A funny thing happened to me during the 5th year of my 3rd start-up: I fired myself. The company continued on, but I walked away. Why? I could say that the company could no longer afford a CFO. (Sales had dipped during the recession, and I was working at half pay.) But that's just an excuse.
The real reason I fired myself from the company that I helped start has everything to do with
You may not know Edward Altman, but he knows whether your company will be bankrupt in the next two years. Altman developed a deceptively simple formula that calculates the financial strength of a business and accurately predicts the probability of bankruptcy more than 90% of the time. The formula, called Altman's Z Score, needs just 8 numbers -- and all of them can be found on your income
There are hundreds of ways to look our business – we can spend hours staring at financial statements and ratios. But financial statements alone won't help us make progress...what an entrepreneur really needs is a map.
A great "business dashboard" can be that map, showing us not just where we are, but also where we are going. (Financial statements tell us only where we’ve already been!)
Its amazing how complicated you can make bookkeeping if you try. Apply for a handful of credit cards, get two or three bank accounts, and carry arround a checkbook ... and you're on your way to a life of late payments and bounced checks.
There's a better way. In fact, keeping your books straight in a small business should be as simple as "Just Say One."
So next time you are asked...
People say that writing things down creates a certain kind of magic.
It must be true. Some of the most powerful magic I've ever seen came from a 24" x 36" piece of paper and a colored marker that became my business dashboard. After I created a business dashboard, nothing was ever the same.
If you want your business to thrive you must know - and measure - the things that make it work.
When I say the word "accounting" I bet you either tremble with fear or yawn with boredom. Right?
Accounting is not some dark science to be feared or ignored. In fact, used correctly, accounting can be the strongest tool in your business strategy toolkit. The key is to give up thinking like an accountant and instead think like a finance person. There's a huge difference.
Would you rather know the complete wind-speed, temperature, and latitude of a hurricane... or to see this satellite picture of it barreling toward you?
To me, forecasting business performance is the same thing. Give me the big picture so I can worry about the things that matter (like finding batteries and bottled water) rather than wasting time pouring over endless details (like wind-speed
There’s no getting around it. Businesses run on cash. The current economic situation makes it painfully clear: when the cash flow stops, the business stops.
The amazing thing is that every company has the power to both predict and avert sales-related cash flow problems. A few numbers from your balance sheet and income statement are all you need to be forewarned of an impending