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Face Your Fears

Know thyself and thy business, Laurie Owen says.

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WATCH CABLE NEWS, scan a few TV commercials, or flip open any newspaper these days, and it would seem that there are no mysteries anymore. Let’s face it, we know way too much about too many people’s habits, problems and proclivities. We’ve got more factoids, tidbits, inklings, stats, blogs and so-called expert opinions (legal and otherwise) than we can use in a lifetime — except, as it often seems, when it comes to the inner workings of our own family business. It’s often our single biggest investment; the entity into which we’ve poured our efforts for years, and yet at the core, paradoxically, it can be in many ways as mysterious as the continent of Africa.[/dropcap]

Here are some of the more interesting unsolved mysteries we’ve encountered from our conversations with jewelers:

  • When are mom and dad finally going to retire and which of my three siblings, now in their 40s and 50s (who’ve been working in the business their entire adult lives), will inherit the business? Is there a written buy-sell plan in place somewhere?
  • Why am I so confused over what my profit was for the last three years and what my actual inventory is at year-end?
  • Why does my balance sheet show a negative net worth and what can I do about it?
  • Can I keep taking money out of the business based on what I want?
  • Why does my new banker insist that I pay off my credit line now?
  • Why do I feel like my dad’s CPA gives me the run-around when I try to get answers?

We’ve found there’s a consistent process in the unearthing of and resolution to these mysteries:

Catalyst Event

Death, illness, and infirmity bring transition issues to a head: No prior planning usually brings (unpleasant) surprises.

  • New Banker In Town: Credit lines need to be paid off, timely and accurate financials submitted, and questions need to be answered.
  • Joining An Industry Peer Group: Especially when you have to share your financial data and, as they say in the biz, “Get naked in front of your group.” You start seeing your business, muffin tops and all, and thinking about a plan to get in shape.
  • Declining Markets/Increased Competition: Nothing like that new chain coming to town to inspire one to get into gear! Ditto for online diamond sales.
  • New Outside Adviser, CPA or Coach: It’s a good sign when you hear them ask: “That’s interesting, can you tell me why you handle X that way?” way before you start hearing any advice.

Defining Moment

If it doesn’t come from outside influences or events, sometimes it comes from within: A great book; a peer who’s faced the same issue successfully; or someone who kept his or her head in the sand until it was too late.

The simple question, “What am I going to do today to make things different tomorrow?” is where it all starts.

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Where To Go From Here

You can’t do it alone. Get help. Join a peer group, find someone who’s been there, done that, and/or assemble a great team of advisers.

Bring in an outside party if appropriate. We can’t tell you how many times we’ve seen what seems to be an irresolvable family business dispute solved when a skilled intermediary is brought in.

Be determined, don’t take no for an answer, but be patient. If your financial statements are a mess, it will take some time and patience to get them accurate. Keep the faith that it will happen, just not overnight.

Realize that usually the question you most fear to ask is the one that must be answered.

Take a minute now to write down the answer to this question and see where it takes you:

What have I been unwilling to ask up to this point?

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  • LUCKY NUMBERS
  • Give Your Store A Perfect Figure: 4.14

WHAT IS IT? That’s how many dollars of current assets the top 25 percent in the 2005 FIT Financial Benchmarking Study had for every dollar of current liabilities. That’s compared to 2.97 in current assets to current liabilities for all other companies. Because this deals with assets that will be used up in a year, and liabilities that must be paid in a year, this ratio measures a company’s ability to pay bills. Current assets include cash, accounts receivable and inventory.

STRATEGY: A higher current ratio is better. Remove inventory from the equation and you get what’s known as the “quick ratio.” Here, the top 25 percent slip a bit, with a quick ratio of .48, versus .52 for all companies.

  • MONEY MATH
  • Want To Know Your Current Ratio?

Let’s say you’ve got: $200,000 cash + $80,000 accounts receivable + $700,000 inventory = $980,000 total current assets.

On the other side of your balance sheet, you’ve got: $100,000 outstanding line of credit + $150,000 account payable + $20,000 accruals (things you owe but haven’t yet paid such as payroll taxes) = $270,000 total current liabilities.

$980,000 current assets ÷ $270,000 current liabilities = 3.63 current ratio.

$280,000 current assets (less inventory ÷ $270,000 current liabilities = 1.03 quick ratio.

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This story is from the April 2007 edition of INSTORE.

Laurie Owen was INSTORE's financial columnist during the first decade of the publication's history.

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SPONSORED VIDEO

When Sales Beat Projections, You Know Wilkerson Did Its Job

There are no crystal balls when it comes to sales projections. But when Thomasville, Georgia jeweler Fran Lewis chose Wilkerson to run the retirement/going-out-of-business sale for Lewis Jewelers and More, she was pleasantly surprised to learn that even Wilkerson could one-up its own sales numbers. “Not only did we meet our goal, but we exceeded the goal that Wilkerson had given us by about 134%,” she says. After more than 40 years in the business, Lewis says she decided a few years ago to “move towards retirement.” And she was impressed by Wilkerson’s tenure in the industry. Overall, she’d recommend the company to anyone else who may be thinking it’s time to hang up their loupe. “As a full package, they’ve done a very good job and I’d definitely recommend Wilkerson.”

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