Today we continue with the interview with Jeff Prager, CEO of Backroom Management. If you have yet to read it, check out Part 1 here: www.dampfang.com/x-51780-Denver-Startup-Business-Examiner~y2010m8d10-Interview-with-an-Entrepreneur-Part-1-Jeff-Prager-CEO-of-Backroom-Management. Jeff resides in the Metro Denver area and I caught up with him last week to learn what his secrets to success have been. Because of the length of the interview, I have broken it into two parts.
Backroom Management is helping companies get through the recession. What they do is give businesses the tools to MEASURE THE IMPACT OF THEIR BUSINESS ACTIVITIES. They don’t have to change a thing — instead, they get metrics that show them exactly what needs to be done to enjoy greater success. You can learn more about his company at http://www.backroommanagement.com.
Q: Jeff, you recently came out of retirement to launch Backroom Management. What led you to starting this new business?
A: I always believed that far more small businesses could succeed than the statistics suggest. The challenge, though, has always been collecting and interpreting the numbers. My own frustrations led me to imagine a single system that managed all day-to-day business activities AND channeled their results into the seven key numbers. But when I retired in 2007, no such system existed.
So retirement lasted about seven months before I decided to turn this vision into a reality. With the weak economy making it critical for businesses to improve their operations, I created the single system U always pictured: a system that employees use for their marketing, sales, and bookkeeping activities, which managers use for their analysis, reporting, and decision-making.
Q: Can you talk more about the software?
A: Backroom Management is an operating system for small business. It’s an integrated web-based software you use to carry out most of your business activities (from lead generation to sales to production to cash in your bank) and spotlight their impact on your 7 Key Numbers. More importantly, we teach customers how to manage those numbers to drive your profitability.
You use it for your day-to-day and your bottom line. Your staff carries out their daily business activities through the software—sales (CRM), bookkeeping, job costing, scheduling, time management, and more. Then you use it to measure the impact of those activities on the bottom line. You also use it to model the financial impact of decisions so you can set benchmarks for your staff. In other words, it’s a tool for carrying out your daily activities as well as increasing your cash flow, lowering your costs, and driving towards profitability.
Q: Can you share what are the “6 Key Success Factors”?
A: 1) Have an exit strategy. Your dream isn’t fantasy if you make it a
tangible goal. Your exit plan is a five-year outlook that forms the
basis of every decision you make.
2) Make specific plans. Beyond your exit strategy, you need specific
plans—including business plans, financial plans, and much more.
3) Develop documented systems. Businesses rarely succeed by accident.
Replicable systems ensure predictable and profitable results.
4) Achieve proper capitalization. There’s an ideal balance between debt
and equity, and it’s different for every company. You need to find yours.
5) Focus on directors. No small business owner is an island. Surround
yourself with the best advisors, employees, and consultants you can find.
6) Fixate on monitoring. It’s imperative that you have crystal-clear
insight into both your financial and non-financial data.
Q: What are the 7 financial numbers that drive a business?
A: The 7 Key Numbers demonstrate how business activities cascade toward profitability, and let managers model the impact of future decisions on the bottom line. The 7 Key Numbers present managers with the clearest path to productivity, profitability, and growth.
Your 7 Key Numbers are:
1. Number of leads generated.
2. Number of leads converted.
3. Number of repeat customers.
4. Number of transactions per customer.
5. Average price per transaction.
6. Variable costs.
7. Fixed costs.
You can use them to see how much your profit goes up if you increase your conversion rate, for instance. Or better yet, you can set a specific goal for profit and then see how each element needs to adjust to reach it. Like whether you need to lower your costs or increase your customer retention, or (more likely) which combination thereof, which tells you the marching orders to give your employees.
Q: What are some financial mistakes that new entrepreneurs make that could easily be avoided?
A: Focusing on profit. Cash flow is far more important.
Profit is actually an unhealthy metric to focus on. Because you can’t use profit to pay your bills—not if it’s in the form of a receivable. And while you can be massively profitable on paper, if you don’t have cash in the bank, you might as well start putting your office furniture on Craigslist.
Q: What are the future plans for Backroom Management?
A: We’re trying to help our customers get through the recessions. This is a terrible business climate right now, but we’ve got no choice but to get ourselves through it. Our software really can help any business increase cash flow and lower costs. We’re targeting businesses that truly want to survive. We know we can help them survive AND even thrive. And that benefits both of us — because when things finally pick up, they’re going to be our biggest evangelists.
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