By Mike BabichBullet Points for Business Owners

Business owners and managers are heroic and inspirational.  Like most super-heroes, it’s lonely at the top.  You must constantly be innovating.  Gary Oborny thrives on innovation, as evidenced by his desire to support Occidental Management tenants in any way.  That said, if you have business questions or want to run a confidential idea by me, I welcome your call at 316-409-2599.   Now, innovation doesn’t mean you have to invent a new product every month.  It means you are on the lookout for opportunity and open to doing things differently.  You may even innovate in your world by making sure you’ve got the basics covered:

Discipline. 

• Fiercely guard your time. It is finite and, behind family and friends, it is the most precious thing in your world.
• Avoid wasting time on tasks that won’t save you money or make you money. But designate weekly blocks of time for employee recruitment and retention, financial analysis, and communicating with strategic partners.
• Identify the 4-5 most critical elements of your company, figure out a way to quantify/measure success in each (sales per day/% of on-time delivery/gross margin, etc.), and measure those constantly

Financial Analysis.

• Accounting is simply the language of business and not something to be feared nor ignored. The balance sheet and income statement (P&L) combine to create a report card for you and your business.  Let’s keep it simple.

• Cash Flow. How much cash is your business producing?  (Net income + Depreciation + Amortization +/- Non-Recurring Expenses/Income).  If you have a loan(s), add Interest Expense to the previous equation, then divide the result by the total of your loan payments during the same period – Debt Service Coverage Ratio.  25 or higher is considered healthy, but this is subject to industry and circumstance.

• Cash + liquid assets that can be converted to cash within 1 week + availability on a line of credit. Divide that number by what you define as your fixed costs.  This ratio indicates how many months the company can survive even if you cease to have income (shock test, granted).

• Compare what you “owe” to what you “own”.  Total Liabilities + Owner Loans to the company divided by the combo of Net Worth, less intangibles and Owner Receivables.  3.5 or lower is considered healthy, but this is subjective.

• Current Ratio, if applicable. Current Assets divided by Current Liabilities.  Usually better to have more assets than liabilities.  5 or higher suggests your balance sheet has good balance.  Again, subject to industry and circumstance.

Succession Planning.

• Even if you are 28, you should consider an exit strategy. What moves can you make today to affect the company’s attractiveness 5-10 years from now?  Be innovative!
• You are doing the owners and the company and each owner’s beneficiaries a huge favor if you have life insurance on all owners, with fellow owners/the company as the beneficiary (to purchase the decedent’s stock). God forbid, your partner dies.  Human tragedy is enough.  Shame on you if you allow business ownership chaos to make things even worse.  Call a trusted insurance professional this week!

Sales and Negotiating.

• Deal with quality, innovative people. I say, “If the people in the room are intelligent, creative, and empathetic and you don’t get a deal done . . . shame on all of you.”

Fight to Maintain Perspective.  Remember why you are doing this in the first place.  Whether out of passion or for profit or both, owning a business is a choice; indeed, a way of life.  Lean on your significant other(s) and your strategic partners.  It will still be lonely at the top.  But you can’t beat the view.