International Door & Operator Industry

NOV-DEC 2018

Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.

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Page 33 of 110

MANAGEMENT by John Zoller & David Bowen, Zoller Consulting, Inc. V O L U M E 5 1 I S S U E 6 D E C E M B E R 2 0 1 8 31 Continued on page 32 Yes, business is good, but this is the time when old habits - nurtured by easy times - need to be changed. Specifically, this means dealers obsessed with not showing a profit to avoid paying income taxes. This attitude must change! If and when times get tougher, during times sales and profits slow, it is critical to have shown past financial performance. To verify financial performance, it is critical to demonstrate the results of a successful business. Namely: profitability, working capital and cash on hand. Having adequate profits, working capital and cash speaks volumes about managerial acumen to those looking at your business. Of course, there are ways to reduce taxable income without affecting cash. For example, accelerated depreciation is a cash-free expense. Depreciable assets are of course needed to take depreciation, but depreciation does lower income while not affecting cash. In truly determining financial performance, track any expenses charged off to a business that another person - be it a financial advisor or a potential buyer for your business - might not take as expenses. Then take these owner's choice expenses and add them back to income. This exercise then paints a clearer picture of the dealership's performance. The important issue is to track discretionary expenses and add these expenses to income in order to prove better dealership financial performance. The warning in planning for the future is: Stop doing everything to avoid paying taxes! There may come a time when it is important to show how profitable a firm is to get Currently, business is strong - even booming for many dealers. With good business comes owners grousing about a lack of qualified installers, sometimes keeping dealership owners from holding promised installation dates. Some dealers complain this strong business environment has created service backlogs, whereby impeding dealership managers from being able to honor same-day or next-day service promises. However, most enjoy this good time and very few long for the bad times. Think about the future, when business is strong! Think about the future, when business is strong!

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