The first order of the day was to examine the numbers. After reviewing the financial statements, I discovered that the CFO was paying himself dividends as the company was running at a loss. When confronted on this item, he declined our request to defer dividend payments until the company was in stronger financial health. It became clear to me that I had to fire the CFO.

Next, I had to shop around for a financing deal that would consolidate all of the company’s debts — instead of the high-interest line of credit the company was paying too much for. But getting a bank to take a chance on the business was no easy task. At the time, I was working full-time in procurement for IBM where I was responsible for negotiating vendor agreements to save the company money. That experience came in handy. I had to knock on many, many doors. And eventually, I found an institution that was willing to give my small business a shot.

After finances, I had to put in place new processes after discovering that the three main divisions of the company (sales, manufacturing and accounting) worked in silos. I eventually got involved in the business full-time and took over as CEO until the company was in stable financial standing. I later hired a general manager to run company operations. Turning the business around was a huge learning experience. Here are some of the lessons learned, which I hope help you manage your own business.

Know Your Company Finances

No matter how big or small your company is, make sure you understand your balance sheets. I recently graduated with an Executive MBA, but you don’t need to have an MBA to learn how to read financial statements. You can always take a course online to help you get a grasp on your numbers. Always get a second opinion on your financial situation — whether things are going well or not. After firing the CFO, I hired a small accounting firm that specializes in small business accounting. For a small monthly fee, they ended up doing a much better job than the CFO who was costing the company 300,000 a year.

Don’t Be Discouraged by Rejection

When I was looking for a financing deal, I received one rejection letter after another. I met up with several bank representatives. Most were very helpful and gave me good advice but were not able to take on the risk and finance a small business. But I persisted. I kept reaching out, making appointments and showing up, until finally, a major bank agreed to give my business a chance. Without that financing deal, the company would not be in business today.

Surround Yourself With the Right Team

It was during those difficult times that I learned the valuable lesson of surrounding myself with a team that I can rely on. When I took over the company, I realized that the previous management had isolated its vendors, clients and employees. It’s amazing what can happen when you treat everyone as part of the same team, working towards the same goal. When the company was in financial trouble, I reached out to our vendors and asked for extended deadlines to make payments. To my surprise, many agreed to it. It was around that time that I developed my “Let’s Grow Together” philosophy. I’m a true believer in the strength and absolute necessity of teamwork as the foundation of success.

A version of this post originally appeared on Medium. 

But book publishers aren’t the only ones suffering from margin pressure. Yes, customers should always be in charge, but the digital age has made them all-powerful. No longer can businesses pretend they offer the best deal in town. Customers can now view a myriad of competitor sites and product reviews within minutes, leaving companies’ profit margins under intense pressure to secure the sale. But there are ways to squeeze a few more percentage points of margin from each product you offer:

Deal With the Incidental Waste 

When our profit margins were decreasing, one of the first things we did was identify all our small, additional expenses and take back control of spending for a brief period. This wasn’t about being controlling, but identifying areas where money was possibly being wasted — stationary, postage, travel, etc. All sound minor, but together can have a negative impact.

Within two months, our spending on these smaller budget lines had reduced by over 25 percent, and as a result, added a percentage point or two to our margins.

To do this, first look at the overall picture. Take your total monthly spend on each line item and compare it to your budget. Then, go through a fully itemized list of expenditure and mark what costs could have been reduced or not made at all. Once that’s done, calculate the difference. You may be surprised by the percentage your business could have saved.

Review Product Manufacturing 

Break down each part of the manufacturing process and related costs, and look to see where you can save. In some places, it’s worth getting quotes from competitors to move elsewhere or keep prices as competitive as possible with your current partner. Even if you have the best price, look at ways to cut costs. For instance, can savings be made by ordering in bulk? Is there anything that can be changed in the specification to reduce cost without compromising quality? Can the delivery costs be reduced if handled differently?

Distinguish Distribution Costs 

It’s easy to focus on the cost of producing your product (and how much you sell it for) while ignoring the other costs tied up in logistics, like shipping. It’s not the fault of your distributor, but rather that your logistics haven’t been properly thought through.

The key here is to separate production costs in your budget. If you lump the costs together, you’re likely going to miss out on savings. Break it down into separate lines — materials, shipping of materials, manufacturing, shipping of final product, storage of final product — and review each one.

We highlighted the cost of returning unsold stock and sending stock for smaller consignment orders that were increasing the percentage cost of sale each month.

Review Trade Pricing

If a large chain comes knocking on your door, it’s tempting to accept whatever deal they offer. But the key is to return to them with an argument rather than a begging bowl.

You may want to consider a varying price depending on the level of promotion included in the sale and offer them exclusivity, or by including added value, give them an advantage over a competitor in return for a better deal. You could even agree to some upfront spend in return for a lower trade price. They’re not going to give anything away for free, but if you can take back a few percentage points from all retail customers, the result will be a significant positive impact on your margin.

Remove Links in the Cost Chain 

Think creatively about adding some higher-margin products into your selling schedule. These are products where the cost of sale is significantly lower, thereby creating a high-profit margin. Reducing manufacturing and shipping costs and repackaging a product where some or all of acquisition and production costs have been paid for leads to a range of higher-margin products.

There’s no one step that will double your margins overnight: It’s usually a process of shaving off percentage points. Margin saving is very often a sum of its parts and can turn a cost-burdened business into a profitable one.

Question: Discuss a recent time your business faced a sales slump. What went wrong, and how did you handle it? What is your best piece of advice for readers encountering a similar scenario?

What every business needs to know is that understanding your costs has more to do with aligning your margins than it does with profit. In our company, understanding what it costs to bring a customer in the door ensures we can truly calculate the cost of a project. If we just calculate profits using the cost of the product or service, we’ll have a gap in our metrics. After all, we don’t want to spend more money bringing in a customer than we actually make on the sale.

Understanding Buyer Behavior

If we could truly understand our buyers’ behaviors and predict the future, I think I could retire early. To correctly understand how much it costs to bring a customer in the door, we evaluated the following costs:

Lead generation: For us, leads come from three main sources, some with significant expenditures and some that don’t:

• Client and partner referrals. We generally considered these to be free, unless we sent them a gift or referral fee.
• Website. Obviously, there are costs associated with running a website, including hosting and web development. We also have to ask the question, “How did the lead find the website?” At Fourlane, we use Google Adwords, search engine optimization and email marketing to get customers to come to our site. All of these efforts contribute to the cost of a sale.
• Marketing/PR spend. We also spend money with a PR agency to help write and place articles on our website and in industry/trade publications (online and print) that we hope will drive more customers to our website. Our social media team concurrently helps keep our name in the mix. Can we attribute these directly to a sale? Not usually, unless a prospect specifically says, “I saw your article here” or “I received your newsletter,” but because we are spending money to attract customers, we need to attribute some of these expenses to customer acquisition.

Other costs attributed to customer acquisition: After analyzing our leads, we had to break down the other obvious and not-so-obvious costs associated with sales.

• Sales team. Our website directs leads to either call or email our sales team, who then respond with more information, a quote and the engagement letter when the customer is ready to start a project.
• Miscellaneous costs. We can’t forget the extra factors that contribute to sales, such as the cost of developing and maintaining our CRM. Without this, we wouldn’t have the data we need to truly understand the cost of customer acquisition. Similar to other companies, we also pay for email marketing software, GoToWebinar and other tools that contribute to the costs.

The Formula

After better understanding where our sales come from, we had to look at what people are buying to get an idea of how that much time the sales process for that product takes, and what it costs. Here’s how we broke it down:

Acquisition cost for consulting projects is comprised of:

• X% of marketing costs (lumping together web, PR agency, pay-per-click ads for consulting and misc. costs)
• X% of sales personnel costs (average amount of time a salesperson spends on a software sale + commission)

The percentage is tied to the percentage of sales for that line of business.

How to Calculate Your Customer Acquisition Costs

So, you are probably wondering whether you should go through this process. Other than just wanting to know, you may want to determine the cost of customer acquisition if you are trying to bring on investors or are about to sell your business. Another reason companies may do this is to ensure they are getting the most bang for their marketing spend.

Figuring out the costs of acquiring customers is complicated and multi-faceted. Here are four steps to get you there:

1. Involve the right people. Accountants should not be doing this in a vacuum. Sales and marketing folks need to explain their expenditures to ensure they are in the right buckets and nothing is missed.
2. Know your buyers’ behavior. With all the right people in the room, create a flow chart of how your new customers find you and what you are doing to keep current customers. Walking through this process will ensure nothing is left out of the calculation. It can also be a creative way to evaluate what is working and come up with new approaches to gathering customers. It is important to do this for everything you sell.
3. Develop the formula. Your formula may look exactly like mine; it may not.
4. Pull three to five specific customers. See if their buying behavior matches your flow chart and calculate their acquisition costs. Ask long-term customers how they found you to ensure you haven’t missed anything.

Getting It Right

I have to admit it: as an accountant, I really want to make sure my numbers are correct, we haven’t left out any expenses for a sale and that the percentages are exactly right. The CEO in me also needs to know this information to determine what costs can realistically be trimmed (assuming the acquisition cost is too high) or what processes should be adjusted. It also pushes me to think about growth: are there other marketing channels we need to pursue, or can we grow through more low-cost channels?

Figuring out how much it costs to get a new customer is a complex process, and every company will differ as to how it arrives at its own formula. However, coming up with that formula is very valuable, and I highly encourage businesses to truly take a look at their customer acquisition costs — it could just be the difference between growing a business, and going out of business.

But today I want us to take a look at things a different way. Instead of trying to fix our relationship with money, why not look at things from money’s perspective? Because I guarantee that money itself is a lot less emotional and a lot more unbiased.

So let’s flip the table and talk about what money loves. Each “love” is unique. But more importantly, you can use each of those loves to your benefit in the long run.

Money Loves Clarity

What can you do in your life and business to create more clarity, especially as it relates to money? For example, could you sort out all of your different bank accounts so you know exactly where all of your money is at all times? This is freeing in and of itself, and it also gives you a sense of ease.

Beyond that, can you make it clearer how customers and clients can give you money? Are your products and services really clear and easy to sign up for, or do you make people jump through hoops to buy from you?

Do people know exactly what you do, or are they confused about your business? The more clearly you can explain how you can help people, the easier it is for people to take you up on it and hire or buy from you. Similarly, if you have a complicated payment process with five steps and plenty of hurdles, that keeps people and their money at bay.

Money Loves Speed

I’m not sure exactly why this is true, but there’s something about money that loves to be in motion — and it feels like the faster, the better. If you’re speaking to an interested customer or client, give them everything they need to say yes right on the spot. Don’t say you’ll get back to them next week. Don’t let them sit on the fence.

Instead, give them all the clarity they need to say yes or no, and move on. When I was doing a lot of web design, I would speak to many interested potential clients on the phone. Every now and then, I’d speak to someone on a Friday afternoon and wait until Monday to get back to them. Those deals never worked out. Money has a sense of urgency built into it. It wants to make things happen. If you drag things out, slow things down, or wait to see how things will turn out, you’ll usually end up with no money exchanging hands.

That’s why online launches work: they have a built-in sense of urgency. It’s also why you don’t want people to be confused or to think things over for too long, because if someone is waffling, then they’re probably going to pass.

Money Loves to Circulate Consciously

This follows from the previous point: There’s something powerful about money wanting to feel useful. If you’ve got money hidden under your bed and it doesn’t have a purpose, then this money feels like it’s not being used to its full extent. Now that doesn’t mean you can’t have savings. In fact, I do think money likes to be saved, but only if you’re saving it with a strong intention behind it — if you’ve earmarked it for something.

Think about it: Every time you’ve wanted to save money for something specific, you were able to do it. There was money there for it: whether it was buying a dress for that special occasion, saving for a down payment on a house, or investing in a program. That’s because you gave money a job, and even a steady accumulation was for a specific reason.

Money also loves to change hands (it loves to be spent). But just like saving, if you’re not being intentional about your spending, the money won’t be there for it when you want it. When you’re investing money in your business, it tends to come back to you. When you’re investing in yourself, it tends to come back. But when you allow money to leak out in less intentional ways, it will find its way into other people’s lives. The distinction is that money goes where it is told to go, but if you don’t care or don’t consciously consider where you want it to go, it will leak out unconsciously.

Bringing awareness to how you circulate your money is another part of the clarity piece, and it ensures you’re making money feel welcome to circulate back to you.

It is common for small businesses to have cash flow problems for a variety of reasons. Many customers will see a bill from a small business as less of a priority than bills that are due to large corporations, so you may get pushed to the bottom of the payables list. However, if you are going to keep your business going strong for years to come, you need to get past this hurdle. You won’t stay in business for long without a strong cash flow, so review the steps I’ve learned from running my own small business to improve in this key area.

1. Get invoices out on time. Your customers can’t pay you if you never send them a bill. You might be surprised to learn how many businesses have cash flow problems simply because their invoices don’t get sent out in a timely manner. You should have an established protocol for sending out invoices (such as on the first of the month), and they should go out on that day without fail. Even sending invoices out a couple of days late can have a major effect on your cash flow for that month.
2. Be proactive. It is important to give your customers a standard period of time — 30 days is common — in which to pay their bill. During this time, you obviously won’t be taking any action to collect the payment. However, once that date has come and gone without payment, you should be proactive in collecting the money owed. Often all it will take is a simple phone call to get one of your customers to send over a check. These phone calls shouldn’t be hostile or accusatory. Just call the accounting office and ask for an update on the status of the payment. Hopefully that will get the ball rolling and get the money on its way.
3. Be flexible. As a business owner, you should be considerate of the challenges that other business owners face on a day-to-day basis. When you send out invoices, you should expect that at least a few customers are going to be having cash flow problems of their own, so they may not be able to pay you in a timely manner. When that happens, you should be willing to accept partial payments in order to bring in at least some of the money you’re owed.
4. Offer cash discounts. Offering your customers a discount for paying quickly is a great way to keep money flowing — especially early in the month when the payments may otherwise be slow to come in. Even a small discount off of the total amount of their invoice will be a motivator for the companies with cash available to send in their payment ahead of the due date.
5. Review purchasing practices. There are two sides to cash flow: the money coming in and the money going out. While it is great to collect money as quickly as possible, you will also benefit from reviewing the way in which you spend money. Are you buying supplies before you need them? Are you making payments in advance without receiving a discount? Solving your cash flow issues may be as easy as optimizing the way you spend money.

Tracking your cash flow and making key improvements is only possible when you have a clear picture of your whole financial situation.