David Brown: Keep Your Financial House in Order

Being a great jeweler is not enough to succeed.

BY DAVID BROWN

Published in the October 2012 issue

If there is one issue of business that can cause the most strain, it is cash flow. There is often little or no relationship sometimes between a business’s cash flow and its profit, due to the timing of when expenses and sales are reported, as opposed to when the cash rolls in or out. We might make a $10,000 sale today, but if the goods have been paid for at wholesale and we have to wait six months to receive the money from the buyer, the business may not be around to see it!

We’ve all heard of the book The E-Myth, wherein author Michael Gerber notes evidence that indicates people who are good at their profession don’t necessarily tend to have successful businesses. Having a high level of skill or talent at one’s craft is no recipe for business success. As Rich Dad Poor Dad author Robert Kiyosaki says, there is a reason why we refer to them as “best-selling authors,” not “best-writing authors” — it’s not the skill of the writing talent but the ability to present the package that counts.

Know your limitations and seek help in the areas that require it.

Unfortunately the passion and skill sets that drive you into the business world are often not what you need to keep you there. The average jeweler with strong business abilities will succeed ahead of the excellent jeweler with limited skills in this area.

But if you are an excellent jeweler who needs some help with the requirements of business then all is not lost. Skills can be learned — or at the very least, delegated to those who are better equipped to handle them. The most important thing is to know your limitations and seek help in the areas that require it.

Here are some steps that can help:

1Keep your finances in order. This may seem obvious, but letting invoices pile up on your desk or forgetting to follow up on jobs is not the answer. You can’t bury your head in the sand because you prefer not to deal with something.

2Minimize risk. This is plain common sense. Ensure that all of your most valuable and important business items are well insured. Make sure you protect yourself against a heavy dependency on one source of income, be it a product line (e.g. beads) or one particular customer (do you do a lot of insurance work?)

3Offer customers incentives to pay quickly so that your cash flow can be predicted with greater accuracy. Follow up on items that have been on hold for a long time or repairs that aren’t collected. Get a 50 percent deposit to cover your upfront costs.

4Get sound financial advice. Have someone prepare a budget for you. Make sure that your numbers are being recorded and monitored so that potential problems can be picked up early.

About the Author: David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports email to inquiries@edgeretailacademy.com or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA