To be more certain of
making even an adequate profit in pet grooming, you must know your
"financial objectives." This includes your estimating
the gross revenue your business needs to earn, and the expenses
you will incur to earn that revenue. The basic objective of
financial planning is to maximize income, and minimize expenses.
Of course, you must be concerned that in doing so you maintain the
high standards of your operation, its professional reputation and
total client satisfaction.
Financial planning
begins by estimating the number of grooming and other pet care
services you expect to perform in a period of time, and the income
that will be derived from those services. A financial plan base
such estimates on no less than a monthly and annual basis. It is
of course even more effective to make projections on a daily and
weekly basis as well. Next, the financial plan estimates the
"operating expenses" required to operate the business in
order to produce the estimated services and derive income. There
is a generally accepted accounting format for compiling estimates
or projections for services, income and expenses. The form is
commonly known as a "profit and loss projection" or an
"income statement projection" and sometimes
professionals will shorten the form name to a "pro forma
projection."
Small business owners
looking for an easy-to-use "profit and loss projection
form" for their specific industry are rarely as fortunate as
you. Why? It may seem almost unbelievable, but you can obtain a
custom pet grooming business "Annual Profit and Loss
Projection" form in From Problems to
Profits. You make photocopies of the blank form in the
business manual, and voila! You have an expert financial
management tool designed expressly for pet grooming. Also, there
are instructions line-by-line included in the book to complete the
entire form.
Your annual projection
is like the "big picture" of your financials goals for
each year you create one. Remember, if you are going to seek a
business loan you will need a pet
grooming business plan with a five-year financial projection
to submit with your loan application to the banker, or investor as
the case may be. We strongly suggest that your financials be
reviewed by your bookkeeper, accountant and management consultant.
In fact, most people have one or all of them prepare their
financial projections, but if you will take the time to work with
the form yourself you will not only learn more about financial
management, but save your professionals working time and possibly
reduce their fee.
If you are expanding an
existing business, you should use your most current set of annual
financials to assist you with creating projections for future
performance.
By creating a realistic
annual profit and loss projection, you have a more sound idea of
what you can expect to earn from your business in the year or
years ahead. Of course, you need to compare your projection with
actual performance on at least a monthly basis. By comparing them,
you become more skilled at making accurate projections, and you
can intercede earlier to prevent or limit financial downturns or
other problems. Your projections for the financial performance of
your business, and the figures of your business' actual
performance should be formatted by a bookkeeper or accountant into
monthly, quarterly and annual "financial statements."
Let's take a close look at financial statements.
Financial
Statements
Financial statements
consist of an Income Statement and Balance Sheet. Preparation of
them requires accurate daily records of your business' financial
activities. We will take a closer look at the daily records in the
material ahead. For now, let's get a better understanding of the
financial statements.
The Income Statement is
sometimes called a Profit and Loss Statement, and looks a great
deal similar to the Annual Profit and Loss Projection described
above. Financial statements cover a period of time, typically a
monthly, quarterly or annual period. It lists the major areas
where income was earned along with a grand total of income for the
period. Subtotals for categories of operating expenses are listed,
along with a grand total of operating expenses during the same
period when the total income shown was generated. By subtracting
the total operating expenses from the total income, you deduce the
profit or loss incurred by the business during the period.
The Balance Sheet is a
more general picture of the business at any one moment in time. It
is more ideal for financial analysis to match the selected moment
in time for the Balance Sheet with the end of the time period
represented by the companion Income Statement. The Balance Sheet
shows assets, liabilities and owner equity, and not income and
expenses.
Unless you have very
strong bookkeeping and accounting skills, you will need a
bookkeeper and/or accountant to prepare monthly and annual
financial statements for your business. Never get behind in your
responsibilities for business bookkeeping, and don't delay in
establishing a professional working relationship with a bookkeeper
and/or accountant before you open a new business. Your bookkeeping
and financial statements are open to review by tax authorities.
But that it isn't the only reason for financial statements. Learn
to interpret them with professional assistance in order to monitor
a more efficient business, a more profitable business.
Bookkeeping
Practices
There is extremely
little in the way of pet grooming specific bookkeeping reference
information. However, what there is, is superior! We strongly
recommend you obtain perhaps the finest bookkeeping forms in the
pet grooming industry by purchasing a copy of From
Problems to Profits. The bookkeeping and finance chapters are
alone worth the cover price of this comprehensive business manual
for pet grooming business owners. In fact, Find A Groomer, Inc.
also sells copies of the bookkeeping forms at reasonable prices,
but you can also make your own using the models in the manual.
You may not think that
there is a lot of financial data involved in pet grooming. Well,
there is. You can just add it up and say, "I earned $292.00
today by grooming 9 pets and selling one bottle of shampoo."
Does that summary really give you information to plan your
marketing, advertising and inventory purchases? Not really. It
would be far more effective to know that you groomed 7 complete
trim and bath pets. Of these, 3 were Poodles, 2 were Bichon Frises,
and 2 were Terriers. There were 2 bath-only pets, both Golden
Retrievers. The shampoo sold was the new all-natural de-flea
product. By breaking down the services and retail, and then
comparing the current breakdown to breakdowns for several other
business days, you may find trends. Perhaps your bath-only
services are increasing and not the demand for complete trim and
baths. Why? Perhaps you will find that you increasingly doing more
and more Bichon Frises. Why? Or, perhaps you are losing bath-only
business, and no longer doing any Bichon Frises, and retail sales
have dropped considerably. In this overly simple example you may
see the value of financial data analysis. You can stop downturns
before they get worse by determining they exist, and boost upturns
even higher, but you have to collect detailed data, and take the
time to consider the meaning of your data.
Important financial
and bookkeeping information continues on the next
page.
