Wyoming Business Tips for Aug. 30-Sept. 5
A weekly look at Wyoming business questions from the Wyoming Small Business Development Center, part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By guest columnist, Rodney Trahan, Streamline Enterprises owner
"Why do you advise me to meet with my accountant more than once a year and why is it important to know my break-even cost?" Michael, Sheridan
Can you imagine the outcome if during an NBA basketball game the visiting team's coaching staff was required to sit outside the arena without any contact with players until the end of the contest?
Do you think that the team would be at a disadvantage? Worse yet, what if the visiting team was not allowed to look at the scoreboard to determine the outcome and amount of time left in the game? Who would call the team in and run a special play to inbound the ball? Who would substitute new players to take advantage of an opportunity presented by the other team's defense?
Can you imagine playing the game without knowing who is winning or how much time is left in the game?
Visiting your accountant only at the end of the business year versus once a quarter and reviewing financial information monthly is like conducting business similar to the above basketball scenario. An accountant will help compile financial information to help a business owner know what the score is in the business game all along the way.
Doing this more frequently helps the owner know much sooner if something negative is beginning to happen in the business.
A colleague of mine was visited by the owners of a new winery in California. They couldn't figure out why even though they were selling so much of their product, they never had any money left over at the end of each month.
Turns out they only calculated their break-even in the initial business plan and never revisited it again until they visited with him a year later. The owners' actual costs differed from their projected costs so they were operating under faulty assumptions. This popular business became one of the 80 percent that fail within the first five years.
Wouldn't you rather find out sooner than later that you were selling your product or service for less than break-even?
Rod Trahan, Streamline Enterprises Inc., president is a Licensed business coach. He can be contacted at (307) 461-4483 or on the Web at http://www.ActionCoach.com/rodtrahan.
A blog version of this article and an opportunity to post comments is available at http://www.wyomingentrepreneur.typepad.com/blog/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, e-mail firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.
Posted on Monday, August 24, 2009