MBG                            

Paradigm
                                                      February 2010
Joe Mayer
Joe Mayer Ph.D.
216-408-6324
 
In the News
________________
 
Join me at this year's Metal Matters Leadership Summit March 3-5 in Orlando Fl.
__________
 
 It takes less work to succeed than fail
               Clement Stone
____________________ 

Want to read unusual thoughts reflecting on everyday occurrences? Check out
IndigoLantern
 
____________________  

If you would like to read some of the previousely published articles, please click here ___________________

 
Forward this email to a Friend 
______________________
 
Looking for more information? 
 
 Go to our
web-site
Greetings!

Most business owners have received the first draft of last year's financial statements and now is a good time to sit down and thoroughly analyze all aspects of your business. Going through the statements with some clients, I realized that this exercise is 1) as popular as getting a root canal and b) most entrepreneurs and business owners do not have a good understanding of the basics behind a balance sheet and income statement. To make matters worse is that costs and expenses are often incorrectly und inconsistently classified, thus make getting the facts and drawing conclusions difficult and the results questionable at best. 


We all know the saying garbage in, garbage out. It means that taking flawed information and drawing conclusions without proper skepticism and examination means that the conclusions will be all but useless. 


So, why should I care, you might ask. As business owners we make a multitude of decisions daily. Setting prices, negotiating discounts, attracting customers, forming alliances and setting staffing levels and salaries, just to name a few. All decisions which have a high impact on our proverbial bottom line. If we do not know and differentiate our products and services and know their real cost and real margins in detail, how can we decide where to invest, which markets to pursue and which customer or market segment provides all the profit for us? Growing back our business can only happen if we grow back the parts providing the highest margins to us.

As the economy starts to rebound, the biggest challenge might be to survive the recovery. Ramping up business levels will require resources both in manpower and money. Spending those on customers who require a lot of handholding and buy only products with slim or negative margins is not a good business decision. Growing your business is only a good goal if you grow it profitably. Sometimes cutting marginal products and customers who drain all your resources, thus shrinking your business, might be a much more profitable alternative. 

 
My advice is to find a business consultant or a business coach with a strong financial background who understands what you are trying to do. Sit down with him or her and take the time to really understand what is going on in your business and become fluent in the financial language. Then make decisions on how and what to grow and what kind of customers you want to attract and serve. From this starting point, growing your profit is a much easier task than throwing darts in the dark.       
 

Joe