Most business owners spend a lot of time being busy—managing employees, operations, and finances. And because they’re busy, that can make them feel like their company is making money. Common sense would dictate that the more work you have, the more money you’re making, right? But the reality is that business owners are often surprised when they review their numbers and find that being busy did not equate to actually making money.

There’s a difference between making money and generating ����Ǵھ��ٲ�—two very different elements of a business. Making money simply means the amount of money (cash) a business brings in because of sales (jobs). This is the top line. Generating profits is what’s left over after you subtract all the costs (expenses) of doing business. This is the bottom line.

For example, let’s say a business generates $100,000 in sales in one month. That sounds like a great month, and the business was probably very busy! Now, total up the business’s monthly expenses (rent, utilities, payroll, supplies, and so on), and let’s say that equals $75,000. Subtract the two numbers, and the profit is $25,000.

Making money = $100,000

Generating profit = $100,000 – $75,000 = $25,000

That’s a great month both making money and generating profits!

Now let’s consider what happens when being busy ends up costing a business a lot of money. This is where business owners can find themselves upside down. Being busy without keeping a close eye on the costs associated with that busyness can catch an owner off guard.

For example, let’s say a business generates $100,000 in sales. Monthly expenses were $110,000, maybe due to rising fuel costs or increased subcontractor and labor expenses needed to complete the work. When these numbers are subtracted from each other, we find the business actually lost $10,000.

Making money = $100,000

Negative profit = $100,000 – $110,000 = –$10,000

The business was busy and appeared to be making money, but it wasn’t really making money in terms of profit. Although it felt like the business was doing well because it was busy, it was spending a lot of money to support that busyness.

The difference between making money or not lies in positive or negative profits.

Positive profits mean a business is earning more than it is spending. Owners are managing cash and expenses, and the business is creating ����Ǵھ��ٲ�—more money than it spends. This requires someone to be looking at the numbers on a regular basis, before more money is spent than was earned.

Negative profits mean expenses are higher than what the business is making in sales. When expenses surpass revenue, the company is operating at a loss. This is the point where owners and managers need to analyze expenses and make necessary adjustments.

Being busy can be a distracting place to find yourself. Be careful not to allow the busyness to distract from the business. Being busy is a good thing when a company is making money, but not when that busyness is costing more than it is generating.

If you’re an owner or manager and not currently in the practice of looking over sales and expenses on a regular basis, create a new habit of doing so. Making money is simply about the total revenue a business earns, while generating profits considers the expenses associated with that revenue. Knowing where your numbers are will help in determining the true financial performance and success of your small business.

The post Are You Busy Making Money—or Are You Just Busy? appeared first on Cleanfax.

How much does a company’s foundation play a role in obtaining such goals? What exactly is a foundation as it relates to a business?

We have all heard the phrase “house of cards,” an expression meaning anything built on a shaky foundation will not stand the test of time (or much else for that matter). Attempting to build a great company without a solid foundation in place is like building a house out of cards—it won’t take much for it to all come crashing down.

Developing a company’s foundation takes time and thoughtful consideration. Its mission statement, vision statement, and core values are critical to building a substantial base. If you already have these in place, then when was the last time you sat down and considered each of them and how they apply to where your company is today? If you are just starting a business, have you taken the time to really think through each of them and decide how to create them for your organization?

Let’s look at each of these foundational pillars individually.

Mission

Most people have heard of a mission statement, although many times it might sound like some corporate term thrown around by multi-billion dollar S&P companies. Ironically, every giant corporation started small, and as it grew, the mission statement was used as a compass.

A mission statement defines, usually in very simple and short terms, the purpose of an organization and how it intends to serve its clients or customers. Here are two examples from businesses we all know:

�ѳ��ٴDzԲ�����’s—Our mission is to make delicious feel-good moments easy for everyone.

The Coca-Cola Company—Refresh the world. Make a difference.

A company’s mission statement might also include a description of the company, what the company does, and its objectives. It quickly conveys the organization’s purpose to anyone involved with that business: decision makers, employees, and customers.

Vision

A company’s vision, or vision statement, is almost self-explanatory—it is the company’s long-distance goals. As a business owner looks way down the road, where do they see the company? What do they hope to accomplish?

Vision statements can be ambitious, as goal setting usually is, and typically communicate how a company plans to make a difference in the world. Here is a look at Apple’s mission statement compared to their vision statement:

Apple’s mission—Bringing the best user experience to customers through innovative hardware, software, and services.

Apple’s vision—To make the best products on earth and to leave the world better than we found it.

Notice how the mission simply states the company’s purpose in straight-forward, concise wording. However, the vision is much more ambitious with some lofty goals: best products on earth and leaving the world….

When creating your organization’s vision statement, dream big. Think of it as the roadmap for what you aspire the company to be or to achieve in the future.

Core Values

Personally speaking, I feel core values are the keystone of every amazing company. They represent an organization’s deeply held beliefs, highest priorities, and its fundamental driving forces. That’s big stuff when you pause to consider the significance of it.

When developing your company’s core values, think about who you are as a company, what you believe, and who you want to be. Core values serve as promises about how the business will treat employees, customers, vendors, and its community.

Core values are generally defined by a word or two, followed by a supportive or explanative statement. For example, here are the core values for Delta Airlines:

Honesty—always tell the truth.

Integrity—always keep your deals.

Respect—don’t hurt anyone.

Perseverance—never give up.

Servant Leadership—care for everyone.

Core values are at the heart of an organization. They teach employers and employees how to treat each other and their customers, as well as how to engage or interact with the world beyond the doors of the office building. Core values help companies navigate complex situations and guide an organization’s actions.

Creating a company’s mission, vision, and core values is no small task. I have the privilege of helping business owners do this every day, and I witness the time and thought that must go into creating these monumental guideposts. To get started, I suggest that owners write down their ideas, then walk away and come back a few days or a week later. Then write down more thoughts and edit the previous ideas. I encourage them to take their time and try to think of the big picture—long term—as these are the words and statements that will guide the business through the ups and downs that all companies experience on their path to greatness. My advice is the same for you and your company.

The post Building Your Company’s Foundation: Mission, Vision, and Core Values appeared first on Cleanfax.