially the due diligence, the financial modeling, and the purchase accounting.  I spent a year and a half on this project working with the turnaround team, accounting personnel and leadership team.  We developed lean processes, streamline the backroom operations, and created a reporting and accountability structure that was extremely effective.

The end result: positive earnings and EBITDA, predictable cash flow, a positive less stressful environment saving 100 manufacturing jobs and resulting in a stable and valuable company!

Check it out

Business Owner Mistake: The Basic Profit Model is not Leveraged

As business owners, we must always leverage the basic profit model.  We are in business to make a profit. The basic profit model is simple, but powerful tool and works for any business.

The formula is:Profit

  • Leads x Conversion Rate = Customers
  • Customers x Number of Transactions x Average Profit per Sales = Revenue
  • Revenue x Margin = PROFIT. 

Medical:  Old patients + new patients = Patients x average revenue per office visit = revenue.  Revenue x (1-(revenue-cost) = profit.

Distribution: Number of invoices x average per invoice = revenue.  Revenue x margin = profit.

Manufacturing: Customers x average invoice less cost per unit less operating costs = profit.

It’s all the same basic formula:   Leads x Conversion Rate = Customers.  Customers x Number of Transactions x Average Profit per Sales = Revenue.  (Revenue- Cost) /Revenue  = Margin.  Revenue x Margin = PROFIT.

Let’s break it down:

1) Leads multiplied by how many people/companies/patients actually buy from you equal your customers.  You know your current customer base proven by your invoice register.  How can your marketing efforts improve to increase the customer base?

2) Each customer (or a patient if medical practice) purchases a certain number of times per year at an average profit per invoice.  Look at your invoice register to determine the actual historical numbers.  How can you increase purchase frequency?  How can you increase the average invoice value?

3) Sales multiplied by margin equals your profit.  How can you reduce your costs and increase your margin?

A slight increase in any of these components can have a dramatic effect on your net income.  First start with your actual numbers—do not make assumptions here.  Develop plans and goals to increase some of the variables.  See the linked spreadsheet to see the power for the basic profit model.

For small and medium-size companies, I like to focus on average transaction, number of transactions per year amount, and gross profit.  The model on the linked spreadsheet is based on actual results with a small truck parts distributor.  We increase .25 leads per day, increase average transaction size from $189 to $225 and increase gross margin 1/10th of a percent.  The impact to this company is a 32% increase in profitability.

For example, strategies to increase average transaction size include:

  • Change product/service mix.
  • Offer add-on products and cross selling of similar products.
  • Reduce number of low dollar customers: increase minimum orders, train sales staff.
  • Look at your freight policy. Increase your free freight threshold.
  • Bundle/kit products together based on customer needs.
  • Raise pricing. This is never popular with the sales guys, but this can make a huge difference.

As you grow and develop, however, things can change.  You may need to address capacity challenges – How is it possible to get more patients through the basic business formula with the current staff and processes, etc.  Fundamentally, the formula still applies, but you may need to address necessary growth challenges.

Run your own numbers and consider how an increase each of the levers can have a quantum effect on profit.  Even slight improvements over many transactions can have a huge impact.



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Birthdays: A Great Time to Reflect and Regroup

birthday cake with candles

I celebrated my birthday this weekend. June 4th. It’s probably my favorite day of the year.  Our birthdays are important days for us.  It’s interesting to me how Facebook helps bring out some old friendship connections.  I love hearing from everyone–who doesn’t?

As I do every year, I like to take some time and reflect on my life–where I am, what am I doing, etc.  I also use the time to regroup on my goals for the remaining portion of the year and what I need to do long term.  Birthdays are very personal for all of us.  Another lap around the sun and to many more!

I love the quote “life is like a roll of toilet paper.” It seems true, but as they say,  “It is what it is.”  The important thing is to focus on where we are and how much of the roll is left, how long can we extend the roll through healthy and productive living, and how are we are going to use the rest of the roll for something meaningful, profitable, and fulfilling.

My birthday is almost the halfway point for the year as well.  It is a great time for the Q2 push for ourselves and our businesses.

Take time now in early June to look at where you are and where you expected to be and make a push to finish the first half of the year strong.  I do a simple first half assessment personally and with all my clients.  Start thinking about your business plan and start developing your second half year plan.  More on that as we close out the quarter.

Thanks for the birthday wishes and cheers to a great year ahead!

Congratulations, Graduates!


Congratulations to everyone who just graduated from college this year.  It’s a huge accomplishment and graduates and parents of graduates should be quite proud.  I am continually impressed with these young minds and spirits.

My daughter graduated this weekend from Fairfield University.  I cannot express how impressed I am with her and her journey so far.  She took college very seriously; she had fun, but really dove deep personally and educationally.  She didn’t do what I did–ski and play rugby (need I say more)–but she really stepped up, raised her standards and worked hard, finishing with an impressive GPA with two minors.

To me, education is like the compounding of interest. It’s interest income on interest income.  I call it the compounding of education.  The smarter you are, the smarter you can become.  It’s an awesome concept.

Now the rubber meets the road for these graduates. Commencement isn’t the end, it’s the beginning.  How are these graduates with these expensive educations going to make a difference in the world?  That’s up to them.

I listened to the Fairfield commencement speaker, who did a fantastic job, say: “The world’s is tough place. Things don’t always go as planned. Work hard for the greater good.”

As I sat there, I thought of other great commencement speeches I’ve heard: Steve Jobs, Kurt Vonnegut, Sheryl Sandberg and many others. And I asked myself, “If I was ever a commencement speaker, what wisdom would I like to impart on the audience?”

I would give them credit for the work they just completed.  For four years, even if they didn’t work super hard, they committed the time and had the persistence to finish something.  That’s a great accomplishment in itself.  I would encourage taking risks, dreaming big, daring to fail.  I would tell them to never drive drunk or get in a car with anyone who was.  I learned this when I was 20.  My roommate was a passenger in a late night head-on and was killed–he was 19.  That was a wake up call.

I would tell them to do something I don’t think I did too well.  Enjoy the ride, every step of the way.  We all get only one lap around the track.  Know this now.  Go after it, but remember to enjoy it.  I see that all the time now.  Another wake up call.

I would tell them to spend daily time meditating; that humans are the only living creature that doesn’t live only by instinct. We can at any point change the path we are are on.  I would encourage setting and writing down goals and advise how to persist through the hard times that will occur through the their lives.

I would say: don’t procrastinate. Procrastination gets me into trouble constantly. When I address the hard issues head-on, I am much better off, every time. The times that I waited to the last minute and procrastinated on my decisions led to a harder situation or cost me lot of money.

I would encourage everyone to eat mostly plant based organic food, drink water first thing in the morning, and exercise at least five times per week.  Believe me, with these three simple principles, you will perform better, be smarter, and statistically live much longer.

So cheers to all recent college grads – get out there and make a difference with your life, big or small. Find important work and dare to fail. Believe me, failure is not failure–it’s learning. Not trying is the only real failure.



Happy Thanksgiving

Most of us–me for sure–do not reflect enough and appreciate how good we have it.


The book Thanks!: How the New Science of Gratitude Can Make You Happier by Robert Emmons discusses how the science of practicing gratitude helps us in countless ways. We become happier, we sleep better, we have stronger immune systems, and we feel more alive.  I believe it, but I still don’t practice it hardly enough.

Life is hard.  We’ve been there this year.  I love the quote by M. Scott Peck:

Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult – once we truly understand and accept it – then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.

With Thanksgiving this week I thought it was a good time to remind myself, and everyone, to recognize that life is hard, practice gratitude and gives thanks.  Originally celebrated by the Pilgrims in 1621 to give thanks and celebrate a successful growing season and bountiful harvest, we all need to take time to contemplate our life situations and be grateful for what we have.  Spend some time and answer positive questions like “Why am I so lucky?” And look around to see how very lucky you really are.

This week is a perfect time to take four days off to be thankful for what we’ve accomplished, what we have, our health, and to celebrate the year’s bountiful harvest.  It’s time to recognize our many hours of hard work and focus and appreciate our friends and families.

So put down your iPhone.  Spend time eating too much and enjoying your family and friends this long weekend.

So to all: I wish you well this Thanksgiving.  We certainly have a lot to be thankful for.

May the good things in life be yours in abundance not only at Thanksgiving, but throughout the coming year.

I hope to talk with you soon,


Featured image: Jennie Augusta Brownscombe [Public domain], via Wikimedia Commons

Almost Half-Time

Well, the second quarter is ending.  June 30th is Tuesday and July 4th weekend is NEXT WEEKEND!  On Tuesday, 2015 will be half over.

There are two more business days of the year to bring your business’s Q2 objectives down the field.  It’s just a measuring point, but a very important one.  From a CFO’s perspective after Tuesday can be the ‘lull before the storm’.  It is about to be an extremely busy and important time of year for many of us.

We need to take a deep half-year look – see what we did well, things that we didn’t, and look forward and tune-up the second half year strategy and business plan.

It is halftime. In sport, halftime is a time the coach and the players review the first half’s results, evaluate the competition, and develop a strategy and action plan for the second half.

That’s exactly what CFO’s and business owners must do next week.

How did you do during the first half? What were your sales? What was your gross profit? How do they compare to last year’s numbers? Compared to plan? How was your customer profitability? Expenses? Overall Profitability? DSO? Inventory levels? Cash in bank? Other metrics?

It is extremely important to take a critical look your business profit and cash drivers – where you are today and prepare a second-quarter plan.  You need to check the scoreboard and develop what-if’s for the second half of the year. You need to plan your cash needs for the rest of the year and identify efficiency improvements.  You need to provide your team some inspiration.  What’s their mood?  What support do they need?

Check and, if necessary, reset your mindset!

So, use this ‘lull before the storm’ to get prepared now.  Take a couple hours and put pen to paper; numbers to Excel.

  • Review your first 2 quarters’ objectives – the top 3 overall business goals
  • List some wins for the year so far
  • Begin prepping your team for the month-end close – many balance sheet reconciliations and checklist items can get done in advance.  Do them next week.  We need to get solid numbers fast.
  • Identify all your business drivers (growth, profit, revenue per patient/per invoice, cash flow drivers) and have your historical data formatted.  If you haven’t done so, do.
  • Plan Cash needs now – update your 13 week cash flow forecast
  • Set-up the Q2 Team Meeting to review the scoreboard results and the 2ndHalf-Year Business Plan – set the deadline on your calendar now.  How about July 18th or the 23rd?  Book it  – if you’re a big company or a one man show, book it on your calendar.

Also, get prepared to take some time over the Fourth of July weekend for some R&R.  It’s summer and life is moving fast.  Get outside and enjoy it!



Ye ole 2HYBP.  I love the term.  I got the it from working with a couple guys from Okidata years ago.  It’s just what they called it.  The second half year business plan.

June is coming to a close.  I know – It’s hard to believe the year is almost half over.  As they say – time flies.  In our business year, it’s almost half-time and now is the time to start putting together the 2HYBP.

Your initial 2015 business plan was published in November or December with data and assumptions from whenever.  Fact: We now have better data, a solid history for the year, and hopefully a good read about orders and sales for the second half of the year.

It’s time now to look at second quarter goals and take stock as to where you are.  Make a focused final push to finish the half out strong.

Finance people – Start planning the quarter financial close so you can get your data finalized quickly. Many general ledger accounts can be analyzed and finalized now.  Get started on the close now.

As a business leader, it’s now time now to begin to 2HYBP planning cycle – start getting your historical info, meet with your team, and prepare to update your operating plan for the second half of the year.

I am working with a client now with 2 business segments – a wholesale model and a direct to consumer business.  The initial targets we set for each business made sense in December, but now with actual results, we are making some significant changes with the direct to consumer business.  We didn’t hit the targets we thought we we would – partially our fault and partially the reality of the market.  Nevertheless, we are  redoing the 2HYBP so we finish strong.  You need to do the same.

Quarterly, I recommend getting out of the office with your team to ensure everyone is in sync.  People take vacations in the summer, so get the meeting on everyone’s calendar now.

Remember – a lesson learned from triathlon racing and my business consulting – finish strong!  Now is the time to focus on a strong finish to the 2nd quarter, prepare for half-time and the second half.