Although owning your own business is about much more than just money, there are times when it’s all about the bottom line.

You can love what you’re doing, make a significant contribution to society, have employees that love you, but if you you’re not making enough to pay the bills and then some, you’re going to be in trouble.

And it’s not all about growing your sales – not too many years ago during the great dot com boom times, there were all sorts of companies that were growing like gangbusters.  They were adding customers, their quarterly revenue growth was incredible…and yet the hidden story was that a lot of them were also losing money hand over fist.

The real measure that’s meaningful is profit – simplistically calculated as Revenue minus Expenses.  here are some ideas for improving profitability. Read More…

photo by clearly ambiguous 

Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.
Mayor: What do you mean, “biblical”?
Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff.
Dr. Peter Venkman: Exactly.
Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!
Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes…
Winston Zeddemore: The dead rising from the grave!
Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!

It’s pretty much impossible to turn on the TV or read a newspaper without getting hammered with all of the dire news about the economy.  This article from Inc.com is a good example:

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I just got back from lovely Madison Wisconsin for some training on the Fintel set of Financial Analysis and benchmarking tools and I had plenty of time to reflect on what is probably one of the biggest issues many businesses face on a regular basis – having enough cash on hand to keep moving. 

Photo by Moriza

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A few months ago I did an entry on using a simplified financial break-even calculation that a business owner could use for high level strategic planning based on what they’d like to make.  You can see the details here.

As a quick summary, the revenue you need to reach a financial break-even point is your Fixed Costs divided by your Profit Margin.

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I had the chance to talk with one of my fellow PBCA members (Professional Business Coaches Alliance) the other day who is also a CPA.  I always find it interesting to get his perspective because I (like a lot of people) sometimes get overwhelmed with financial jargon.

Unlike some CPAs, John does a great job of keeping things simple.  A big part of the discussion we had was on the importance of Cash Flow relative to the health of a business.

Discussions on Income Statements and Balance sheets are often where an accountant will take you - and those are very important things to keep up to date and accurate, but they won’t always tell the whole story and they’re often more complicated due to accounting standards and can be difficult to plan with.

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