Business Building Tools

It’s important to know PAEI Personality Styles *. Each of us brings our personality to work with us every day and it influences how we see the world, problem solve, and interact with others. It’s also the root of most organizational problems and conflict. When we understand personality styles, we can work better as a team, provide greater customer satisfaction, and get to the sale quicker!

PAEI*, developed by Ichak Adizes of the Adizes Institute, is similar to Meyers Briggs, DISC, and many other tools that are available. Our Founder, Ernest Lewis. is a certified Lecturer of PAEI Management Styles and has been presenting and sharing PAEI with his clients for nearly thirty years. We use PAEI because it’s a little easier to learn, quicker, and more intuitive. And, in the workplace, we don’t need to know everyone’s style to the nth degree. We simply need to know each other’s tendencies so we can better understand and work better together. That’s the key!

There are four fundamental styles in each of us. We typically are stronger in one or two and weaker in the others. Here are brief descriptions of the four styles.:

PAEI Summary

Four Key Management Styles/Roles

Producer (P)

Producers like to do things. They like to stay busy and get things done. Their primary purpose in life is to produce. How do we recognize Producers? Their desks are covered with stacks of “stuff.” They are so busy doing the work they do not have time to file “stuff” away. If you open their file cabinets, the drawers are empty. They have no time for filing. No time for meetings. No time for anything new. They only have time for producing. Producers arrive to work early. They are the last to leave at the end of the day. Have a problem or a fire to put out? Give it to a Producer.

Administrator (A)

Administrators focus on being organized. They make sure we’re doing things in an orderly manner, correctly, and by the book.  Administrators like rules, policies, and systems. If there are none, the Administrator will make some. When we look at an Administrator’s office space, we see a spotless desk with only the bare essentials and everything in its place. If someone moves the stapler when the Administrator is not looking, he will ask: “Who’s been messing with my stuff?” The file cabinets are full. Each and every file is alphabetized and color-coded. The drawers are labeled with clear and concise descriptions of the contents. Administrators have no time for unplanned spontaneity. They arrive to work on time. They leave work on time. Need to talk to an Administrator? Schedule a meeting.

Entrepreneur (E)

Entrepreneurs are visionaries and risk takers. They consider and develop ideas of what to produce in the future. They are high in energy and never sit still long enough to finish a conversation let alone an entire project. When we look at an Entrepreneur’s office, we see a desk with a layer of dust on everything. Where is the Entrepreneur? Out starting a new project. Never mind that the last project is not finished: “Just give that to the Producer.” There are newer and better opportunities to seek. Need to speak to the Entrepreneur? You have to find him first.

Integrator (I)

Integrators make sure we’re getting along and that everyone is involved. They are great team builders as well as listeners. Have a problem? The Integrator has time to listen to help you solve it. In the extreme, integrators don’t like to rock the boat. “Never make waves” could be their motto. Integrators are so in to integrating they have difficulty making decisions by themselves. They will first ask what you want then they will order the same thing.

We use PAEI Personality Styles* with all of our clients. Once employees start to learn the styles, they can see how they are wired and how the people around them are wired, and almost immediately they realize why “they” do what they do. With that realization comes understanding. improved communication, and better teamwork.

Would you like your team to perform at a higher level? Give Us a Call to do PAEI and start to take your team to new heights!

 

* PAEI Management Styles by Ichak Adizes, The Adizes Institute, Inc.

Are you experiencing employee performance problems?

If so, you might want to tackle the issue by first looking at the area of expectations and feedback with the Coaching Analysis Diagram. Most employees want to do a good job. But when we investigate performance issues, we often find that performance expectations aren’t clearly defined and that employees aren’t given the right feedback to help them do a better job.

Therefore, complete and timely performance evaluations with performance goals and guidelines are a must. And just as importantly, you need to consider performance accountability as a major factor in employee success.

One useful tool you can use is the Coaching Analysis by Ferdinand Fournies, author of Coaching for Improved Work Performance. The analysis is a simple series of questions that help you walk through the steps to objectively analyze a situation and correctly identify the problem area and resolve the issue. It also provides you with a structured approach that considers expectations, feedback and accountability.

The Coaching Analysis Diagram

Use the Coaching Analysis Diagram below to resolve performance issues. Start at the top of the chart and work your way down the list.

Below are a few conflict resolution tools that can help you manage conflict as well as minimize the possibility of conflict.

Staying Cool in the Clutch

Getting comfortable being uncomfortable – Through simulations, you can imagine your way to success and make the unfamiliar, familiar.

• Focus on what you can control; how you play the game rather than winning or losing
• Write down one to three goals that you want to accomplish that will increase your chance of success, process not outcome related, specific, controllable, positive.
• Share them with someone as you commit to your goals.
• Put the paper inside your shoes, pockets, or somewhere close.
• When the game or task is over, read your goal and know you held to your commitment.

Cooling Off Hotheads

Be aware of threatening situations and plan how to handle irate individuals.

• Stand or sit slowly and calmly.  Listen attentively and do not interrupt.
• Be polite and listen attentively, let them vent.  Call your backup person or security.
• Acknowledge how important the issue is and reflect it to them “Here’s what I heard you say…is that correct?”  Then offer choices “Here’s what we can do…”
• Re-explain what you will do with a follow-up time and place as you escort them to the door or the appropriate person for help.
• End the conversation politely.
• Report and document the event.

Mediating Conflict

Start with the Conflict Resolution Covenant: “We agree to…”

• Attack the problem not each other.
• Focus on things we can do.
• Not place blame.
• Collect the facts.
• Own our problems.
• Listen to understand.
• Take the time we need.
• Encourage and respect each other and our ideas.

Prepare:  Gather the facts, be neutral, and relate the problem to performance.

• Start by stating the problem as a mutual one to be solved, not a win-lose struggle.  Get agreement on this before continuing.
• Ask each person to share his version of the problem, stating only the facts.
• Ask each person to state the other person’s viewpoint.
• Ask each person to confirm the accuracy of the restatement
• Ask each person to suggest a solution…negotiate.
• Ask each person to restate their agreement.
• Schedule a follow-up meeting

Tough Love

Help employees cope in the workplace – Employees bring two types of problems:

Personal Problems: Let the employee vent. Just be a sounding board for them to say what they need to say. Beware that too much time here will enable a victim mentality. Let them say what they need to say, then it’s back to work.

Performance Problems: Listen, collect data, ask for solutions, and offer resources. When work is not getting done, you need to understand why. Listen to what they have to say, identify the level of performance and any roadblocks they may be experiencing. Then you can effectively start to look for solutions.

Maintain the Three R’s of Good Management
Resist: Resist the urge to offer advise right away.  Help them grow through discovery.

Resources: Build knowledge and skills through training and development opportunities.

Refer: Use other and better sources of help and support.

Improve Your Listening Skills

• Develop an active listening posture.
• Eliminate annoying habits.
• Keep your emotions in check.
• Ask questions.
• Don’t jump to conclusions.
• Try to stay focused.

Inhibitors To Listening

• People don’t always say what they mean.
• People don’t always understand their own feelings.
• It’s sometimes difficult to put into words.
• The same words have different meanings for different people.
• We sometimes hear only what we want to hear.
• People are thinking about what they are going to say next.

W Edwards Deming was the father of the quality revolution that swept the world. Deming’s 14 Points of Management was developed in the 1950’s. It was Deming’s teachings on Quality and Statistical Quality Control, that helped Japan rebuild its manufacturing base after World War II. By 1954, just four years after starting to rebuild, Japanese industry started to impact the world economy.

14 Points of Management

Source: W. Edwards Deming, Out of the Crisis1982, MIT CAES.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.

3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.

8. Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.

10. Eliminate slogans, exhortations, and targets for the wok force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

11. Eliminate work standards (quotas) on the factory floor. Substitute leadership. Eliminate management by objective. Eliminate management by numbers, numerical goals.

12. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

Role of a Manager

Source: W. Edwards Deming, The New Economics, 1993, MIT CAES.

1. A manager understands and conveys to his people the meaning of a system. He explains the aims of the system. He teaches people to understand how the work of the group supports these aims.

2. He helps his people to see themselves as components of a system, to work in cooperation with preceding stages and with following stages toward optimization of the efforts of all stages toward achievement of the aim.

3. A manager of people understands that people are different from each other. He tries to create for everybody interest and challenge, and joy in work. He tries to optimize the family background, education, skills, hopes, and abilities of everyone.

4. He is an unceasing learner. He encourages his people to study. He provides, when possible and feasible, seminars and courses for advancement of learning. He encourages continued education in college or university for people that are so inclined.

5. He is coach and counsel, not a judge.

6. He understands a stable system. He understands the interaction between people and the circumstances that they work in. He understands that the performance of anyone that can learn a skill will come to a stable state – upon which further lessons will not bring improvement of performance. A manager of people knows that in this stable state it is distracting to tell the worker about a mistake.

7. He has three sources of power: 1. Authority, 2. Knowledge, 3. Personality and tact.

A successful manager of people develops Nos. 2 and 3; he does not rely on No. 1.

8. He will study results with the aim to improve his performance as a manager of people.

9. He will try discover who if anybody is outside the system, in need of special help.

10. He creates trust. He creates an environment that encourages freedom and innovation.

11. He does not expect perfection.

12. He listens and learns without passing judgment on him that he listens to.

13. He will hold an informal, unhurried conversation with every one of his people at least once a year, not for judgment, merely to listen. The purpose would be development of understanding of his people, their aims, hopes, and fears. The meeting will be spontaneous, not planned ahead.

14. He understands the benefits of cooperation and the losses from competition between people and between groups.

A complicated name but a simple tool with lots of value! Determining priorities can often be difficult. It is not always clear as to where our true or most critical problems are. The ID can help:

1) Place the issues or tasks you face in a circle.

2) Compare each issue with every other issue.

3) In each case, draw an arrow from the issue that is the greater influence over the other.

Example: “Does customer service influence sales more or sales influence customer service more?” Most would answer customer service has the greater influence. So, draw an arrow from customer service to sales. If no clear relationship exists, no arrow is required.

4) Total all outgoing arrows and incoming arrows for each issue as X out / Y in.

Issues with more outgoing arrows are called drivers or root causes. 

Applying your time and energy on a driving issue will resolve the issue and alleviate other issues, at the same time, for maximum benefit. In our example, the major driving issues are Planning and Customer Service. And it shows Profit as a result. Try it out!

Here are several time management tools and philosophies. Remember, it’s not about managing time but about managing yourself and how you use your time.

The Just Do It Now Philosophy

• Learn to manage yourself in time
• Define your priorities, set specific goals and stop procrastinating
• Understanding First Things First
• Critical skills for effective time use
• The Twelve Strategies for effective time use
• Avoid management by crisis

PERSONAL TIME MANAGEMENT

Time is a unique resource that everyone has an equal amount of:  24 hours in each and every day. More importantly, once it’s gone, it’s gone for good. This means, time management is a misnomer. What we really need to do is manage ourselves as we use our time.

Some Basic Concepts

Define Your Priorities

What you determine to be important will naturally be where you spend your time each day. The trouble is, most of us fail to determine what is important in our lives and we spend time where it is easy, not important. The important things take a little bit of thought and effort, which is often why we tend to not do them in the first place.

List the top five things that will make your life meaningful.

1.

2.

3.

4.

5.

These five priorities are the areas where you can more effectively use your time. Knowing these will help you prioritize tasks on a daily basis. When you have too many tasks, you can select tasks that match your priorities and more easily say “no” to those tasks that don’t fit.

Work on those tasks that make a difference. Separate needs from wants. Needs should come first. Wants, busy work, and low priority tasks should come later or not at all.

Don’t forget yourself. Include time alone, exercise, spiritual development, etc. as priorities. If you don’t take care of yourself, you can’t take care of anyone else.

Set Specific Goals
Goals give you direction and a target to shoot for. Writing down your goals increases the probability you will achieve them. Use SMART goals.

SPECIFIC
Goals should be specific.  i.e. “I am going to lose weight,” is a vague and ambiguous target, whereas “I am going to lose 10 lbs this year,” is more definitive which means you will have a better idea of what to do to get there.

MEASURE-ABLE
Set goals where you can measure your performance and track your progress.

ATTAINABLE
Set goals that are achievable. You want goals that cause you to “stretch” and reach higher but you don’t want goals so high that you always see failure.

REALISTIC
Be realistic of what you want to accomplish. Working on ten to twenty goals for improvement each year probably won’t happen but working on one per month or 2-3 per year are more likely to happen. Also, be able to adjust as you go. If you realize a goal was too high or too low, simply adjust the goal accordingly. Often circumstances beyond our control need to be taken into account.

TIMELY
Put your goals and tasks on your schedule. We schedule meetings and doctor’s appointments because we need to do those things.  We should do the same for the goals we want to achieve. Blocking time in your schedule will help you do the things you need to.

Simple Steps to Personal Time Management

1. Own your time
Say NO when you need to. Assisting and taking care of others is good unless it causes you to be over committed or keeps you from taking care of your own priorities. Look out for the guilt factor. You need not feel guilty for not taking on other people’s priorities!

2. Prioritize
Take care of the important things and the rest will take care of itself.

3. Plan your day
If you are a slow starter, you may do more routine tasks early and schedule the intense work for later. Determine which times of the day are best for you for particular tasks.

4. Block your time
To be more efficient lump similar tasks together. Answer emails in the morning rather than all day long. Open mail at the end of the day. Block large chunks of time to do one type of task or even tackle one big project all at once. You will be more efficient getting more done in less time and be able to concentrate and focus when you need to.

5. Bite-Sizes
Some tasks are overwhelming. Break them down into smaller chunks. Running a marathon is a monumental task especially if you never ran one before. You may need to start by walking. As your strength and endurance increase, you might try a walking and running combination. You get the picture. Small steps lead to great journeys.

6. Delegate
Let others help. That’s what they are there for. They may not do it as well as you could or even do it the same way you would have but they can still get it done. Define the results you expect and make sure they have sufficient skills and knowledge to complete the task.  If they don’t, you need to train them!

7. Develop systems for the routine things
If you need to do it regularly, set up a system that simplifies the effort. Procedures, check lists, filing systems do help. Also, put like things with like things to save time. I once had a client who didn’t understand why getting dressed in the morning took so long. When questioned, she revealed she kept clothes upstairs in the closet, downstairs in another closet and in the basement. She was spending twenty minutes every morning running up and down the stairs. An inefficient use of time and energy!

8. Reward yourself
Build rewards into your goals and tasks. Life should be fun and enjoyable. Stop and smell the roses. Take a vacation. Call a friend and let them say “Well done!”

Emotional Intelligence is important for Effective Teamwork and Effective Leadership

Emotional Intelligence is key for effective leadership and strong teams. Signs you need help with EI include infighting, low morale, overwhelm, and anxiety. Below are some key points to consider if you need to work on emotional intelligence. Some of these can be gained through self-development and especially through our Emotional Intelligence Workshop.

• Assess your emotional intelligence quickly and easily
• Learn what emotional intelligence is and is not
• Recognize and understand the five competencies of emotional intelligence
• Understand the relationship between emotional intelligence and IQ
• Discover the “Must-have” Skills needed in the workplace

Emotional Intelligence

A simple definition of Emotional Intelligence:

Knowing how you feel, how others feel, and what to do about it.

How is your emotional intelligence?  Take this self-test to get a feel for areas you may need or want to work on.

Self-Assessment for Emotional Intelligence

Rank yourself on the following questions using a scale of 1-5, with 5 being more true of yourself.

Low (1) to High (5).

___ People often tell me I am just being emotional

___ I easily cry when I am sad or upset

___ People’s expressions often puzzle me

___ I lose my temper when working with others

___ I often say “I wish I hadn’t done that.”

___ I am often surprised by how people respond

___ People usually know when I am having a bad day

___ I feel misunderstood quite often

___ People usually frustrate me

___ I often don’t understand why I get angry

TOTAL ___

YOUR RESULTS
Your score can range from ten to fifty. In evaluating your score, remember that there is no best or optimum value. This is simply and purely a self-assessment which means that the numbers are relative to you and you alone. The value in this self-assessment is that it allows you the opportunity to evaluate your own situation and well being.

Most participants score between 15 and 30. If you are in that range, it may mean you are pretty normal. If you scored a little lower, it may mean you are pretty well adjusted emotionally. If you scored a little higher, it may mean you have areas to work on for improvement.

In any case, look at your scores for each statement in the self-assessment and ask yourself if that is an area you would like to improve on. Any areas with high (3-5) values may qualify. For example, if you rated yourself a 4 on “People usually know when I am having a bad day,” meaning you tend to freely express your negative emotions to the point of disrupting the office, then this would probably be an area you could work on.

Let’s start with a standard question. Are you self-aware?

Most people would confidently reply with an emphatic, “Yes. I am self-aware!” However, before jumping to any bold conclusions about your self-awareness level, let’s look at some simple facts. According to Tasha Eurich (an organizational psychologist) 95% of people believe that they have self-awareness, but in reality, only 10-15% of people are self-aware. Whether you think you’re self-aware or not, I have some stunning news – statistically speaking, you are not.*

Why do so many people believe they’re self-aware when they aren’t? Because we all have blind spots. And many people think they can see these blind spots when they don’t. In fact, they can’t. Because the very nature of the term “blind spots” indicates extra help is needed to see clearly. This is where self-awareness comes in.

Here’s a hypothetical question I often ask in Team Trainings:

If a banana looks in a mirror, can the banana see its brown spots?

Logically, we know bananas don’t have eyes. Enough said. But hypothetically, if a banana could see, it surely wouldn’t see all its’ brown spots because many of these “spots” are hidden inside, underneath the surface. Where does a banana get its blind spots? Some are genetic, while others appear due to age or bruises developed from injury. Either way, these spots form from the inside out. And there you have it. That’s the overall concept of Emotional Intelligence [EI] – what’s going on inside each of us often surfaces on the outside, though we’re completely unaware. Consequently, we all have blind spots.

What’s going on inside each of us often surfaces on the outside
though we’re completely unaware.

Where do we begin?

Let’s face it. Every day, our thoughts “leak out” through non-verbal communication.

Self-awareness is the necessary first step in EI. Our blind spots (defined as strengths and weaknesses) require both internal and external self-awareness to resolve. Internal self-awareness is knowing my thoughts, emotions, behaviors, and values while understanding how they affect those around me. External self-awareness requires necessary feedback from others to fully understand how my thoughts, feelings, behaviors, and values are portrayed daily to those around me.

Our thoughts are felt in our emotions.
Our emotions are exposed through body language, tone of voice, and posture.
Our behaviors are outwardly exposed to those around us.
Our core values accentuate each of these producing harmonious or dissonant actions.

Why develop self-awareness?

Self-awareness is one of the greatest keys to success in the workplace. Self-awareness not only brings greater happiness, stronger relationships, more success, and overall more purpose driven lives, but studies repeatedly show the most effective and successful leaders to be highly self-aware.

Studies repeatedly show the most effective and successful leaders to be highly self-aware.

Recently, I facilitated a Staff Development at a retail store where one employee shared with me her personal revelation of a major blind spot in which she was unaware. She said, “One day, an employee came up to me and said, ‘You look really mad when you’re creating product displays. I know you’re not an aggressive person, but your focus face looks different than your usual facial expressions.’ She was referring to my resting face. I had no idea! Here I was, on the floor with customers each day with this awful customer service face.” This employee grew in self-awareness because she was willing to receive external feedback from her employee to increase self-awareness. Working on teams is one of the best environments to understand our blind spots because whether we’re aware or not, they clearly see them each day.

How do I increase self-awareness?

Here’s where you can start.

1. Pay attention to your behavior throughout the day and how it affects others.
2. Check in with yourself periodically to identify your feelings and thoughts.
3. Ask someone you trust for feedback on your nonverbal communication style.
4. Learn your strengths and weaknesses by asking those you trust.
5. Don’t deny or minimize your weaknesses (we all have them). Problem solve instead.

“A workplace that encourages self-awareness is an environment where the most productive, curious, and innovative people thrive.” Neil Blumenthal

How does increased self-awareness grow your business?

In short, we are communicating our blind spots every day through our interactions with others. How? 93% of communication consists of non-verbals and 7% is our actual words.

Communication creates culture. Self-awareness sets the tone for organizational culture
subsequently producing toxic or healthy workplaces. A healthy culture consists of good
communication improving team cohesion, performance, customer satisfaction, employee
retention rates, and overall productivity. Each of these greatly affects our bottom line.

Let’s end with that question. Are you self-aware? No matter where you fall on the continuum, self-awareness is a skill that can be discovered and built. Inertia brings momentum, propelling you and your team forward to the next level.

Contact Coach Christy if you would like a little help working on your self-awareness!

*https://www.forbes.com/sites/jeffkauflin/2017/05/10/only-15-of-people-are-self-aware-heres-how-to-change/

Basics for Small Businesses: Top 5 Things to Watch

Managing money is very important for small businesses to thrive. Here are five key financial areas that every small business owner should keep an eye on with the basic formulas outlined and examples to illustrate. Be sure to work with your accountant and financial advisor when creating and analyzing your financials for projections and decision making.

Cash Flow

Cash is king! Cash flow is like the blood flow of a business. It shows how much money is coming in and going out. It’s important because it tells you if you have enough money to pay bills, invest back into the business, and handle unexpected costs without borrowing money.

A cash flow statement shows where money is coming from and going to in a business over a specific period. Here’s a basic breakdown in layman’s terms:

Formula Components

1. Cash Inflows (Money In):
   • Operating Activities: Cash received from sales of goods or services.
   • Investing Activities: Cash received from selling assets or investments.
   • Financing Activities: Cash received from loans or investors.
2. Cash Outflows (Money Out):
   • Operating Activities: Cash spent on expenses like rent, utilities, and salaries.
   • Investing Activities: Cash spent on buying assets or investments.
   • Financing Activities: Cash spent on repaying loans or distributing profits to shareholders.

Basic Formula

To find the net cash flow, you subtract the cash outflows from the cash inflows.

Net Cash Flow = Cash Inflows – Cash Outflows

Example

• Cash Inflows from Operating Activities: $10,000 (from sales)
• Cash Outflows for Operating Activities: $5,000 (for expenses)
• Cash Inflows from Investing Activities: $2,000 (from selling equipment)
• Cash Outflows for Investing Activities: $1,000 (to buy new equipment)
• Cash Inflows from Financing Activities: $3,000 (from a loan)
• Cash Outflows for Financing Activities: $1,500 (loan repayment)

Net Cash Flow:

• Operating: $10,000 – $5,000 = $5,000
• Investing: $2,000 – $1,000 = $1,000
• Financing: $3,000 – $1,500 = $1,500

Total Net Cash Flow = $5,000 + $1,000 + $1,500 = $7,500

This means your business has $7,500 more in cash at the end of the period than it did at the beginning.

Profit and Loss

Also known as an income statement, this is a report that shows if your business is making money or losing it over a certain period. It lists your income and what you spend (like costs and expenses). This helps you understand how well your business is doing and is also used when doing your taxes.

Basic Formula

The basic formula for a profit and loss statement is:

Profit (or Loss) = Total Revenue – Total Expenses

Components

1. Total Revenue (Money In):
   • This includes all the money your business earns from selling goods or services.
2. Total Expenses (Money Out):
   • This includes all the costs your business incurs, such as rent, salaries, utilities, and cost of goods sold.

Detailed Breakdown

1. Gross Profit = Revenue – Cost of Goods Sold (COGS)
   • Revenue is the total money earned from sales.
   • COGS is the direct cost of producing or purchasing the goods that were sold.
2. Operating Expenses:
   • These are regular costs of running the business, like rent, utilities, salaries, and marketing.
3. Operating Profit = Gross Profit – Operating Expenses
   • This shows the profit from the core business activities before accounting for taxes and interest.
4. Net Profit (or Loss) = Operating Profit – Interest and Taxes
   • This is the final profit or loss after all expenses have been deducted.

Example

Let’s say you have a small bakery. Here’s a simple profit and loss statement for one month:

1. Revenue:
   • Sales from bakery products: $10,000
2. Cost of Goods Sold (COGS):
   • Ingredients for baking: $3,000

Gross Profit = Revenue – COGS

• Gross Profit = $10,000 – $3,000 = $7,000

3. Operating Expenses:
   • Rent: $1,000
   • Utilities: $300
   • Salaries: $2,000
   • Marketing: $200
   • Miscellaneous expenses: $100

Total Operating Expenses = $1,000 + $300 + $2,000 + $200 + $100 = $3,600

4. Operating Profit = Gross Profit – Operating Expenses

• Operating Profit = $7,000 – $3,600 = $3,400

5. Interest and Taxes:
   • Interest on loan: $100
   • Taxes: $400

Total Interest and Taxes = $100 + $400 = $500

6. Net Profit = Operating Profit – Interest and Taxes

• Net Profit = $3,400 – $500 = $2,900

Final Result:

• The bakery made a profit of $2,900 for the month.

Summary

• Revenue: $10,000
• COGS: $3,000
• Gross Profit: $7,000
• Operating Expenses: $3,600
• Operating Profit: $3,400
• Interest and Taxes: $500
• Net Profit: $2,900

This means that after accounting for all income and expenses, the bakery has $2,900 left as profit for the month.

Balance Sheet

The balance sheet is a snapshot of what your business owns (assets), what it owes (liabilities), and what’s left over for the owners (equity) at a specific time. This helps you see if your business is financially healthy and helps you make decisions about things like taking on debt or investing in new projects.

Basic Formula

The basic formula for a balance sheet is: Assets = Liabilities + Equity

Components

1. Assets: These are things the business owns that have value. They can be current assets (easily converted to cash within a year, like cash or inventory) or non-current assets (long-term investments like property or equipment).
2. Liabilities: These are debts or obligations the business owes to others. They can be current liabilities (due within a year, like accounts payable) or non-current liabilities (long-term debts like loans).
3. Equity: This represents the owner’s stake in the business. It includes things like the initial investment and retained earnings (profits that are kept in the business rather than paid out).

Detailed Breakdown

1. Current Assets:
   • Cash: Money in the bank.
   • Accounts Receivable: Money owed by customers.
   • Inventory: Goods available for sale.
2. Non-Current Assets:
   • Property, Plant, and Equipment: Long-term investments like buildings and machinery.
3. Current Liabilities:
   • Accounts Payable: Money the business owes to suppliers.
   • Short-term Loans: Loans that need to be paid back within a year.
4. Non-Current Liabilities:
   • Long-term Loans: Loans that will be paid back over several years.
5. Equity:
   • Owner’s Investment: Money invested by the owner.
   • Retained Earnings: Profits that have been reinvested in the business.

Example

Let’s say you own a small bakery. Here’s a simple balance sheet for a specific date:

Assets

1. Current Assets:
   • Cash: $5,000
   • Accounts Receivable: $2,000 (customers owe you this money)
   • Inventory: $3,000 (value of ingredients and baked goods)

Total Current Assets = $5,000 + $2,000 + $3,000 = $10,000

2. Non-Current Assets:
   • Equipment: $8,000 (baking ovens and other equipment)
   • Building: $50,000 (property value)

Total Non-Current Assets = $8,000 + $50,000 = $58,000

Total Assets = Total Current Assets + Total Non-Current Assets

• Total Assets = $10,000 + $58,000 = $68,000

Liabilities

1. Current Liabilities:
   • Accounts Payable: $2,500 (money owed to suppliers)
   • Short-term Loan: $1,000 (due within a year)

Total Current Liabilities = $2,500 + $1,000 = $3,500

2. Non-Current Liabilities:
   • Long-term Loan: $20,000 (loan for equipment)

Total Non-Current Liabilities = $20,000

Total Liabilities = Total Current Liabilities + Total Non-Current Liabilities

• Total Liabilities = $3,500 + $20,000 = $23,500

Equity

1. Owner’s Investment:
   • Initial Investment: $30,000
2. Retained Earnings:
   • Retained Profits: $14,500

Total Equity = Owner’s Investment + Retained Earnings

• Total Equity = $30,000 + $14,500 = $44,500

Putting It All Together

Assets = Liabilities + Equity

• $68,000 = $23,500 + $44,500
• Assets: $68,000 (everything the bakery owns)
• Liabilities: $23,500 (everything the bakery owes)
• Equity: $44,500 (the owner’s stake in the bakery)

This simple example illustrates how a balance sheet provides a snapshot of a business’s financial position, showing what it owns, what it owes, and the owner’s stake.

Accounts Receivable and Payable

Accounts Receivable (AR):

• What it is: This is the money your customers owe you for goods or services you’ve provided but haven’t been paid for yet. Think of it as IOUs from your customers.
• Example: If you run a bakery and deliver $1,000 worth of cakes to a restaurant, and they promise to pay you in 30 days, that $1,000 is your account receivable.

Accounts Payable (AP):

• What it is: This is the money you owe to your suppliers or creditors for goods or services you’ve received but haven’t paid for yet. It’s your business’s IOUs to others.
• Example: If you buy $500 worth of flour from a supplier and promise to pay them in 30 days, that $500 is your account payable.

Tips for Managing Accounts Receivable

1. Set Clear Payment Terms:
   • Decide when you expect to be paid (e.g., within 30 days) and make sure your customers know this upfront.
2. Invoice Promptly:
   • Send out invoices as soon as you provide a service or deliver goods. The sooner you invoice, the sooner you get paid.
3. Follow Up on Late Payments:
   • Keep track of who owes you money and follow up with reminders if they’re late. Polite but firm reminders can help ensure you get paid on time.
4. Offer Discounts for Early Payments:
   • Encourage customers to pay early by offering a small discount. For example, a 2% discount if they pay within 10 days instead of 30.
5. Use an Accounting System:
   • Use software to track who owes you money and when it’s due. This helps you stay organized and avoid missing out on payments.

Tips for Managing Accounts Payable

1. Track Your Bills:
   • Keep a list of all your bills and their due dates. This helps you avoid missing payments and incurring late fees.
2. Prioritize Payments:
   • Pay essential bills first, like rent and utilities, followed by suppliers. Make sure to prioritize based on payment terms and importance to your business.
3. Negotiate Payment Terms:
   • Talk to your suppliers about extending payment terms if you need more time. For example, asking to pay in 45 days instead of 30 can help with cash flow.
4. Take Advantage of Discounts:
   • Some suppliers offer discounts for early payments. Paying early can save you money in the long run.
5. Avoid Overdue Penalties:
   • Paying bills on time helps you avoid late fees and keeps your suppliers happy, which is crucial for maintaining good relationships.

By keeping track of who owes you and who you owe, and by managing payments and collections efficiently, you can maintain a healthy cash flow, which is essential for the success of any small business.

Budgets vs Actuals

Comparing your planned budget with what actually happens is a good way to keep your finances in check. It helps you spot where you’re spending more or less than expected. Reviewing your budget regularly helps you make smart choices and reach your financial goals.

Budgeting:

• What it is: A budget is a plan that outlines how much money you expect to make and spend over a certain period, such as a month or year. It’s like a financial roadmap for your business.
• Example: If you plan to earn $10,000 from sales next month and expect to spend $6,000 on rent, salaries, and supplies, those figures are part of your budget.

Actuals:

• What it is: Actuals are the real numbers showing how much money you actually made and spent during that period. It’s the reality compared to what you planned in your budget.
• Example: If at the end of the month, you actually made $9,000 and spent $7,000, those figures are your actuals.

Importance of Comparing Budgeting to Actuals

• Why compare: Comparing your budget to your actuals helps you see if you’re on track, overspending, or not making as much as you expected. It’s like comparing your financial goals with your financial reality.
• Example: If you budgeted $10,000 in sales but only made $9,000, you know you need to find out why sales were lower and make adjustments for the future.

Tips for Managing Budgeting vs. Actuals

1. Create Realistic Budgets:
   • Make sure your budget is based on realistic expectations. Look at past performance and current market conditions to make informed estimates.
2. Track Your Actuals Regularly:
   • Keep a close eye on your actual income and expenses. Record them accurately and frequently, ideally every week or month, to stay on top of your financial situation.
3. Compare Regularly:
   • Compare your actuals to your budget regularly. Monthly comparisons are a good start. This helps you spot any discrepancies early and address them promptly.
4. Analyze Variances:
   • If you notice differences between your budget and actuals, analyze why they occurred. Did you spend more on supplies? Did you have fewer sales? Understanding the reasons helps you make better decisions.
5. Adjust Your Budget as Needed:
   • Be flexible. If your actuals consistently show that you’re spending more or earning less than planned, adjust your budget accordingly to reflect the new reality.
6. Set Aside a Contingency Fund:
   • Include a buffer in your budget for unexpected expenses. This helps you handle unforeseen costs without disrupting your financial plans.
7. Use Accounting Software:
   • Use software to track and compare your budget and actuals. This makes it easier to see where you stand and to make necessary adjustments.
8. Plan for Seasonal Changes:
   • Consider seasonal fluctuations in your budget. For example, if you run a retail store, budget for higher sales during holiday seasons and lower sales during off-peak times.
9. Get Team Input:
   • Involve your team in the budgeting process. They might provide insights into expected costs or revenue that you hadn’t considered.
10. Review and Learn:
    • Regularly review your budget and actuals to learn from past mistakes and successes. This helps you create better budgets in the future and improves financial planning.

Showing appreciation at work isn’t just a nice thing to do, it’s a powerful way to help employees feel good and do their best. When people know they are valued, they work harder, perform better, and stay at the company longer. Appreciation builds trust, brings people closer, and creates a workplace where everyone feels safe and important. By regularly noticing and praising both big accomplishments and everyday efforts, leaders can build an environment that encourages trust, respect, teamwork, and a shared sense of purpose.

1. Personalized Thank-You Notes – Write a heartfelt note that specifically mentions what the employee did and why it made a difference.
2. Public Acknowledgment – Recognize accomplishments during team meetings or company-wide announcements.
3. Employee of the Month – Create an award highlighting one person’s standout achievements.
4. Team Celebration – Host a small event, such as a lunch or happy hour, dedicated to celebrating a recent project success.
5. Spotlight on Internal Channels – Dedicate a blog post, newsletter section, or intranet feature to share an employee’s story.
6. Peer Recognition Programs – Encourage coworkers to nominate one another for exemplifying company values.
7. Mentoring Opportunities – Offer valuable growth opportunities by pairing employees with mentors they admire.
8. Leadership Development – Invest in courses and seminars that help employees develop leadership and management skills.
9. Professional Conferences – Reward employees by sending them to industry events or conferences to gain new insights.
10. Certificates or Plaques – Create tangible awards for milestones like work anniversaries or reaching a particular goal.
11. Shout-outs on Social Media – Celebrate employees and their achievements on the company’s official social media channels.
12. Early Dismissals – Surprise high-performing employees with the gift of time—an early end to their workday.
13. Personalized Gifts – Give small, thoughtful presents based on employees’ interests (e.g., a favorite book or coffee subscription).
14. Learning Lunches – Provide lunch and a short workshop on a topic the employee is passionate about, whether it’s job-related or a hobby.
15. Expanded Responsibilities – Show trust by offering new responsibilities or cross-departmental projects that allow them to grow.
16. Casual Dress Day – Treat your team to a relaxed dress code to celebrate meeting a major deadline.
17. Wall of Fame – Create a visible display that highlights top performers and appreciates contributions in real time.
18. Team-Building Outings – Organize enjoyable group activities like sports, escape rooms, or volunteer projects outside the office.
19. Innovation Challenges – Show that you value fresh thinking by creating a contest that recognizes creative solutions.
20. Lunch with Leadership – Invite select employees to a casual lunch with senior executives for more direct interaction and recognition.
21. Flexible Scheduling – Offer flexibility in work hours as a way to thank employees for their dedication.
22. Public Gratitude Board – Keep a physical or digital board where employees can write thank-yous for each other.
23. Gamification Rewards – Implement fun reward systems (e.g., points or badges) for collaborative achievements or learning goals.
24. Skill-Sharing Workshops – Invite employees to host mini-sessions teaching a skill they excel at—recognizing their expertise.
25. Wellness Perks – Provide gym memberships, yoga classes, or mental health resources to show care for employees’ well-being.
26. Surprise Treats – Show up with coffee, pastries, or fruit one morning to brighten the team’s day.
27. Regular 1:1 Check-Ins – Use these sessions to specifically praise progress and accomplishments.
28. Anniversary Celebrations – Mark each year of employment with a thoughtful gesture—cards, small gifts, or a shared moment of recognition.
29. Custom Badges or Pins – Offer unique, collectible tokens that signify different milestones or achievements.
30. Continuous Feedback – Make positive feedback a part of the daily culture instead of waiting for performance reviews.
31. Peer-to-Peer Awards – Let employees create fun awards and give them out to colleagues for day-to-day contributions.
32. Thank-You Videos – Record a short video message from the team or from leadership recognizing a person’s impact.
33. Department Swap – Give employees the chance to shadow a different department for a day, acknowledging their interest in bigger-picture operations.
34. Charitable Donations – Make a donation to a cause the employee cares about in recognition of their hard work.
35. Swag and Merchandise – Offer branded items like hoodies, mugs, or notebooks as tangible forms of appreciation.
36. Stress Relief Sessions – Host short breaks for meditation, breathing exercises, or coloring—showing care for mental health.
37. Milestone Announcements – Send out company-wide emails or messages praising individual or team progress, not just big achievements.
38. Group-Based Recognition – Recognize an entire team that worked collaboratively and emphasize each member’s contribution.
39. Unique Experiences – Provide experiences like a cooking class, museum passes, or nature excursion to celebrate a win.
40. Leadership Notes – Have executive leaders write personal emails or letters praising an individual’s specific contributions.
41. Gift Cards – Whether for coffee, lunch, or a bookstore, a small token can deliver a big message of thanks.
42. Office Decor – Let employees decorate a shared space with personal touches when they’re recognized for a major success.
43. Encourage Autonomy – Allow more decision-making power or project ownership as a show of trust and appreciation.
44. Create Custom Awards – Funny or serious, these can focus on anything from “Best Team Player” to “Most Creative Problem-Solver.”
45. Surprise Half-Day Fridays – Allow employees who have gone above and beyond to leave a few hours early before the weekend.
46. Skill-Specific Training – Offer master classes or advanced courses relevant to the employee’s growth path.
47. Catered Lunches – Arrange a catered team lunch to celebrate the completion of big projects.
48. Work-from-Home Privileges – Give employees added flexibility and autonomy as a thank-you.
49. Performance-Based Bonuses – Whether monetary or extra paid time off, a tangible reward can affirm employees’ hard work.
50. Regular Town Halls – Conclude each meeting by showcasing an employee or team for their notable contributions and inviting applause.