Wednesday, June 18, 2008

What is a P&L or The Profit and Loss Statement?

It adds all the revenues of the business and subtracts all the operating expenses, thereby providing you with a figure representing a profit or a loss. The P&L measures the results of operations of a business over a given period of time, usually a month, quarter, or a year. The P&L is also known as Income Statement.

The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flow. The income statement is divided into two parts: the operating and non-operating sections. The section of the income statement that deals with operating items is interesting to investors and analysts because it discloses information about revenues and expenses that are a direct result of the regular business operations.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company's regular operations.

Here is a sample of an Income Statement or Profit and Loss:

Profit and Loss Statement
December 31, 200x
Sales (revenues)
- Cost of goods sold
= Gross margin
Wages and salaries
Selling expenses
Total expenses
Net income (pretax)

What is a Balance Sheet?

The Balance Sheet is also known as statement of financial position. The balance sheet is a picture of a company's financial condition.

The Balance sheet is divided in three parts: Assets are listed first, follow by Liabilities, and the last part is the Shareholder's equity. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company.

In financial accounting the balance sheet is the only statement which applies to a single point in time.

Here is an example of a Balance Sheet:

BALANCE SHEET of ABC Inc. as of Dec 31 200x


Current Assets
Cash and cash equivalents
Accounts receivable (debtors)
Prepaid Expenses
Investments held for trading
Other current assets

Fixed Assets (Non-current Assets)
Property, plant and equipment
Less: Accumulated Depreciation
Other intangible fixed assets
Investments in associates
Deferred tax assets

Liabilities and Equity

Current Liabilities: amounts due within one year
Accounts payable
Current income tax liabilities
Current portion of bank loans payable
Short-term liabilities
Other current liabilities

Long Term Liabilities: amounts due more than one year
Bank Loans
Issue debt securities
Deferred tax liability
Minority interest

Retained Earnings

What Can You Learn From TOYOTA?

I just read the article about Toyota, titled The Contradictions That Drive Toyota's Success by Hirotaka Takeuchi, Emi Osomo and Norihiko Shimizu. On the Harvard Business Review, June 2008.

It is a great article that provides a lot useful information. What amazes me about Toyota is that they keep everything as simple as possible, but its behavior contradicts what a large organization typically does. Here are some of their beliefs:

  • Never being satisfied. But setting impossible goals Toyota's employees push to achieve they very best.
  • Everybody should win. A true win-win: Customers, dealers, company, employees and management.
  • Toyota trains its employees in solving problems, Toyota invests in its employees for the long term, if the company needs to cut cost, they will cut cost except lay off its workforce.
  • Employees play mentor roles.
  • Toyota allows information to flow freely, up and down the hierarchy.
  • Toyota give people the freedom to VOICE CONTRARY OPINION. When was the last time you had this freedom at work without fearing repercussions? Employees feel safe, even empowered to voice contrary opinions and are able to contradict superior.

Can American companies compete against Toyota and be profitable? I believe so, however, it will be extremely difficult because the Toyota way can't be simply copy and paste. Toyota is a culture and as every culture it needs to grow, people must believe in it and it takes a long time to be nurtured. Will companies' share holders have the patience? Only time will tell.

I encourage you to read the article, you will learn something and apply it to your business.


Reduce Your Fuel Cost

The average price of a gallon in the U. S. is now $4.08, in other areas such as the San Francisco Bay Area, the average price is $4.60 per gallon. What to do to keep your fuel cost from eating into your profits? The option of buying a smaller fleet of vehicles or a fleet of hybrid vehicles may be nice but it is also very unrealistic.

Here are a few tips that can help reduce your fuel cost and won't cost you much.

  1. Drive more efficiently: driving at 65 mph instead of 75 mph will reduce your fuel cost a 13%. The technology is available that will allow you to set up a maximum speed on your company's vehicles so your employees won't be able to drive faster than the set speed.
  2. Maintain your vehicles: change dirty air filters, proper pressure on your tires, these can decrease your fuel cost another 13%
  3. Avoid idling.

Other companies are investing in technology to reduce their fuel cost as well as their carbon print. Interserve, a building management company has saved 15% of its fuel costs by tracking its vehicles with satellites, they have cut the average speed of vehicles, they have been able to plan their routes more efficiently such as on duplicated journeys. Interserve uses Cybit's Fleetstar-Online (a British company) Their system is web based and reports on any given vehicle every 20 seconds. The system will display additional information such as: mileage information, traffic report.

How about reducing the number of Left Turns you make? will that reduce your fuel cost? Just ask UPS. According to UPS, reducing the numbers of left turns also reduces the idle time of the vehicle which in turn lowers fuel consumption. For the full article about UPS here is the link

Implement the changes now... The price of gas will continue to increase.

Good Luck. .

Tuesday, June 17, 2008

The Basics of Sales

If you want to be a successful business owner you need to control cost and bring in the revenue. Sales will support the life of the business, and its importance is the same in the for profit and non-profit businesses.

This section will touch the basic of sales, we'll later expand more in the art of selling.

Things to Consider Before You Start Selling

Your image is YOUR business's image. These things influence that image:
  1. First Impressions
  2. Dress
  3. Language
  4. Being On Time
  5. Business Meeting Etiquette

Some of the Traits of Successful Sellers

  1. High energy
  2. Self motivation
  3. Persistence and perseverance
  4. Good listening skills
  5. Technical knowledge
  6. Ability to use the product
  7. Ability to explain the product
  8. Good communication skills
  9. Ability to overcome objections
  10. Knowing how to close the sale

Six Steps to Sales Success

  1. Prospect and Prioritize Accounts
  2. Plan and Prepare for Sales Calls
  3. Make the First Contact Count
  4. Present your Product
  5. Handle Objections
  6. Close the Sale

Closing Techniques

  1. Basic close
  2. Offer Alternative Choice
  3. Compare Pros and Cons of Buying the Product
  4. Ask Closing questions and Summarize
  5. Cite Examples of Others Who have purchased
  6. Isolate the Customer's Potential Objection and Clarify
  7. Use a Secondary Question to Close




Four Customer Service Basics

  1. Positive Talk
  2. Recognizing Customer Needs
  3. Finding Common Ground
  4. Building Trust

Learn What Your Customer Needs

  1. To be Understood
  2. To Feel Welcome
  3. To Feel Important
  4. To Feel Comfortable

Why We Lose Customers?

  • 1% Die
  • 3% Move away
  • 4% drift to another business
  • 5% change on a friend's recommendation
  • 9% buy it cheaper somewhere else
  • 10% have a service problem that is not resolved
  • 68% leave because they feel they're not getting good service!

What Customers Expect from Your Business:

  • Clean, comfortable, attractive surroundings
  • To be welcomed pleasantly
  • Well-groomed, professional sales personnel
  • Immediate, focused attention
  • Eye contact
  • To be addressed by name
  • To be assisted by someone with excellent product knowledge
  • Confidentiality
  • To be treated with courtesy and respect

Dealing with a Complaint

  • LISTEN!!!
  • Recognize the customer's feelings
  • Apologize when it's the right thing to do
  • Clearly explain what you're going to do about the situation
  • Thank the customer for bringing the problem to your attention
  • Take action to make things right
  • Follow up with the client

Customer Service Essentials

  • Welcome customers to your business
  • Thank customers for coming to you
  • Educate customers about your product
  • Answer questions
  • Follow up promptly
  • Thank customers for choosing you
  • Follow up with the customer, to make sure that your product and service were satisfactory
  • Use Follow up responses to improve your product or service

These are the basics of sales. Learn the basics well. There will be more posting about sales and will cover more specific topics.

Good Luck in your sales activity

Monday, June 16, 2008


The world wide web has made it possible to start up a business with minimal capital and it is a great tool if you use it wisely.

To access the Web, you nee a computer with a modem, a Web browser, and a connection to the Internet. Most telephone and cable companies offer package deals for Internet service, which can be convenient and cost effective. But when you rely on a single company for your phone, cable, and Internet service, you become more vulnerable to technical problems. Also, deals like these may prevent you from taking advantage of better offers.

Internet Connections

The faster your Internet connection, the more you can do with it. Dial-up connections tend to be too slow for most uses, although they're better than nothing. Broadband services like DSL and cable are much faster, although they're also more expensive. Wireless connections can also be pricey. However, may towns are working on setting up free wireless networks in disadvantaged areas.

E-mail and E-mails Clients

An e-mail client is a software application that allows you to send, receive, filter, and organize your email. E-mail clients access your mail from a server, and download it onto your computer. the most commonly used e-mail client is Microsoft Outlook, but there are dozens of others. many of the best clients are free, so you can experiment and find one that works for you. Popular clients include Thunderbird, Eudora, and Pegasus.

Even some sophisticated computer users don't understand how e-mail works, and can't tell the difference between a client program like Outlook, and an ISP's mail server. The main point to emphasize here is that Webmail accounts are a bad choice for businesspeople. They have limited storage and sorting capabilities, and worst of all they can't be accessed offline. Even if you're using a Hotmail account, you should run it through an e-mail client. That way, you'll have a copy of all your mail on your computer, whether you're online or off.

E-mail Security

As a general rule, you should assume that your e-mails are not private. think of them as postcards rather than sealed letters. Most e-mail messages are not encrypted, which means that they can be intercepted and read by third parties. Also, most ISPs back up copies of your messages for a few months, even if you delete them from your mailbox. In addition, there is no law that prevents an employer at your ISP from reading your e-mails!

Managing Business E-mails

E-mails should be answered promptly and professionally. They should also be backed up against loss and filed in such a way that you can find them easily. E-mails are important business records, and they can even form legally binding contracts.

Searching the Web

To find information on the Web, you need a search engine, like Google, Yahoo, Dogpile.

Websites especially ones that sell to the public go to a lot of trouble to make sure that they get a high rating in search engines. Just as your participants want to find what they're looking for with one click, Websites want people to find them with one click.

Online Trends

The most important general trends for microbusiness are these:

  1. Microbusinesses usually target niche markets, and the Internet increases access to niche markets all over the world.

  2. Just as you can sell all over the world, people from all over the world can sell to your hometown. (How does that change the competitive landscape?)

  3. Many consumers and businesses use the Internet to gather information about products, before buying them in a traditional store. that means a marketing site is a good idea even if it has no e-commerce ability.

  4. Customer service and security are increasingly central to successful online selling. Consumers expect as much or more service and security than they'd get at a conventional store.

Online Security

On the Internet, a microbusiness can sell to customers all over the world. You can be located in a small town in Kansas and find that customers living in Mexico and England are interested in your niche product.

for little or no cost, simple online stores can test pricing and product mix strategies without a brick and mortar retail space. Discussion boards and blogs are perfect forums for testing ideas, and for getting support and feedback from other entrepreneurs. And even if decide not to sell online, a promotional Website an be terrific marketing tool, providing pre- or post sale information to consumers.

Planning Your First Website

Building a Website or a Web-based business raises the same questions as building a business offline. Consider:

  1. Short-term and long term business objectives

  2. Attractiveness of target market

  3. Marketing mix

  4. Competition

  5. Customer needs

  6. Your business's strengths and weaknesses

  7. Your budget

The budget question is an important one. There's a wide range of costs for Web development. You could design and launch your own site almost for free. On the other hand, a well-designed promotional site with no e-commerce functionality might cost a few thousand dollars, and could take one to two months to design and build.

Registering Domain Names

If you don't register the name you want today, it may not be available tomorrow! Your domain name can be important to your branding strategy, and should be chosen carefully. Students should get input and feedback from management, staff, friends, customers, and Web professionals. Once a domain name is registered, it's unchangeable and nonrefundable, so spell carefully when registering!!

Researching Sites Online

Spending time online is the most important thing you can do while planning your Website. the only way to know what works is to visit a lot of sites. Which online stores are easy to use, and why? Which aren't, and why not? Which sites are visually appealing? Which sites load the fastest?

Basic E-Commerce Capabilities

Merchandising: People can touch or test your goods online. That makes merchandising very important for Web-based businesses. People want to be able to find what they're looking for easily, see some nice pictures of it from several angles, and read a detailed description of what it is and why it's worth owning.

Making the sale: In this stage, the customer must be able to select items, choose from different shipping options, get a price total that includes shipping and tax, and enter a billing address and shipping address.

Getting paid: If you're selling online, you may be able to set up a merchant account with your bank to accept credit cards. Otherwise, you can choose from a number of alternative e-commerce services. The most well know of these is PayPay. If you're a merchant who uses PayPal, your customers can click on a "Pay" button that brings them to a checkout form. PayPal collects the money, and credits it to your account (minus a fee). You can transfer money in this account to your bank, or access it with PayPal's debit/credit card. If you sell through an e-commerce host, they'll have a payment system in place.


E-commerce requires trust, which is why you must offer a secure a method of accepting credit cards. The standard security method is called secure socket layer (SSL) To implement SSL, you'll need an authentication certificate. This is a sort of digital ID card that confirms your identity. Studies show that sites with SSL certificates enjoy increased e-commerce sales, fewer abandoned shopping carts, and more repeat purchases. Again, e-commerce hosts should have high security standards.

Calculating Taxes

Tax rates vary from state to state. This is a issue to bring up with your accountant or CPA.

Shipping Options:

Should the shopper be socked with a higher shipping cost for spending more money at your online store? Of course not. If anything, the shopper should be rewarded with a discount. Free, discounted, or upgraded shipping are typical rewards for big online spenders. Upgrade shipping is a very good incentive; the cost of upgrading from UPS ground service to 2 day service is not high, but it can make a huge difference in how your customer feels about your business.

Customer Service Online

Online customers expect the same level of customer service they receive offline, if not more. According to study done by, a firm that tracks customer satisfaction with e-commerce, quality of customer service was the top factor in determining whether a customer returned to a particular online merchant.

One of the biggest complaints customers have with e-commerce is that they can't get in touch with online businesses. They complain that phone numbers can be hard to find on Websites, and if called, may not be answered. Also, customer e-mails often get no response for days on end, or receive an automatic response that doesn't answer the customer's question.

Once again, we arrive at the issue of first impressions. Does your Website communicate who you are and how you feel about your customers to everyone who looks at it? Of course it does! Do your e-mail responses have to be just as professional, friendly, and punctual as you and your employees are in person? Absolutely!

To avoid making people mad, and to assure customers that your company is for real, be sure to have a phone number where customers can reach you. Many customers call simply to make sure that the company really exists. These calls present a great opportunity to promote your product.

Online Marketing Strategies

The Internet is very, very crowded. Somehow, you have to get your site noticed so that people can see what you have to offer. This means marketing. Always remember that attracting new customers is about six times more expensive than maintaining a loyal customer base.

There are two primary types of Websites marketing: passive and active.

  1. Passive marketing: means designing your site so that it's picked up by search engines.
  2. Active marketing: means using any and every means of information the world about your Website.

You must combine passive and active marketing to attract the greatest possible number of people to your site.

Online businesses are always coming up with new strategies for online advertising. Most experts agree that the usual ad techniques don't work well on the Web. Unfortunately, there's not much agreement about what does work.

Microbusinesses should focus at first on tried and true techniques of offline marketing. All your packaging, letterhead, and other business materials should have your Website's address printed on them. World of mouth is a powerful tool, too. Be sure to tell your customers and friends when your Website goes up.

Good Luck setting up your E-commerce.