Service 4: Review of your own Budget Percentages, E-Myth - Marketing my Service - Marketing Ideas for Service Businesses

Go to content

Service 4: Review of your own Budget Percentages, E-Myth

5. Our offer for you

Budget Percentage & Income Pattern Review

Included as part of the All-in-One Service



This is a Budget Review like no other. It is included as part of the 'All-in-one' service, or can be offered as an optional add-on to Marketing Training Course if required, at £75/hr + VAT, and does require that you do some initial research first.



_____________________________


PLAY THE PERCENTAGE

_____________________________


This is not intended to encroach on what your accountant does. We will together look at your spending in percentage blocks. You can start work on this now, and return to it in stages over a few days or weeks. It is part of your budget setting process.


You may have heard of Michael Gerber and his book The E-Myth. If not, it is recommended reading.

Michael Gerber stated that, broadly speaking, a small business's turnover should be split 30:30:30:10. Wages 30% (including the owner's wages), Profit 30%, Everything Else, including all overheads and marketing, 30% and Contingency Fund, 10%.

In practice every business is different and your percentages may vary. A service business will tend to be more labour intensive, while a manufacturing business will have a higher spend on raw materials.

Within 'Everything Else', one third (10% of turnover) is allowed for Marketing and Sales, and two thirds for heating, lighting, and overheads. In my SelClene business I did actually achieve 30% profit with 10% spare for contingencies, but I have never enjoyed these levels in the hotel trade.

Most businesses are happy with 10% profit. However if you are running a small business with between 100k and 250k annual turnover, and you are only making 10% profit, this is pretty low. Chances are if you are a small business owner, you may not be paying yourself much either. So it is a useful exercise to look at your management accounts, your spending, in terms of percentages of the income available.




Innovative & Inspirational Marketing Keys
to unlock new income from your business today

Strip out the VAT and look at each item of expenditure in your Management accounts as a percentage of your turnover net of VAT.

_____________________________________


HIGH AND LOW INCOME
TRADING PERIODS/ DAYS / SEASONS

_____________________________________


1. Look at your income pattern, seasonal and daily.


2, Work out which are your high-income days and your low-income days.


3. What level of income do you need each day to break even, to cover your trading costs?


4. Are there some days when it would save money if you did not trade at all? Are you spending too much staying open out of habit and because you have become used to a certain trading status quo?


___

When our own turnover halved at Craig y Nos, I was surprised how much wastage we had in Wages. I was able to cut wages substantially. Strict budgeting reduced wages from 40% of my higher turnover to 30% of the new 'recession period' lower turnover. I found that in my high turnover days, I'd been spending too much on wages. There were lots of people around who were quite unnecessary. Just as work fills the available time to complete it, so staff fill the available space. You can easily end up with more staff than customers in the hotel trade.

I had to pay my staff even when there was nothing much that needed doing. They seemed busy, but for much of the time they were gossiping among themselves or moaning about each other behind each other's back. This is common when people have nothing to do (at least where I am). If you are not keeping your staff busy with daily trading - you are paying out in lost profits and lost opportunity.

In a recession you are forced to reassess your trading and business model.  Look at your trading pattern, through the seasons and through the weekdays and weekends. Can you afford to accept losing money in the winter months because you anticipate making it back in the summer? What if summer trade slackens or can barely pay its own way, let alone supplement the winter period?


In good times I traded the weekdays, even though they were quiet, because I would make it up at the weekends. But once income dropped in the post 2008 recession, I found 140 days of the year where income was so low, that it was better to close. Now my income is increasing, but costs are increasing faster, so though we are not currently (2018) in a recession, the same principles apply.


By declining uneconomic business on low value days, I could save tens of thousands. An owner sees this, but staff do not. Staff just wonder why you are refusing half a dozen covers, not understanding that 3 staff (chef, potwasher, waitress/ bar person) to serve those 6 covers does not make economic sense.


Now in the winter, instead of trading through the slow winter months, I introduce 'winter trading'. Everything closes after breakfast aside from reception and maintenance. If a big wedding or event is on, I'll open, but I'll not trade the small stuff.

If your business and trading cannot be increased, through improved marketing, you may need to switch existing staff to part time and seasonal work, or to different tasks. You can switch staff to different tasks (according to the needs of the business) that make you money rather than have them out of habit (yours and theirs) continue to perform tasks that lose you money.


You may require advice on redundancy in some cases - check if any existing bodies you belong to include free legal advice before going down this route. However our emphasis will be more on increasing income levels by re-deploying resources more efficiently, rather than just cutting budgets! It may mean some staff leave, but it is better to offer someone 4 days a week Thurs evening to Sunday morning, for longer hours, than a five day week on weekdays, when you are running a weekend-busy weekday-quiet hotel.

As you look at your own trading pattern, the peaks and troughs of your own business, you'll see some days of the year and some months, where you are earning less than your costs. Staying open and trading requires a minimum income level to justify heating and lighting premises and paying staff. Slack time might be better spent closing completely. This frees you and selected members of your team to concentrate on marketing and promotion.

In some years we closed our hotel in January, February and most of March (other than for big events), October and November and use the time to market, sell, promote, and sign up new business. We do now have enough Winter Events to trade the weekends but still close mid-week.

__________________________________

WHERE IS YOUR MOST VALUABLE BUSINESS?

__________________________________



5. Where does your income come from? Look at your business, your products, your services, your clients, in some detail.


6. Are you earning different levels of profit and turnover from different sources? Which sources of income lose you money? Which make you a profit.  


You will find there is not much correlation of income to effort. Indeed in some cases you will be make a lot of effort for only a little income, while in other instances you will make a lot of income for comparatively little effort. In other instances, you will be making a lot of effort, but LOSING money.

Pareto Principle says that 80% of your time gives you 20% of your results, and 20% of your time and effort gives you 80% of your results. Sit down and work out which services you offer pay.


Some accounts, some customers, generate your profit, while others may be costing you more to service than you are making. Pareto principle dictates that 80% of your profit comes from 20% of your trading activity.

____________________________________


HOW EFFICIENTLY

ARE YOU USING YOUR OWN TIME?

- RIGHT NOW?

____________________________________


As owner of the business, how you direct yourself and use your own time is more important to your business than anything else.



7. Read the Time Management Manual in its entirety here. Also, if this link still works, read this article.


It is too easy to get bogged down in a comfortable daily routine, never stopping to consider if what you are doing on a daily and weekly and monthly basis is actually the most profitable and effective use of your time.

Stop to really consider if you are truly making the best contribution you can, if you really are getting the most out of your time and energy, for the benefit and profitability of your business?

Consider how your own time is spent now.



8. Monitor your time for 30 days starting now. Create a diary for the month (start now for the next 30 days) and monitor what you actually do each day.

Write the time one side, and your activity against the time. At the end of the month, work out the percentage of your time on each activity.


How much of this time is 'reactive' work, where you reacted to something that you were given that YOU felt YOU needed to sort out. How much of your time was spent working on what YOU planned to do, on 'proactive' work?

A principle of Michael Gerber's E-Myth is that you as owner should spend the bulk of your time working ON your business, not IN it. So once you have finished your 30 days diary, and worked out what you have been doing each day, each week, and over the month, express your activities in percentage terms and divide the tasks to


'Working In' and


'Working On' your business.

Now go through the tasks and code them


R: Reactive,

P: Proactive,

RR: Reactive and Repetitive,

PM&S: Proactive Marketing and Sales tasks

BSD: Below your skill level and delegateable,

SK: Skilled tasks only you can do.


Some tasks you do will be within your skill level and not delegateable. Some are delegateable. Some, you may find, are tasks you do because you enjoy them, but are nevertheless below your pay grade and delegateable.


9. Start a To Do List - this could be the most important thing you do.


Do you have a To Do List?  See more on this in the Time Management Manual. If so how is it organised?  Weekly Tasks, Monthly Tasks, Annual Tasks - list them.


_____



The purpose of this review is to re-position your budget and to organise your trading pattern and your own use of time so you maximise the return on your effort and cut out areas of spend and time and effort that are in percentage terms, disproportionate to the rewards and returns yielded.

_________________________________

ARE YOU GETTING THE BEST OUT OF

YOUR STAFF'S EFFORTS AND TIME?

_________________________________


With staff it is always very difficult to move people from 'reactive' to 'proactive'. As owner you will tend to be more proactive. This is one of the distinguishing characteristics of people who own and run businesses. You will find something useful to do, even in quiet trading times.

But with most staff, they will just not think the same way you do. They will slow down to the pace and rhythm of your business. If there is no business coming in, they will stop completely. Inertia rules.

So how can you better deploy any under-utilised staff resources?  How can you encourage staff to be, like, you, more proactive?  This is something we will discuss with your team separately.

Together we need to be sure your team are motivated to help the business prosper and grow. You probably need some element of reward (financial and recognition) for their efforts. Not all your team will particularly want to get involved, but you won't know who will until you put in place some financial rewards for those who are willing to become more committed, more excited about your business, and to become more proactive in turn.

___________________________________

MONITORING INCOME & EXPENDITURE

___________________________________


How easy is it for you to check monthly income and expenditure? Some businesses do not look at their income and costs flow from one month to the next. Complex accounting programs can confuse as much as they can inform.

My personal preference is for a simple excel spreadsheet to show me my monthly profit and loss, and my monthly spending relative to budget. You may prefer something user friendly and simple yourself - see the spreadsheets we use in our business below.

What you will receive / create at / by the end of this Review


1) Management Accounts Excel Spreadsheet adapted specifically to your business. Includes departmental budgets and budgets monthly and annually for each area of spend

2) Management Accounts Profit and Loss Monthly Monitor spreadsheet

3) Wages rota spreadsheet referenced to trading level (in order to maintain wages spend within 30% of turnover ratio)

4) Events bookings Spreadsheet (if applicable) to assess gross bookings income for the year ahead, with monthly income forecast totals, adapted to your business.

5) A personalised Time Management Diary / To Do List for yourself and your actions as owner

6) A structure to create the same for your key staff so that both you and your team are working more effectively to create profits for your business.


7) Your own revised To Do List, showing proactive tasks and reactive tasks, with the latter delegated.



In many cases you will already have systems in place for some or all of the above, in which case the objective will be to add in any useful elements that we monitor that you currently overlook, to supplement the elements you already monitor and manage.



Innovative & Inspirational Marketing Keys
to unlock new income from your business today


Use this handy Index to skip to any subject that interests you


__________________________


Promoting your Hotel or B&B

__________________________

How to increase your hotel's bookings


Marketing your Hotel - what we can do for you


Calling All Hotels who need to grow turnover ahead of costs


How our hotel found its customers - ideas you can use


Find your own Money-Making Marketing Keys here


_____________________________________


Our Services to promote your business

_________________________________


7-Point summary of how we will grow your business - start here


Marketing Audit: find specific Marketing Keys that will boost your business now


Marketing Training Course for your staff and Managers on your Key Money-Making Marketing Tasks


Marketing Hotels & Events - All-in-One Marketing Service - Results Guaranteed


Marketing your Hotel - Our £50,000 annual turnover increase guarantee


Marketing Advice by email - client advisory service


For a Weekly Marketing Tip - subscribe here



___________________________


Niche Marketing Opportunities

___________________________


Niche Marketing - why it works


Niche Offer Websites - Case Study and Benefits of Niche Websites


Niche Offer Website Service


Discover new Marketing Opportunities here - Be Inspired!


How 'Marketing Necessity' will always accelerate your business to unexpected highs


Find your 'Marketing Mojo' here



______________________


Sales & Marketing Tips

_____________________


Why promoting your business is an Owner's Responsibility alone


Sales & Viewings Presentations


Marketing Keys that will grow your business - explained


Time Management Manual - bed-time reading; my free booklet on Time Management




Back to content