Improving Business Profits using the CLEAR Method

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Are you paying yourself $2500 per week and making a 10% profit? 

 

If not, read on.

Over the past two decades, I helped hundreds of businesses overcome financial challenges. As their trusted advisor, I saw that many of the challenges were identical and these could be grouped according to their stage in the business lifecycle. That is when the CLEAR method was born. 

The CLEAR method is a tried and tested five-step process, developed by Next Level. The purpose of the CLEAR method is to transform your business into a well-oiled, high-performance, profit-making machine. CLEAR is an acronym for the five stages every business owner needs to pass through to gain full control over finances, a journey from chaos to financial clarity – hence the term CLEAR.

The CLEAR Method – A High-Performance Approach

The CLEAR Method is a high-performance accounting and strategy approach for trades and construction businesses. It is an acronym that stands for:

C – Clean Up: The “Clean Up” phase refers to the process of tidying up tax compliance, streamlining bookkeeping, and establishing payment plans for any outstanding tax debts. It involves addressing financial challenges such as not paying proper wages, lacking knowledge of gross profit margins, struggling with cash flow, and having overdue tax lodgements. The goal of the clean-up phase is to improve financial management and set a solid foundation for further progress.

L – Learn: The “Learn Phase” is a part of the CLEAR Method where businesses focus on implementing the accounting and finance systems needed for their operations. This phase aims to achieve financial visibility and clear direction for the business. It involves outsourcing bookkeeping, preparing a budget, working out the break-even point, and analysing monthly financial reports. By completing these steps, businesses can gain a deeper understanding of their financial performance and make informed decisions to improve profitability and overall financial management.

E – Enjoy: The “Enjoy Phase” is where the fog of confusion and stress dissipates and is instead replaced with the joy of solid profits, great cash flow, and always having the money to pay yourself, the taxman, and suppliers. All overdue tax debts vanish during this phase. It’s the time to rejoice in the results of all your hard work. The system behind attaining these results is 25/10. This means paying yourself a wage of $2500 per week and achieving a 10% operating profit.

A – Ambition: Ambition is when the belief arrives to tell you that the sky is the limit. This is the phase where we help to position your business in the stratosphere. When aiming high, it is of paramount importance to nail down the numbers. This includes examining how your business charges for project management services, often overlooked and undercharged on the false premise that it’s a cost of doing business. We assess hourly charge-out rates to determine the true cost of labour and its effect on business profitability. And implement annual price reviews, tightening the screws on profit leakage caused by increased business costs. If you aim high, and the numbers are right, an exciting ride lies ahead.

R – Reward: The Reward phase arrives when you’ve made it. It’s where the investment of time, money, and effort in your business peaks. It is the fruition of your belief and achievement, and rightful compensation for your effort over the journey. It’s also a time of reflection and introspection to assess how you see your involvement in the business moving forward. Do you want to run the business and maintain control? Or would you prefer to appoint a CEO to run it for you? Profits and cash flow stable, establishing a dividend policy both keeps profit in the business for future growth and financially rewards owners for their investment. Furthermore, it is a time for succession planning and possible sale.

Case Study: Geoff & Lyn’s CLEAR Journey

Geoff and Lyn have achieved success in their business. But it wasn’t always this way, like many, they had their ups and downs. Geoff used to arrive at work at 6am, an hour before the staff and left at 7pm, 3 hours after everyone else had gone home. Something always had to be done and if that was not enough, Geoff would come in on the weekend. Geoff said, "It's fair to say that I was working my guts out and achieving very average results. I thought the only way to get on top was to work harder." That all changed forever when Geoff implemented the CLEAR Method.

When Geoff, like 58% of Australian small businesses, came to the realisation that sound financial management is essential to achieve financial success, he turned to Next Level to implement CLEAR to say goodbye to hard work, skimpy results and not knowing the numbers - and hello to making money, knowing his numbers and having a ball in his business.

When we asked Geoff to name the best thing to come from implementing CLEAR, he said, "When we reached the ‘Enjoy Phase’, Next Level uncovered one of the areas of my business where I was losing money – it was in job rework."

Rework refers to work that needs to be redone because it was not done correctly the first time. In Geoff's case, the cost of rework was three times the original cost. This was because the initial work was done incorrectly and required a second attempt. The third cost was the lost income from being unable to take on a new job while the rework was being carried out. Geoff improved several business processes to reduce the daily rework. That is, to get the job done right, the first time. After he did, the rework hours went down, and the daily revenue went up. We helped Geoff tighten the screws in areas his business was losing money. Again, we go to Geoff, "It was a complete business turnaround, in the first three months we made the profit we usually make in a year. The chart system was telling us that rework was down, revenue was up". He went on to say, “Take it as gospel, it’s empowering to go from believin’ you're doin’ it right, to knowin’ you are”.

The CLEAR Promise: 25/10

Many of the financial frustrations faced by business owners are the same: not enough pay for the owner, poor business profitability, cash flow shortfalls, and not knowing the numbers. The CLEAR Method promises to show you how to pay yourself a wage of $2500 per week and make a 10% operating profit (25/10). 

Next Level has developed two tools to show you how to do this, they are:

25/10 Budget 

The 25/10 budget tool has two goals. Design a financial plan for your business that:

      • Pays you a wage of $2500 per week, and

      • Ensures your business makes a 10% operating profit

    We analyse the historical transactions of your business including margins, overhead expenses, employment expenses and occupancy costs. We project expected sales for the coming 12 months. We then build 25/10 into the budget. Then you will know your monthly sales targets, gross profit margin and the provision for overhead expenses. Achieve this and you will reach your 25/10 goal. 

    25/10 Breakeven Point

    The 25/10 breakeven is a management tool that will provide you with:

        • The Daily Revenue target needed to reach 25/10

        • The Gross Profit percentage needed to reach 25/10

      When you are armed with this knowledge, you will have a clear direction when it comes to the management of your business and finances.

      The CLEAR Method is a powerful framework that can help businesses in the trades and construction industry improve their financial management and increase profitability. By following the five stages of the CLEAR Method - Clean Up, Learn, Enjoy, Ambition, and Reward - businesses can overcome financial challenges, gain financial visibility, and ultimately achieve success. 


      The method provides a step-by-step approach for tackling common financial issues, such as tax compliance, bookkeeping, and cash flow, and guides businesses towards solid profits, clear direction, and financial stability. Implementing the CLEAR Method, along with tools like the 25/10 budget and breakeven point analysis, can empower business owners to make informed decisions, optimise their operations, and ultimately reach their financial goals. So, if you're looking to transform your business into a well-oiled, high-performance, profit-making machine, embrace the CLEAR Method and take your business to the new heights of financial success.

      Written by Lyndon Russell

      Next Level 

      Director & Adviser

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