Tag Archives | business model

PEO or Outsource Payroll

See Also:
Advantages of a PEO
What is a PEO?
How to Select a PEO
Professional Employer Organizations FAQ’s
Service Department Costs

PEO or Outsource Payroll

Do you have a PEO or outsource payroll? Under the PEO Arrangement, there is a co-employment relationship in which both the PEO and the Business Owner have an employment relationship with the employees. Contractually, the PEO and the Business Owner allocate and share many of the traditional employer responsibilities and liabilities. For example, the PEO assumes responsibilities and liability for employment related matters such as Payroll and Payroll Taxes, Employee Benefits, Human Resources Management, and Safety and Risk Management. As a result, the Business Owner can concentrate 100% on growing their Business.

Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting for SMBs

Outsourcing is a contractual arrangement, absent an employment relationship, with a vendor (and its supervised personnel), for services, either on the customer’s premises or off-site at the vendor’s location, to perform a function or run a department that was previously staffed and supervised by the customer directly. Furthermore, examples include: Payroll Processing, Financial Auditing, Agent of Record Services, and Legal Services.

Today’s Professional Employer Organization (PEO) is a “hybrid” of all of the honorable characteristics of the Staff Leasing Business Model. In addition, combine it with all of the efficiencies of the Outsourcing Business Model.

Guide to Outsourcing Your Business's Bookkeeping and Accounting

If you’re interested in becoming the trusted advisor your CEO needs, then download your free How to be a Wingman guide here.

PEO or Outsource Payroll

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PEO or Outsource Payroll

Originally posted by Jim Wilkinson on July 24, 2013. 


E-Commerce is the New Black

You may have heard the phrase, “[insert color, thing, etc.] is the new black”. It stemmed from the fashion industry in reference to the color. Ever heard of “pink is the new black?” Black has always been a traditional, stylish color that will never go out of style. That’s why today, we’re saying the e-commerce is the new black. As the Internet as evolved and technology has improved dramatically, we see the Internet becoming a more prevalent opportunity that needs to be sought out by every company.  

The Internet is just one external source that could have a dramatic impact on your company. Are there any other factors that you may be missing? Click here to access our free External Analysis whitepaper.


What is E-Commerce?

Simply put, e-commerce is the transfer or selling of products or services via the Internet. When built well, it can integrate your supply chain management, customer service, inbound sales, online transactions, etc. As a result of e-commerce platforms, many business owners around the world are able to sell while sleeping. The Internet world has connected people from all around the world together to address a specific issue. For example, we have built this website full of content and we connect with people on the other side of the world daily.

But how does e-commerce make (or not make) your life easier? Unless a technology disaster occurs, you will always have a platform to sell on. Even if your local market tanks (like we experienced with the recent oil & gas crisis in Houston), then there are still potential buyers not impacted by an industry/economic crisis that are wanting what you’re offering.

In addition, we only live for a certain amount of years. We see business owners unexpectedly pass away, and unfortunately because they didn’t have any e-commerce platform or web presence, their company becomes non-existent. As a financial leader, you need to invest in the next generation of your company. There’s a reason why so many companies are investing in their online presence. It’s because that’s their “succession plan“. Obviously, a Chevron or Apple would have a succession plan if anything were to happen to its leadership. But they have also heavily invested in their online presence.

Monetizing Your Website

One of the primary components of e-commerce is that a site must be monetized. It used to be the case that websites were just pretty brochures, right? But websites have changed for the better. Retail stores are being closed because their online presence is so strong, they can cut the overhead that comes with having a building. Training is no longer available in a classroom, but at the touch of your fingertips. Working at trade shows, conventions, or other markets? Now, you can do the same amount of sales everyday by using your online presence.

Monetizing your website comes in multiple forms. For example, a site could sell real estate to ad platforms or to other companies that have similar audiences. Affiliate marketing is also a viable way to monetize your site. You can also sell your own widget, whether it’s your e-book, a product, 1-hour consultations, etc.

When you take advantage of opportunities because you are actively seeking them out, you get ahead of your competitors. Stay ahead by downloading our free External Analysis whitepaper.

e-commerceE-Commerce Business Models You Should Consider

As a financial leader, it’s important to be in tune with what’s going on in the world and how your business reacts to it. Successful companies do not continue to do the same thing for X amount of years without reacting. Even in the past several years since the 2008 recession, we have seen companies dramatically change to adapt to the changing economy. As a result, you should consider how having an e-commerce business model can improve your numbers. Let’s look at several e-commerce business models to consider if you haven’t already yet done so.


When companies apply the freemium business model, it allows them to offer a portion or a limited amount of time in their product. For example, Canva is a design site that allows people design graphics easily and without needing any training for free. They make their money by only offering a limited amount of free templates, icons, etc. and showcasing all paid templates, icons, etc. A typical person would not subscribe to a graphic design service because there is a learning curve associated. But this company made it easy to buy into because they allow people to enter in their product.


In comparison, a subscription model is when a company charges a customer the same price monthly/annually for their product or service. This typically automatically renews until the customer cancels the subscription. Furthermore, this recurring revenue is a very attractive feature to a prospective buyer of your company.

For example, the SCFO Lab is a subscription service. For only $37.90/month, subscribers are able to access the tools, checklists, and resources one would need to be a successful financial leader.


While wholesaling is often seen in physical businesses, we have seen it grow as an online business. This is a great way to move more units of inventory and increase the amount of cash flow in your company.

This also relates to dropshipping. Simply put, dropshipping is where a customer buys off a website. That website offsets their liabilities by paying another company to deliver the requested product. So the website becomes an intermediary between the shipper and the end user. This is very common in the retail industry.


Another popular e-commerce business model is white labeling your product. For example, a software company created this incredible dashboard. Their customers are marketing agencies, and those agencies wanted a dashboard for each of their clients.  So that software company sells the shell of their dashboard so their customers (the marketing agencies) can customize their dashboards to reflect their branding. Those agencies are able to bypass creating their own program, but their clients don’t know the difference.

Why Everyone Should Be Using E-Commerce

In some form or fashion, every company should be applying e-commerce to their business. In 2018, it’s an assumption that if you are in business, then you have a website. Instead of leaving it as an asset that isn’t making money, strategize with your marketing and sales team how you could generate sales and make money off of it.

Furthermore, e-commerce isn’t the only thing you should be looking at as an opportunity. Click here to download the External Analysis to gear up your business for change, find other opportunities, and identify threats/obstacles to avoid.





What is a Business Model?

Entrepreneurs and businesspeople have many different definitions of what is a business model.

Business Model Definition

In the simplest form, business models are the method and strategy that a business or organization uses to operate. This includes the purpose, systems, and people that work together to add value to customers. These components can either be formal or informal. For example, large corporations have very formal purpose statements. This gives a framework to build around the systems. Ultimately, the people are the ones that put the business model into action and create value in-line with the organization’s purpose.

What is a Business Model?

So, what is a business model? First, entrepreneurs are notorious for not writing their business models down. These entrepreneurs often overextend themselves. As a result, it increases the likelihood that the company will lose sight of its mission. This is a serious danger but is not all-inclusive. Some entrepreneurs keep their business model in their heads and continue to deliver quality products. More often than not, however, entrepreneurs do not write their plans down. As a result, those plans are in jeopardy of not being fully executed. One possibility that is equally as frightening as no execution is the inability to tell the effectiveness of the plan.

An organization’s business model is bound to change and adapt. However, if it is not recorded in some way—whether in writing, pictures, or computer graphics — then it is difficult to assess whether the plan was successful or efficient. This can be detrimental to entrepreneurs, because they don’t have clear feedback to learn from in order to improve. To learn more financial leadership skills, download the free 7 Habits of Highly Effective CFOs.

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Market Dynamics

See Also:
Asset Market Value vs Asset Book Value
Efficient Market Theory
Market Positioning
Business Cycle
Market Segmentation
Brand Equity

Market Dynamics Definition

Market dynamics, defined as the factors which effect the supply and demand of products in a market, are as important to economics as they are to practical business application. Many economists established market dynamics. Arguably, they are most developed in Porter’s five forces of competition.

Market Dynamics Meaning

Market dynamics means the factors that effect a market. From the theory of economics they would be supply, demand, price, quantity, and other specific terms. From a business standpoint, market dynamics are the factors that effect the business model which involves the applying party. In comparison, the dynamics may be the price of a barrel of crude, total oil production, total national or international stockpiles of oil, the price of other energy commodities, and more for an oil firm. Whereas for a web 2.0 business, a social network for example, market dynamics analytics may be the total amount of free time spent online for both national and international users, amount of money spent online each year, growth of online advertising, and more.

For a prudent business, market dynamics are included in the market analysis of their business plan. Furthermore, these factors affect the business so much that it would be neglectful to exclude them. In conclusion, market dynamics play an important role in the marketing plan of a business. They may also play an important role in other areas such as cost of goods sold, distribution, logistics, and more.

Market Dynamics Example

Charlotte is writing a marketing plan for her new business. Charlotte sees a real need in the fashion industry for high quality accessories like purses and necklaces. Her experience in retail gives her a strong base to refer back to.

To complete the marketing plan she must complete a competitive and industry analysis. Essentially, she needs to assemble a market dynamics analysis for the fashion industry, with respect to accessories. Then she needs to understand them so she can fill a space for customers not being served.

Charlotte starts with the industry analysis. She looks at a number of statistics: consumer spending rate, retail growth, growth of the fashion industry, growth of brick and mortar business sales, and the competencies of wholesalers. Here, she is assembling market dynamics in order to find whether the market can support her business. She knows this an important foundation for her idea.

Next, Charlotte performs a competitive analysis. She finds all competitors and similar businesses. Then, she analyzes their strengths, weaknesses, and the perception of these companies to the average consumer. From this she realizes a matter of key importance: though clothing, cosmetics, and other stores exist there is no provider for the accessories which complete an outfit. She is satisfied and resolves to continue research to keep up to pace with her industry.

Prepare for the best… and the worst. Download the External Analysis to gear up your business for change.

Market Dynamics

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Market Dynamics


Margin Percentage Calculation

See Also:
Margin vs Markup
Markup Percentage Calculation
Retail Markup
Gross Profit Margin Ratio Analysis
Net Profit Margin Analysis

Margin Percentage Definition

Gross margin defined is Gross Profit/Sales Price. All items needed to calculate the gross margin percentage can be found on the income statement. The margin percentage often refers to sales or profitability which may help lead to several key understandings about the company’s business model as well as how successful the company is at maintaining its cost structure to gain the proper amount of sales. Analysis of margins within a business is often useful in controlling the price in which you need to sale as well as a control on the cost associated to make the sale. Look at the following margin percentage calculation process.

(NOTE: Want the Pricing for Profit Inspection Guide? It walks you through a step-by-step process to maximizing your profits on each sale. Get it here!)

How to Calculate Margin Percentage

In this example, the gross margin is $25. This results in a 20% gross margin percentage:

Gross Margin Percentage = (Gross Profit/Sales Price) X 100 = ($25/$125) X 100 = 20%

Not quite the “margin percentage” we were looking for. So, how do we determine the selling price given a desired gross margin? It’s all in the inverse…of the gross margin formula, that is. By simply dividing the cost of the product or service by the inverse of the gross margin equation, you will arrive at the selling price needed to achieve the desired gross margin percentage.

For example, if a 25% gross margin percentage is desired, then the selling price would be $133.33 and the markup rate would be 33.3%:

Sales Price = Unit Cost/(1 – Gross Margin Percentage) = $100/(1 – .25) = $133.33

Markup Percentage = (Sales Price – Unit Cost)/Unit Cost = ($133.33 – $100)/$100 = 33.3%

Margin Percentage Calculation Example

Look at the following margin percentage calculation example. Glen charges a 20% markup on all projects for his computer and software company which specializes in office setup. Glen has just taken a job with a company that wants to set up a large office space. The total cost needed to set up the space with computer and the respective software is $17,000. With a markup of 20% the selling price will be $20,400(see markup calculation for details). The margin percentage can be calculated as follows:

Margin Percentage = (20,400 – 17,000)/20,400 = 16.67%

Using what you’ve learned from how to calculate your margin percentage, the next step is to download the free Pricing for Profit Inspection Guide. Easily discover if your company has a pricing problem and fix it.

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Accrual Based Accounting

See Also:
Accrual Based Accounting GAAP Rules
Time Saving Tip for Filing Accounts Payable Invoices
Statement of Financial Accounting Standards – SFAS
Generally Accepted Accounting Principles (GAAP)
General Ledger Reconciliation and Analysis
Cash Basis vs Accrual Basis Accounting

Accrual Based Accounting Definition

The accrual based accounting definition, or accrual basis accounting, forms a method of recording financial transactions based on economic impact. In the accrual accounting method, record revenues when earned. Then, record costs when incurred, whether or not cash has actually been exchanged between the relevant parties. Contrast this method with cash basis accounting, which records transactions only when cash has been exchanged between the relevant parties. The accounting world uses the accruals concept well, in the accounting world it is far more common to use accrual accounting rather than cash accounting. The accrual definition may also vary based on industry and business model.

Download The Internal Analysis Worksheet

Cash Basis Accounting Method

Cash basis accounting is a method of recording financial transactions which records transactions only when cash has been exchanged between parties. This contrasts with accrual basis accounting, which records transactions based on economic impact. When thinking about accrual vs cash accounting, remember that accrual keeps record of any sales where cash keeps record of income only. It is also possible to perform accrual to cash adjustments and conversions in accounting records.

Cash vs Accrual Basis

When a company sells its product to a customer, it must record the transaction. Using cash basis accounting, the company would not record the revenue from the sale until it received the cash from the customer. Using the accrual method of accounting, the company would record the revenue from the sale once the customer has received the product, whether or not the company has received the cash from the customer. The accrual method seeks to record the entire process of a transaction.

Accrual basis accounting gives a more accurate depiction of a company’s financial condition. However, implementing it is more complicated and more costly than cash basis accounting. Accrual accounting is often used in situations with complexities beyond that of the simple sole proprietorship.

All companies that report financial statements according to GAAP rules use accrual accounting. Only very small and unsophisticated businesses (a local coffee shop, an antique store with little inventory, etc.) would use cash basis accounting.

Accrual Principle

Derive accrual basis accounting on two fundamental accounting principles: the revenue recognition principle and the matching principle.

Accrual Basis Statements

According to GAAP, and in accordance with the revenue recognition principle and the matching principle, you must prepare all financial statements using accrual accounting.

Download your free Internal Analysis worksheet to start developing and enhancing your strengths as well as start reducing and resolving your weaknesses.

accrual based accounting

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Accounts Payable Turnover Analysis

See Also:
Accounts Receivable Turnover
Days Payable Outstanding
Financial Ratios
Operating Cycle Analysis

Accounts Payable Turnover Definition

The accounts payable turnover ratio indicates how many times a company pays off its suppliers during an accounting period. It also measures how a company manages paying its own bills. A higher ratio is generally more favorable as payables are being paid more quickly. When placed on a trend graph accounts payable turnover analysis becomes simplified: the line raises and lowers just as the ratio does. Common adaptations used to calculate accounts payable turnover yield results like accounts payable turnover ratio in days, A/P turnover in days, and more. A useful tool in managing and measuring the efficiency of paying bills is a Flash Report.

Accounts Payable Turnover Formula

A solid grasp of the accounts payable turnover ratio formula is of utmost importance to any business person. Though some ratios may or may not apply to different business models everyone has bills to pay. The need to understand A/P turnover is universal.

Accounts payable turnover = Cost of goods sold / Average accounts payable

Or = Credit purchases / average accounts payable.

Purchases = Cost of goods sold + ending inventory – beginning inventory.

(NOTE: Want the 25 Ways To Improve Cash Flow? It gives you tips that you can take to manage and improve your company’s cash flow in 24 hours!. Get it here!)

Accounts Payable Turnover Calculation

Calculate accounts payable turnover by dividing total purchases made from suppliers by the average accounts payable amount during the same period.

Average Accounts payable is the average of the opening and closing balances for Accounts Payable.

In real life, sometimes it is hard to get the number of how much of the purchases were made on credit. Investors can assume that all purchases are credit purchase as a shortcut. As a result, it is important to remain consistent if the ratio is compared to that of other companies.

For example, assume annual purchases are $100,000; accounts payable at the beginning is $25,000; and accounts payable at the end of the year is $15,000.

The accounts payable turnover is: 100,000 / ((25,000 + 15,000)/2) = 5 times

An accounts payable turnover days formula is a simple next step.

365 days per year / 5 times per year = 73 days

Slightly different methods are applied to calculate A/P days, A/P turnover ratio in days, and other important metrics. This article outlines the fundamentals of how to calculate A/P turnover. For more ways to improve your cash flow, download the free 25 Ways to Improve Cash Flow whitepaper.

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For statistical information about industry financial ratios, please go to the following websites: www.bizstats.com and www.valueline.com.