Words of Wisdom: Sally Healy

There are a lot of books about business out there in the world. I haven't found many that I can actually use (or, admittedly, understand) for a massage therapy practice.

However, I recently met a book I'm enjoying reading! I've gotten involved in a women's publishing network here (which I am really going to miss!). The leader, Bev Ryan, was the project manager for "Women on Top: Against the Odds" by Terri Cooper and Sally Healy. The book profiles 11 women who have built successful independent businesses and talks about the lessons they have to offer. Most of these businesses started out as small, often home-based, businesses so there are lessons I'm taking away from each of them.

I'd like to share great quotes from the book along the way. Today we start with Sally Healy. She built Jigsaw Consulting Group, "a market leader in delivering professional and personalised recruitment, training, and coaching strategies."

I had a clear picture of what the business looked like although I struggled to put it into words. Rather than get hung up about the lack of a plan I decided to let the business unfold naturally, which may have been naive, however it allowed me to be very client-driven. Friends and professional alike advised me to make a business plan and stick to it. I disagreed with that philosophy and still believe that if you follow the exact path your business plan mapped out you may miss critical opportunities you might otherwise have embraced.

Now, if you've read this blog for long you know that I am a big proponent of the business plan. Yet I found great wisdom in what she has to say.

A business plan helps us get clear with what we're trying to do -- what are we doing, why are we doing it, what it's going to cost, our organization, and what steps to take to move forward -- but a business plan is not Truth In All Its Majesty. The most valuable part of the business plan, the part you should never ignore, is not the financials or the organizational strategy or the competitive analysis. The most important parts of a good business plan are the mission and vision statements.

If you stay true to your mission and your vision, then the specifics (including the financials, competitive analysis, etc.) can be very flexible. You have to be able to adapt as you discover what really works and doesn't work but you do need to stay focused on why you're doing what you're doing and what you hope to accomplish. Both of those truths (Truths?) are contained in well-constructed mission and vision statements.

A few more good quotes from Sally:

On working from home: Client calls sometimes happened in my walk-in-wardrobe [closet for you non-Aussies] to escape the household noise.

On developing a brand: A brand is not just a logo, nor is it an arm of your marketing strategy. It represents your business ethics, personality, values and tone of voice. It creates customer loyalty and market positioning.

On when to get started: Don't wait for things to be right in order to begin. Change is chaotic. Things will never be just right. As Teddy Roosevelt once said, 'Do what you can, with what you have, where you are right now.'

On the role of passion in business: I believe that passion is the competitive advantage that an organisation can't buy. Passion fills us with energy and enables us to perform at our peak and that is infectious. Embrace it, revel in it and use it to stand apart. Follow your heart and not the crowd.

On competition: 'It's a cut-throat world, where serious business means competing for market share to survive. We watch our competitors closely to ensure we have the upper hand.' This competitive outlook is the conventional view of the world of marketing. It's based on the mentality of lack, on the belief that there are a limited number of clients for your services. Of course competition is healthy, but if we are willing to get past the essence of rivalry there is much to be gained from collaboration. The key to success is keeping an open mind and willingness to learn and share knowledge. You are more likely to succeed if you go into a collaboration with that frame of mind.

On growing your practice: 'Grow or die' has been an unquestioned presumption of executives, business schools and journals that I have avidly devoured. I made the mistake of recruiting a bigger team and taking bigger premises without doing what I call a risk audit...Growing too quickly can stress people, processes and quality controls...Growth occurs well when the risks of growth are properly managed. If not, it can be harmful.

On contracts: A signed contract is simply a piece of paper with words on it. What's behind a signed contract is a relationship. If the relationship breaks down, the contract won't save you...Once you are at the stage of resorting to what's written on the contract, the arrangement is already in trouble.

On intuition vs. logic: If you base all your business deals on logic and disregard your intuition, you will most likely regret it.

Biz Plans Demystified

We all know business plans are "good things", in general. But I'm willing to bet that most of us don't have one. They seem so daunting and that's before we actually look at them! Once we look at what a standard business plan includes, most of us just want to lie down and take a nap. A long nap.

Executive summaries. Sales plans. Supply chains. Competitive analysis. Communication plans. Exit strategies. Inventory management. Accounts receivable. Accounts payable. Break even analyses. Sales projections.

And that's just a sampling!

It's worth it to get a general idea of each section of a standard business plan, even if you're not going to write a standard business plan. If you understand the purpose of each section and get a general idea of what all those terms mean, you can start to customize a standard business plan to suit your own purposes.

This book does a pretty good job of explaining the different parts of a standard business plans: Business Plan In A Day. I know there are others, though there are a lot a lot of references that assume you understand all these terms and references.

Using a reference like that, you can scale down a standard business plan to something you will actually understand.

If you want to go a step further, you can abandon the standard business plan completely! (This only works if you're writing a biz plan for your own purposes and not because you're trying to get financing. If you want financing, you've got to work with some form of a standard business plan.) If you are using a business plan mostly to clear up your own thinking and set some goals for yourself, I recommend you look at alternative business plans.

The one that I use (and I've even customized that) is the One Page Business Plan, explained by Jim Horan in his book of the same name. The first time I wrote a business plan, I used this book. It took me three solid days of work the first time. Since then, I update it every January. It takes me one day now to review the last year, plan for the coming year, and update the biz plan.

Because it is literally one page, I'm not overwhelmed by the process. It's so much more manageable. I can also tack it to the wall above my laptop so I've got a visual reminder of my goals and objectives for the year every day.

One-page may not be the answer for you but don't be afraid to create what you need. The most important aspect of a business plan, like the most important aspect of a business card, is that it exists. The brilliant plan that you're going to write....one of these days.....is worth far less than a goofy irregular plan that you've actually written.

I've got a business plan that I've customized for massage therapists. I intend to start offering a workshop next year walking people through this business plan. If you're interested, keep an eye on my website to see when it's next going to be offered.

How's Business?

For many of us, the financial health of our practice comes down to “can I pay my bills?” That is an excellent baseline measurement of business health, I admit. Sometimes, though, it’s helpful to have a deeper picture of the financial health of our practices.

Big corporations use a raft of financial reports to do just that. Most of those reports, however, either don't make sense for the kind of businesses we’re running or they’re answering questions we don’t generally ask. There are three common financial reports that I do think are useful to massage therapists and they answer three fundamental questions:

• How much is my practice worth?
• Is my practice actually profitable (how much money am I really making)?
• Do I have enough cash to pay my bills?

How Much Is My Practice Worth?

Are you wondering if you could sell your practice? Do you need to take out a loan for your business? Are you curious if you’re practice is worth more than it was when you started? Then you need a balance sheet.

A balance sheet shows you how your business is doing on any given day. To create a balance sheet, you list all your assets, list all your liabilities, and see what the difference is. The difference is your “net worth”.

Your assets include things you can convert to cash: cash (obviously), the money in your business bank accounts, any money that is owed to your practice, any inventory that you have waiting to be sold, and expenses you’ve pre-paid (rent, for example), reference books, and (probably our biggest category) office and massage equipment (massage table, CDs, linens, laptops, printers, etc.). If you ever added all this up, you may be surprised how many thousands of dollars you have in assets.

Your liabilities are things like the balance on business loans, taxes you will need to pay for this quarter, outstanding bills, and (one that we don’t always think about) outstanding gift certificates and packages. In short, liabilities represent money or services you still owe.

Balance sheets are particularly valuable for comparison. That is, if you generated a balance sheet for the last day of 2010 and another one for the last day of 2011, you could see if your net worth went up over the course of 2011.

Is my practice actually profitable (how much money am I really making)?

We become massage therapists to help people but we also want to make money at it. It’s good to have some cash in our pocket but is our practice actually supporting itself? Are we making more than we’re spending? How much more?

To learn that, you want to create an income statement (it’s also known as a Profit and Loss statement). The income statement lists all the money you made in a period of time (usually a month, quarter, or year) and then lists all your expenses for that same time period. Hopefully, the income is more than the expenses! That’s called your profit.

If you do your bookkeeping through a program like Quicken or Quikbooks, the software can easily create this report for you. If you do your bookkeeping in something like Excel or on paper, it’s just a matter of adding up the columns.

This may sound suspiciously like the Schedule C you fill out for your annual income tax return. It is very close to your schedule C. In fact, I usually create an income statement to help me fill out my schedule C.

Like the balance sheet, it’s especially helpful when you want to compare one time period to another. Did you make more money in the 1st quarter or the 2nd quarter of 2011? Was 2010 or 2009 more profitable for you?

Will I Have Enough Cash to Pay My Bills?

We usually know how much cash we have right now because our clients pay as they go. Cash flow can be a challenge for us, though, if we sell a lot of gift certificates or packages. What happens if most of our clients in one week pay with gift certificates? We don’t end up making much money that week!

A cash flow report helps us anticipate periods of low income or high expenses. There may be software that helps with this but I find it to be mostly a pencil-n-paper exercise (though I keep mine in Excel). List the months of the year and write down the big expenses you know you’ve got coming up. As much as you can, put them in the month you think they’ll occur. Common examples would be:

• License renewals
• Professional society membership renewal
• Conventions and continuing education (and associated travel expenses)
• Vacations
• Quarterly taxes
• New office equipment (laptop, iPod, cell phone)
• New massage equipment (tables or chairs in particular)
• Gift-giving crunches (like Christmas or, in my family, October!)

This list gives you an idea of your cash outflow.

How do you figure out what your normal monthly inflow is; that is, how much money do you usually make in a month? Take a look at your monthly income for the last year if you haven’t been in practice very long. Notice the highs and lows in your income. That will give you a general idea. If you’ve been in practice a couple of years, it’s worth it to run an income statement for several years, broken down by month. Then you can see what your average monthly income is over several years or you can start to notice whether some months are consistently low or high income months.

Sounds like a lot of work? It’s absolutely worth it if you’re the kind of person who is regularly uncertain / uncomfortable about having enough money to pay your upcoming bills. Putting it down in writing at least gives you a more concrete idea of what you’ll need.

When you need to know how you’re really doing as a business, these three reports can provide you a wealth of valuable information.