Michael Gerber's Franchise Prototype Model Rule to Win #1: Add Consistent Value

Gerber, p. 99, says:

1. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what the expect.

I see at least two implications of this. First, with regard to customers, it's not clear what a customer is anymore. In the bad old days, you developed a product, pushed it out there, and people bought it (or not). Marketing was price, product, promotion, and the other "P" I can't remember right now.

Your business is really part of an extended enterprise which includes those other people and organizations Gerber includes in his list above. And one way you add value to your product is to include all these customers in the design of your product. Working together you develop "applications" which have added value and you can then charge for.

These days, people are only interested in paying for value. So you have to add value to your product if you're going to get people to pay for it. The process of getting paid for added value we call "monetizing," as in "Sounds like a great idea, but how are you going to monetize it?" This is particularly a problem with new, web-based businesses. You see all these businesses going under? I suspect a lot of them don't have a clue about this.

Second, you have to pay attention to the other people in your extended enterprise. Businesses aren't hierarchical, command-and-control type organizations. Well, many still are and many are in trouble. They're flatter, more interconnected, with more surface area. You have to add value for all of those folks if you're business is going to be all that it can be.

When Gerber wrote this, he didn't have on his radar screen all the social media and Internet tools we have today. But his words still ring as true as ever. That's because business hasn't really changed at all. Adding value to relationships is there today just as it was when LL Bean founded his company almost 100 years ago.

What do you think of this? I'd like to know. Post comment

Entrepreneurship informs all of my professional activities. Entrepreneurial ideas are their life's blood. For my ideas on entrepreneurial real estate go to www.yourstopforrealestate.com/blog and for my ideas on writing and publishing, go to www.kearneymusicschoolmurders.blogspot.com

Cash Vs. Accrual Accounting

Stephen Fishman, in Nolo.com, describes cash vs. accrual accounting this way:

The cash method and the accrual method (sometimes called cash basis and accrual basis) are the two principal methods of keeping track of a business's income and expenses. In most cases, you can choose which method to use. Learn how they work and the advantages and disadvantages of each so you can choose the better one for your business...Under the accrual method, transactions are counted when the order is made, the item is delivered, or the services occur, regardless of when the money for them (receivables) is actually received or paid. In other words, income is counted when the sale occurs, and expenses are counted when you receive the goods or services. You don't have to wait until you see the money, or actually pay money out of your checking account, to record a transaction...Under the cash method, income is not counted until cash (or a check) is actually received, and expenses are not counted until they are actually paid.

Example:Your computer installation business finishes a job in November, and doesn't get paid until three months later in January. Under the cash method, you would record the payment in January. Under the accrual method, you would record the income in your November books.

Example: You purchase a new laser printer on credit in May and pay $1,000 for it in July, two months later. Using the cash method, you would record a $1,000 payment for the month of July, the month when the money is actually paid. Under the accrual method, you would record the $1,000 payment in May, when you take the laser printer and become obligated to pay for it.

Go to this site and read the entire article. There's a lot of good information.

Which one you choose is up to you. Me, I prefer to do my business planning on an accrual basis and report taxes on a cash basis. If you do your taxes on the accrual basis, you end of paying taxes on things you haven't actually benefited from yet.

They are measures of two different things. Cash accounting tells you your cash position. Accrual accounting measures the value of your business. You need to track value to see how you are growing or not. You need to track cash to know what you can spend.

The best way to choose between them is ask your account and your lawyer.

What do you think about this? Do you like accounting? Post a comment.

Entrepreneurship informs all of my professional activities. For entrepreneurial real estate, go to www.yourstopforrealestate.com./blog and for entrepreneurial writing, go to www.kearneymusicschoolmurders.blogspot.com