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ONT NTS

1 WHAT IS A PROFIT LEAK?.....................................................................................................................1

2 SO WHATS IN THE BANK ? ................................................................................................................... 4

3 MY ACCOUNTANT LOOKS AFTER THE BOOKS!.............................................................................6

4 HOW DO YOU MAKE DECISIONS?.......................................................................................................8

5 I KNOW WHERE IM GOING!...............................................................................................................10

6 I KNOW WHAT IM DOING!..................................................................................................................12

7 ARE YOUR SYSTEMS AND PROCEDURES DOCUMENTED? ....................................................... 17

8 I DONT LIKE TO SELL......................................................................................................................14

9 SO WHERE TO FROM HERE? ..............................................................................................................17

Now, would you like a Guarantee?... ........... ........... ............ ........... ........... ............ ........... ............ ......... ........ 22

Two Boomerangs Guarantee ........................................................................................................................22

Copyright Adam Gordon, Profits Leak Detective

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1 What is a profit leak?

I'm glad you asked! Let me recount a problem I had a while ago with my water bill. Darwin, where I live,

is in the tropics. So we essentially have two seasons only, commonly and somewhat unimaginatively

known as the Wet and the Dry. During the Dry we can go for 5 - 6 months without a skerrick of rain, but

the weather more than makes up for it during the Wet.

A tropical storm is a wonder to behold, towering thunderheads, incredible lightening. Darwin supposedly

has more lightening strikes each year than any other city, anywhere. NASA has even sent special aircraft

out to study the phenomenon. But I digress.

As there is no rain during the Dry (obviously) if you have a garden you need to water it. Most of us install

automatic reticulation. So the reverse applies during the Wet, and we turn our reticulation off. Bear with

me, I'm getting there.

We are billed quarterly for our water. If we were billed monthly I might have picked up the problem

earlier. (Hint - that is why you need to look at your accounts and other KPIs on at least a monthly basis.)

It was a Wet Season bill, and my bill was more than DOUBLE what I was expecting. A very big OUCH!

Why was it so?

There were no leaking taps, water spurting or even dripping anywhere, either in the house or in the

garden. No lush green patches. Being the Wet the garden was all lush and green. So where was the

problem, and had how did I find it?

In the end I found it by accident, treading into a very mushy bit of garden. And underneath the mushy bit

was a split pipe, from whence all the water was leaking.

But that was pure luck. I suppose would have found it eventually, if I had carried out a careful

examination. But finding leaks by accident is just not good enough.

And that is the problem you may have in your business. Sometimes the leaking tap is pretty obvious. A

particular line, or activity is obviously costing you money. If you can see it, you can do something about

it. But what about the times when you don't know profits are leaking. You don't know until you get the

quarterly, or half yearly or, even worse, the annual figures. Because by then it is too late. The profits

have leaked.

Sure, you might then plug the leak, but what is gone is gone.

So maybe you need to be a profits leak detective to find out if there is a leak, hidden leaks, and to do

something about it.

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Are there aspects of your business which are not doing as well as they should?

Are you in markets which don't perform as well as others you could be in?

Is a good performance in one area of your business masking a poor performance in another (and

havent I seen this so often)?

Are your margins what they should, or could be?

Do you really know your Cost of Sales? If you don't, Id be willing to bet you are not covering all

those costs, and are writing them off against overheads, not recovering them against the sale.

So how do you know that you should be looking for leaks? Are there some clues or symptoms that

are telltales saying that a bit of drilling down into your business might pay some dividends? Possible leakcould be anywhere.

Of course we are dealing with high level, or first order clues here - clues that say that there is

possibly, or probably a problem which needs investigation. These clues do not attempt to find the leak,

but are more to alert you that there may be some leaks to find and plug. They are symptoms of a

possible or potential problem. You will need to dig deeper and look for more specific clues, forensic

evidence as a detective might say, to guide you to where you need to take action. Otherwise what you

might end up with is some mushy ground and a big bill. And thats just what you dont want to happen.

So here are the clues, but not in any particular priority. Hopefully one or two of them will really resonatewith you, and but they wont necessarily be the same clues for everyone..

1. So whats in the bank? Obvious? But read on..

2. My accountant looks after the books but how often do you review your financial statements?

3. Availability and use of data for decision making. I'm looking at more than just Key Performance

Indicators (KPIs).

4. I know where Im going - Lack of vision/direction, a focus on short term goals only.

5. I know what Im doing are you concentrating on what you do and not on managing or developing

the business.

6. I dont like to sell - Lack of a planned approach to marketing.

7. Lack of documented business systems and processes.

They are not meant to be sequential or cumulative. Having said that, if more than two apply to you, in

your shoes I think Id be looking around your business with a very suspicious eye, or even calling in the

detectives in the form of your accountant, consultant or business advisor.

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Now get your magnifying glass out, and have prowl around your business with open, suspicious eyes.

To help you focus at the end of each section chapter is a score line. Score yourself out of 1 5 where 1

represents an extremely poor performance and 5 is excellent. Think about what you do in your business

in the context of each chapter and be as realistic as you can in the scoring.

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2 So whats in the Bank ?

Show us the colour of your money, as the old saying goes.

What is your bank balance like? Is it in the red, or in the black? If its in the black, is what is there as

much as you would expect?

Now thats a pretty obvious clue, I know, but bear with me. The bank balance is the open window that

shouldnt be, or the forced door that should grab your attention. Hullo, hullo, hullo, whats going on ere?

we used to mimic the British Bobbies saying, with their hands crossed behind there back as they

surveyed the scene of the crime.

In the beginning

Do you remember when you started business, when every sale was treasured, when you wondered

where the next sale was coming from? Of course there was not much in your bank balance then, nor

would you expect there to be. It takes awhile for sales, and cash, to accumulate.

No, Im talking the situation when you have been in business for some time, when you are working hard

for long hours, when you are wondering when you might get some time off, when the only solution seems

to be to work harder.

When youre in that situation, and your bank balance is in the red, or not as much in the black as it should

be, then you should suspect that you may have a profit leak.

What other evidence does your bank statement give?

Somewhere on your bank statement, maybe on the top right hand side you should see four lines: the

Opening Balance, Cash in, Cash out, and Closing balance.

It is the cash in and cash out that is the evidence. If there is plenty of cash coming in, but also plenty

of cash going out then there is a problem. Obviously there can be variations in cash flow, so where might

they come from?

Maybe there is a spike in expenses.

You have had to make a large purchase of stock or materials to complete an order;

Some unexpected repairs and maintenance;

A large annual expense such as insurance

Or a fall off in sales:

Seasonal conditions many industries can be extremely seasonal;

A one-off, unexpected loss of a sale.

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It happens, so it is the trendyou are looking for not the one-offs and unexpected events, but beware if the

unexpected becomes the expected. Is the colour of your money an aberration, or a clue to an on-goingsymptom of an underlying leak?

Score yourself out of 1 5 on how comfortable that bank balance is. Could there be a leak?

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3 My accountant looks after the books!

But how regularly do you check your Financial Accounts?

Were talking profits, right. And where do you find the record of your profitability, or otherwise? In your

accounts of course. So if you want to know how your business is faring in the profitability stakes, then

you would keep a regular eye on your profit and loss statement and balance sheet.

Your balance sheet tells you what you are worth at a particular point in time, and the profit and loss

statement tells you how you got there. Both are worth knowing. Of course these financial statement will

tell you a lot more, if you set up your chart of accounts to give you the information you need to make

decisions about the business. They can provide some of the forensic detail you may need to where the

profit leaks are. But thats not what we are about at the moment.

What we are on about is determining if it is likely that you do have a profit leak, whether further

investigation is required, with one clue being how frequently you actually look at your accounting records

as given by your financial statements.

Probably because as a small business owner you are a key part of the economy (dont laugh, in Australia,

the UK and USA about 90% of businesses are small businesses and collectively they are the largest

employers) governments and other people are always looking at small businesses and how they operate.

In Australia one such enquiry was the Wiltshire Inquiry. Now although it was over 30 years ago (1974)

my experience working with many small businesses for nearly 20 years is that its findings are as relevant

now as they were then. The Inquiry found that, amongst other things:

An inadequately managed finance function has been the main functional problem for failed small

enterprises, and this includes poor accounting.

A survey of 400 UK small business owners (of companies with less that 20 employees) carried out by

Vanson Bourne on behalf of the financial software company MYOB commented on the link between

company survival rate and good accounting practices.

It is clear from the survey results that small business owners need to be made aware of the fact that

there is a definite link between company survival rate and maintaining good accounting practices, made

possible by having good accounting software. This is despite the fact that 68% of sole traders felt that

accounting software was unnecessary and 3% admitted to having no formal tools in place, paper based

or otherwise, to manage their accounts.

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Now I know they are concerned with selling software, and not on the survival rates of small businesses

but there has been a similar finding in Australia.

A few years ago now Professor Williams from the University of Newcastle (Australia) did a study of the

correlation between how frequently small businesses looked at their financial statements this and their

survival rates. He found a very strong correlation between the two:

Frequency Survival Rate

At least monthly 80%

Quarterly 72%

Half Yearly 50%

Annually 36%

I dont think things have changed much. Of course in Australia, since 2001 you have to pay your Goods

and Services Tax (GST) either monthly or quarterly and in the UK you have Value Added Tax (VAT). So

your accounts must be prepared for that, but do you actually look at the completed financial statements to

see how your business is travelling from a profitability perspective.

You see, one of the issues here is that your financial statements are what we call lag indicators. What is

in them has already happened and youre looking back at the past. So if there is a profit leak, the sooner

it is found and plugged, the better.

Makes sense doesnt it? If there is a profit leak it would be silly to leave it for six months or a year to find

out. But stranger things have happened.

Score yourself out of 1 5 on how frequently you analyse your accounts to check for gross and net

profits, trends in expenses, ability to pay your bills on time and all the other information to be found in

these pesky figures.

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4 How do you make decisions?

Are your decisions soundly based on data, information and knowledge?

A related issue to use of the accounts is whether you are collecting and analysing the data you have

trapped in the business to make your business decisions. A good example is the one quoted on the

Profits Leak Detective site (www.profitsleakdetective.com). That client had the information available in

Job Cards, but they were not collecting and analysing it.

If they had been collecting and analysing the information they had on their job cards they would have

noticed that their profitability on individual jobs was extremely variable, and that on some jobs they lost a

significant value of the overall price.

And having seen the size and frequency of the losses they would have gone looking for the cause.

If a business is not collecting data and information and using it to analyse how the business is performing,

its London to a brick there will be a profit leak just waiting to be found.

Another example, but of a different type of profit leak was a client in the fitness industry. Now this person

had hit on a very good way of building the relationship with his clients. On the counter where they paid for

their session before leaving was a simple exercise book, you know the type you would have had at

school.

Clients were encouraged to write a comment in the book before leaving, a comment which could be onanything. And clients took advantage of it. The books went back some years, pages and pages of

comments. People kept commenting because the owner always replied to their individual comment. The

reply might be humorous, cheeky, serious, give thanks or whatever, but he always replied.

Now this owner certainly succeeded in his aim of building relationships, but what he didnt realise was that

he had a very large, albeit unorganised, database on the business. He had information on what was

working, and what wasnt, suggestions on new activities, background music and on and on. There was a

large depth of information which could help him improve the value of his services, and improve his

profitability.

And it was all just sitting there, awaiting a little analysis.

In Australia there have been a number of formal inquiries into the needs of small businesses over the

years. As mentioned in the previous chapter one such inquiry was the Wiltshire Inquiry which reported

over thirty years ago in 1974.

There tends to be a lack of information acquired by small firms because of an unawareness that it is

needed: An imbalance of functional skills can lead to a failure to recognise, or tardiness in recognising,

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impending difficulties and the need to find early solutions. Where such a lack of awareness exists it

explains a failure to seek outside advice or to acquire the knowledge which would avoid such difficulties.

People dont know what they dont know, if you get what we mean.

Another survey of the information needs of small manufacturers in New South Wales (Australia), found a

constant sense of urgency in proprietors leading them to avoid searching for information and waiting for

external advice.

Lets look at a practical example. In a small business there may be an underlying problem with poor

inventory control. What the owner might see is lack of cash. But if the owner doesnt understand cash

flow management, or have information available on the stock turn for different items he is unlikely to

understand that this is where the real problem is.

And if they dont understand that, they may not seek appropriate advice or assistance. The effective use

of facts, data and knowledge leads to better decisions.

So where might there be data and information in your business just waiting to be collected and analysed?

A hidden leak of profits just waiting to be plugged by making informed decisions.

Why not start by having a look at the records you keep. There are financial records of course, and we

spoke of those in the previous chapter, but other records such as Job Cards, Time sheets, customer

complaints, sources of enquiries, quotation success rates, 80/20 customers, management reports and so

on.

How and where have you analysed the data from these records? Can you point to the business decisions

you made as a result of this analysis. Not doing so could be a clue.

Score yourself out of 1 5 on how well you use data and information to make decisions.

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5 I know where Im going!

Do you? Or do you have a focus on short term goals/operational issues, rather than a long term

vision?

Its no surprise that lack of direction has been recognised as a problem for a long time, two thousand

years in fact. The following quote has been attributed to Seneca, a 1st Century Spanish-born Roman

Statesman and philosopher 'If a man does not know what port he is steering for, no wind is favourable to

him.'

Kinda makes sense doesnt it.

Even Alice in Wonderland had something to say:

Lost in Wonderland, Alice asked the Cheshire Cat: Would you tell me, please, which way I ought to go

from here?"

"That depends a good deal on where you want to get to, said the Cat.

"I dont much care where, said Alice.

Said the Cat: Then it doesnt matter which way you go."

Or as marketing guru Dan Kennedy says You can eventually get south by going due north, but life is a lot

easier and less stressful, and business more profitable, it you actually get headed in the direction that

leads to your destination of choice.

A sure sign a company is not doing as well as it could is when the owners focus is 100% on short term

goals, on what he is going to do today, and not where he is taking the business. Direction is critical but if

owners and managers ignore that and focus on getting the sales in now, prioritising immediate sales over

everything else, including customer service and satisfaction, then it doesnt matter which way they go,

theyre steering for no particular port.

Successful businesses seem to buzz with confidence, but simultaneously they hum with dissatisfaction

a good kind of dissatisfaction - the sort of restless knowledge that there's more to be done, that there are

always improvements to be made.

When asked where he wanted his business to be in five years a new client said Dunno, havent thought

about it yet. There were certainly improvements to be made in that business. If they werent there was a

fair chance that the business would be overtaken by events, and by their competition.

A Japanese proverb says "Vision without action is a daydream. Action without vision is a nightmare."

And that is what happens for so many small businesses. They get very busy doing things and end up in

the nightmare of being busy and going nowhere, and very probably leaking profits on the way.

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How can we be sure that profits are leaking in this situation? If there is no direction or vision, then

theres a pretty good chance that the decisions being made are not optimal, that they wont be consistentor have direction.

And that is the point. Given that small businesses are usually short of both time and capital, decisions

need to be optimal, and made with a view of taking the business somewhere, somewhere there is a better

future.

So where do you fit in this situation? Where is your better future? For some of you it will be to grow your

business. You may not wish to be number two in the world but you see yourself growing to be a dominant

business in your market. Maybe you wish to extend to branches, or grow by franchising your business.

For others, it is not so much size as profitability, not growing the business in size but just making a

reasonable level of profits. Do you want not so much a bigger business but one earning more profits from

your existing level of business, and the effort you are putting into it, would be much more satisfactory. Is

that you?

Or for you is it more free time? To be able to take more time off with the family each day, each week. To

be able to have decent holiday each year. To just get off the treadmill without your business going belly

up. More free time is the wish of many a small business owner.

Giving their children a better and more secure future than they had drives others. Not to have to go

through the hard times, the struggles that they went through, drives others. This may be your goal, yourvision.

Whichever overall goal fits you, and obviously there are many others, if you dont have an overall goal, a

vision for your business to guide your decision making, then no wind will be favourable to you.

So why dont you get yourself a good cup of coffee or tea, and take ten minutes out to have a good think

about how clearly you have set the direction of your business for the next five years.

Score yourself out of 1 5 on how clearly you have determined the direction of your business.

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6 I know what Im doing!

Are you concentrating on what you do and not on managing or developing the business?

This really follows from the previous clue. You started the business because you are good at what you

do; better in fact than the staff you employ, so you keep on doing the work on the shop floor, or whatever

is the work of your business. So effectively you spend your time being an employee of the business and

not the owner/manager of the business.

This situation has been recognised in studies of small business. The business depends at the start, and

often for a long time afterwards, upon the personal characteristics, abilities and resources of the owner-

manager(Wiltshire Enquiry 1974).

Nothing much has changed in the decades since then. The personal characteristics and resources of

the owner-manager are likely to still be those he or she started their business with, the technical skills that

gave them confidence to start their business and were the basis for their initial success.

And because youre better than the staff, do you still feel the need to do the work of the business, solve

the technical problems? Some owners also feel a need to also feel the need to do some work on the

shop floor because they need to earn their wage.

So you have to do the work and make the business decisions. The Wiltshire Report went on to say The

responsibility imposed on one or two persons for all management decisions usually leads them into

working long hours in an atmosphere of constant pressure. This pressure is partly due to lack of

management know-how and has the unfortunate result of preventing participation in activities designed to

alleviate these pressures.

Does your business require you to work long hours? In his well known book, The E-Myth, Michael

Gerber recognised the underlying cause of this situation. He said that people were working in the

business and not on the business.

And that is a basic problem of smallness. You are the chef, the cook and the chief bottle washer. You

find yourself doing the work and making the decisions. And because you may not be as profitable as you

could be, you have to keep the work coming in, and churning it out so you dont have too much time to

think about the business, and the decisions you are making.

Sometimes the pressures lead to a feeling of isolation, and that nobody could help you if they were not in

your particular industry. They wouldnt understand it. And if nobody understands it, then there is not

point in asking for outside assistance. So you keep pounding away on that treadmill. And where do

treadmills go nowhere!

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It is easy to recognise if you are on this treadmill, working in the business and not on the business. A

good clue is the clothes you are wearing. Depending on the industry you are in these are often khakis orblues. They signal an intent that you intend to spend at least some of the day working on the shop floor

and not managing the business.

So why does this lead to a profit leak? While you are working on the shop floor, working on the technical

side of the business you will be earning whatever hourly rate you charge out or mark-up you put on the

product. You will not be looking at how to increase sales, how to increase or improve margins, how to

increase productivity, improve purchasing, or reduce expenses.

In other words you will be looking at the job on hand and not how to increase profitability. And if you can

increase profitability just maybe you can get of the treadmill and spend less time in the business.

Wouldnt it be good if the focus of your daily activities had a high impact on the business, and not just on

the job on hand.

Why not start by making a record of what you do each day, a timesheet of your days activities. Do this

for a few days, and then review the record. How much time goes on just doing the job, and how much

time you spend on developing the business

Score yourself out of 1 5 on what proportion of your time goes on managing and developing the

business, as opposed to just being an employee of the business.

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7 I dont like to sell

Sales will happen, right?

Well, they might, but lack of a planned approach to marketing is a sure indication that you are not making

as much profits as you could. And that is just as much a profit leak as hidden costs not being recovered.

Costs not being recovered are just cash draining from the business. Not marketing properly amounts to

unconsciously reducing cash coming in. The effect on the bank balance is the same. So not doing good

marketing is a huge profit minimiser.

So you just accept any job which comes through the door. And as long as they keep coming there is no

problem. Right!

Well, may be so, but:

Are you attracting the right clients?

Do all the sales you make have the right profit margins?

How much repeat business are you getting?

Are there more profitable markets you are missing out on?

With a little attention to marketing you will know the answers to these questions. Lets look at some of the

reasons (excuses) Ive heard over the years.

1. Marketing is, well, pushy and I dont like to be pushy you dont have to be pushy. Marketing is

about meeting customers needs, wants and expectations. If you properly understand your

customers than by providing them with what they want you are actually doing the right thing by them.

Or would you rather a competitor did that?

2. I get enough business as it is and well you might be, but is it the right business? Is it the most

profitable business you could get? Lets face it. Some products have better margins than others, and

some market segments are bigger and offer more potential than others. Some customers are only

interested in the lowest possible price, others buy on value.

You dont have to sell more to have a better business. You only have to sell more of those products

and services which have reasonable profit margins, and less of those which have poorer profit

margins. And it can be done. Just read the case study on the front page of the Profits Leak Detective

website again (www.profitsleakdetective,com).

3. If I turn away a customer they wont come back do you want them back? If they are the wrong

type of customer, a low profit customer, do you really need them? Turning away the wrong type of

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customer will be good for your business, not bad. It will free you up to accept the good type of

customer, one who is worth retaining.

Occasionally you may have to turn away a good customer because you are genuinely busy. If they

are the right type of customer, and you have been looking after them, they will come back. They will

appreciate your care and guidance as to who can look after them on this occasion, or be willing to

wait if the matter is not urgent.

In any case, being genuinely busy with good customers just demonstrates how much in demand you

really are. It is good promotion.

4. I need the sales this is a variation of the any sale is a good sale theme. Let me tell you the tale of

two manufacturers, both small businesses, both manufacturing the same products for the same

geographical market. One had good turnover, planned their approach to the market, knew the

customers they wanted and achieved very good margins. They were extremely profitable even when

the market had a downturn, as markets do.

The other was the mirror image, the reverse. This company was desperate for sales, sales from

anyone, and would accept any sale, at any price. So their margins were thin, their cash flow poor,

and they felt they had to accept any sale to keep the cash coming in. They were on a treadmill off

which they could not get. I wrote about this in an article (www.profitsleakdetective.com/)

You see they had no target market any sale would do and no marketing strategy and itsaccompanying marketing mix (price, product, promotion, place) to deliver the strategy. The first

company had a target market and a strategy, the second didnt. Take your pick. Who had the profit

leak?

5. I dont have the time to be marketing, Im busy enough as it is busy doing what? I know, the

work you have already have. But is it good business or the right business as we discussed above.

And what are you going to do when these jobs end? Take the first sale that walks through the door?

You get the picture.

Wouldnt it be better to ensure you were getting the right sales, and getting them when you neededthem, and not have to take just any sale?

6. I tried marketing and it didnt work did you, or did you try what you thought was marketing? Was

it to a plan, or a one-off promotion? Were you spreading your message too thinly instead of creating

a hit list and communicating more often to them? Image advertising instead of "selling in print". Small

business needs something more responsive than image advertising.

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Did you have a target market and understand the particular problems of that target market. Have you

crafted a Core Marketing Message that really gets your target markets attention? Have youidentified what it is about your business that offers a true advantage to clients?

Does your message match the market? Without these, and of course repetition, your marketing would

not have worked.

You dont have to sell. By and large people seek to buy something when they have a problem to be

solved, something they want or need. Is the role of your business to solve those problems, satisfy those

wants or needs when and where you have the expertise to do so? If not, why are you in business?

A planned approach to marketing really ensures that those people come to you when they are in that

situation. And you cant help them if you are tied up servicing the wrong type of customer, the

unprofitable customer.

Is there the possibility that you could have a profit leak from the profits that you are not making, but could

be making with better sales and marketing? Its time for another cup of tea or coffee and have a good

think about your approach to sales and marketing. Score yourself out of 1 5

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8 Are your systems and procedures documented?

Have you noticed that all good businesses have good systems?

Some of you will be old enough to remember when products made in Japan were just a load of rubbish,

Jap Crap people used to say. Yet now, Japanese products are synonymous with quality. The change

didnt happen over night. It happened over a decade or two, but it happened.

The person who made it happen, who showed Japanese business how to improve their businesses was

an American, Dr. W. Edwards Deming. During the Second World War Deming had developed a system

to help American industry meet wartime requirements which became known as Total Quality

Management (TQM), sometimes known as management for continuous improvement. Deming was

bought to Japan by General MacArthur after the war to help rebuild Japans industry as a bulwark against

the Soviets.

Enough history. The key to all this is that Deming understood that everything you do in your business is a

system or process. He said "94% of all failures occur when a person is not following a tested system."

When you get a failure you have to redo the task, repair the product or replace it. And that is WASTE,

waste of your time, waste of your money.

Another day, another dollar another leak! That is, another dollar not in your pocket.

Waste in a business is sometimes likened to an iceberg. You only see the top 10%. Which means there

is an awful lot going on that you dont see. And if you dont see the waste, just like my water leak, it will

go on and on adding costs and draining profits from your business.

And dont forget the opportunity cost of waste. Whilst you are redoing the job that should have been done

properly in the first place you are not doing the next job, or making the next sale and the dollars that go

with it.

The whole point of having documented systems and procedures is that, if followed, mistakes dont occur

repeatedly. Nor do you waste time and money reinventing the wheel.

There is another benefit from documenting systems and procedures. They prevent you slipping back into

your old, bad habits. Have you ever heard of, or seen the situation where a mistake has been made or

problem occurred, the business has worked out what went wrong and how to prevent reoccurrence, but

over time people slipped back into the comfort of the old ways. And lo and behold, the old mistakes and

problems creep back into the business.

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A definition of business insanity is to do the same thing year after year and expect a different result at the

end of each year. It doesnt take much thought to see that if you want a different outcome in yourbusiness when it has not been traveling as well as you would like, you must change either the process,

the product, or both. If you always do what you have always done you will get what you always got!

As soon as someone says but weve always done it that way a warning bell should be sounding in your

ear to say have a good look at this.

The problem for many people is that they are too close to the problem to see that the way they have been

doing things may be wasteful, or if they were useful once, they may have become obsolete. That is why

the outside view is useful.

The outsider comes with a different perspective. They are not emotionally involved as the business

owner. Sometimes, when you have your head down, bum up and are pedalling furiously, it is difficult to

step back and see things as they really are. Is that you?

Does your state, province or business association have some kind of a business award program? You

know the type of thing Exporter of the Year, Small business with less the 20 employees, Conference

and Event Manager of the Year. Without doubt, most winners of business awards have documented

their business processes in their Operations Manuals. They know doing this is a virtual guarantee against

profit losses. Documentation of processes is the beginning, the foundation, and the bedrock of worthy

undertakings.

So just how well are your systems and procedures documented? Are they readily available in hard copy

or electronically? Score yourself out of 1 5.

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9 So where to from here?

So what have you found? Did you score yourself less than say, 3 against any of the symptoms? And if

so, against how many symptoms?

Lets check!

Symptom Your Score

So whats in the Bank ?

How regularly do you check your accounts ?

How do you make decisions ?

Do you have a focus on short term goals/operational issues, rather

than a long term vision?

Are you concentrating on what you do and not on managing or

developing the business ?

I dont like to sell

Lack of Documented Systems and Procedures

Total

Does that suggest to you that some further forensic work might be worthwhile, that there may profits

leaking away from your business? Now a good hard look is something you can undoubtedly do yourself

in your own business but, and its a big BUT:

Do you have the time? After all lack of time is one of the problems bedevilling you right now?

What can you set aside to do the research?

Do you have the expertise and experience? Now Im not saying you dont know your own

business. After all, it was your expertise and experience in your field that enabled you to start

your own business in the first place. But step back and remember how many years you put into

developing that skill in the first place. And how many years have you put into developing your

financial management and marketing skills? Its horses for courses is it not?

Do you know where to start, what are the most likely areas to investigate? After all, you dont

have the time to waste chasing down the wrong leads?

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Here are some tools that might help you.

1. Financial Management Self Assessment Program -Do you know how to analyse your financial

statements? Can you use your Profit Loss Statement and Balance Sheet to dig deeper? The

ultimate outcomes of profit leaks are measured largely in financial terms. And it is the financial tools

which assist you to drill down and find those leaks.

If you dont have a grasp of how to use your financial statements to analyse your business then our

Financial Management Self Assessment program will give you an understanding of what to look for.

Go to http://www.profitsleakdetective.com/products/financial-management.html

And as a bonus for buying the Financial Management Self Assessment program I throw in a

recording of a tele-class on Cash Flow Management.

2. Forensic Diagnostic do I hear you say But I need more than that? The Forensic Diagnostic is

where we work with you to drill down further into your business, looking for telltale clues which may

guide us to the profit leak.

If you have studied the article How to increase profits and cash flow on the Profits Leak Detective

website (http://www.profitsleakdetective.com/articles/how-to-increase-profits-and-cashflow.html ) you

would know there are five broad areas to work on to do just that, increase profits and cash flow. They

are:

Increase Sales users, usage & uses

Increase Margins increasing prices

Improving margins lowering the cost of sales

Lowering the cost of operation your overheads and administration costs

Improving productivity systems, processes & procedures

Your profit leak may lie in one or more of these areas. But before we can pin it down we need to know

a little more about your business and your responses to the 7 Clues.

The Forensic Diagnostic comes to you as a workbook which guides you through a series of questions

and tables for you to complete.

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When you return the workbook we analyse the results and prepare a practical report on the issues we

identify and make specific, practical recommendations on the steps you may take to plug the profitleak. If required we will contact you by telephone or email to clarify any areas of your response.

Bonus once you have received the report we will have a one-to-one conference call (1 hour) to

discuss our findings and the rationale for our recommendations.

Our work with AKS Welding highlighted on our web site, started with just such a business review:

Over the last three years Adam has had a huge impact on the way we do business today.

He has a calm common sense, no jargon approach to explaining how business works.

Some of the valuable points learned were in marketing, proper use of job cards, time

keeping, and the successful estimating of jobs to improve our margins to name just a few.

Julie Shugg, Managing Director, AKS Welding and Fabrication Pty. Ltd.

So what will be covered in the report?

Identification o f that prof it leak - Of the five key areas to look at there may well be leaks in 2,

maybe 3 but very rarely in all 5. The report will identify the specific leaks to plug.

What-if- analysis the report will provide a what-if-analysis of the impact of closing off this

profit leak. It will show just how much your position will be improved by taking the necessary

steps to close of the leak(s).

Practical steps to follow it is all very well to help you identify the impact of the profit leaks, and

how your position to will be improved. But you need more than that. You need practical steps

you can follow, and thats what will be included in the report.

You have established that there is a pretty fair chance you are leaking profits. The next decision you

have to make is

Do you want to do something about it?

I have been working with small businesses to review and improve their operations for 18 years, and

across a wide range of industries. And Ive always found some areas in which to help the business

improve its position. You cant buy experience like that?

Well, you can actually. Thats the thinking that has gone into this Forensic Assessment product, and the

analysis that I will undertake when I get your answers.

I want you to do a simple test and its on only one possible profit l eak!

Take out your last annual Profit & Loss Statement

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Calculate the value of an increase in your Gross Profit % of an additional 5% ((for example from

20% to 25%).

Assuming for the moment there are no increases in your expenses, that increase will go straight

through to your Net Profit.

What has your net Profit increased by?

Now, what is i t worth to you to achieve that increase,remembering that is only one area of possible

profit leak?

Your detectives fee is only $675.00. Your decision!

Now, would you like a Guarantee?Here's what we can do for you.

Two Boomerangs Guarantee

Now why do you need two boomerangs for your guarantee? It's simple really.

First boomerang- of you feel you haven't got value out of our product then all you have to do is heft it on

to your hand, and return it. Just like a boomerang, wing it back to us. You may dance on it, throw a part

around it or even use it at a corroboree. That's all right, as long as you give it a good throw so it returns

to us. And then:

Second boomerang - we get the product back, and arm back, and.... Throw...whoosh, whoosh, whirl,

whirl back come your funds. In full, right into your hand.

It's simple really. One good boomerang returns another.

If you are still unsure, go back and check the calculation you just did.

Then contact me on tec@profitsleakdetective.comand we can have a chat about your challenges.

To your profitable future.

PS. Now what did your calculation show?

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10 About the Profit Leak Detective

Adam has been suppor ting small and medium enterprises (SMEs) for over 18 years as a business

consultant. To do so he draws upon his many years experience at senior management levels in both the

private sector and government. This experience includes both manufacturing (aerospace, marine, farm

machinery) and retail industries with responsibilities in general management, marketing and export. His

qualifications include B. Ag. Econ (UNE), MBA (UNSW) and a Diploma in International Marketing.

Managing a small business is no t always easy. Do you:

Struggle with cash flow, profitability and available management time.

Know you work hard, and are a good operator in your area of business; but

Find that, because you are always busy, you lack the time to identify the key constraints on you

and your business.

Suffer from profit leaks in the business which drain the profits you hope for.

As a result you work long hours, seven days a week and rarely have the time to enjoy what you

do.

If this is you, then you are the type of small business the Profit Leaks Detective assists.

Some people promise solutions we provide results!

If you are a typical business owner or manageryou started your business because you are good at

what you do, and that has got you to where you are today. But to keep building your business you may

need guidance or assistance in areas in which you havent had the time or opportunity to develop

expertise. For most small and medium businesses these may be developing a clear strategic direction,

developing effective management systems and processes, understanding financial management, or how

to effectively market you business.

Profitability is not optional! Have a look at our "How to Improve Profits and Cash Flow Model" and

other useful articles on www.profitsleakdetective.com site then contact me for a chat.

Do you recognise yourself above an owner operator who has built a business based on your expertise

but find yourself struggling with cashflow, profitability and never enough time? Thats where we specialise

helping small and medium businesses overcome these burdens.

Of course I don't know your business as well you do ; nobody does and it would be impertinent of me

to suggest otherwise. What we do bring is knowledge of particular techniques and principles to find and

plug profit leaks which can be applied widely to small businesses. I have successfully worked with

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businesses across a wide range of industries, from tourism to real estate, IT, engineering and

manufacturing. And every time I have been able to identify some opportunities for improvement whichhad a positive impact on the business.

Many years of practical experience in business- hands-on direct management experience running a

small business - enables me to bring you a deep understanding of how small business operates and the

pressures you face.

And I specialise in working wi th small businesses because I understand the issues they face, the

need to have greater control over their business and to improve their quality of life.

Is there something bugging about this page, something that is just not right, or that (horror)

I spelt incorrectly? If so, let me know through this link. And thank you!

Adam Gordon, Profits Leak Detective

TEL:61 8 8941 0388 FAX:61 8 8981 8382

EMAIL: tec@profitsleakdetective.co.

Copyright Adam Gordon, Profits Leak Detective

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