Success is in the Detail
By Dr Paul E Adams | September 30, 2003
"Grain by grain-a loaf; stone upon stone-a palace." George Bernard Shaw
Do you know the inner workings of your business? Do you think details are for duds? I hope not as management by appearance rarely works in the long run. Yet many small business owners- turn the details of financial management over to hired hands and a tax accountant. Ask these hotshot entrepreneurs how much money they made or lost last month and most can't tell you. Why? They will tell you they do not have time to be bogged down in the books. Besides, they have an accountant to work up the numbers –and advise them- so they think!
Many entrepreneurs are great sales types- they love the romance of the sale, the excitement of spotting and swooping down on a new prospect. They rise to the challenge of the close- anything less is boredom. These gifted souls can take an idea and craft it into a business but live on the edge of success. The bigger the challenge the bigger the dream. I have had the experience of working with such dynamos and it is an experience. An exhausting one at that. These leaders are on stage day and night- no dull moments but their Achilles heel many times flips them into failure. And it is usually failure from ignoring the details of their creation.
These icons of flambouncy and drive can drag race but fall asleep on the interstate. The excitement is in creating a new business or a new product at full speed but the daily demands of managing the enterprise become more irksome than rewarding. And so what happens- the detail is delegated- And unless there is a crisis, bookkeeping and financial statements have a tough time competing for the entrepreneur's attention.
Surveys of failed entrepreneurs reveal most neglected the financial nuts and bolts ignoring the financial erosion of their businesses hoping that the next big deal or the buying season to set things right. As a management strategy that is much like staying too long at the black jack table waiting for a "run" that never seems to happen.
Most successful business owners measure their success with a scorecard of net worth. They know if last month was profitable or not, they know how much they owe, and they know their break-even points. These successful business owners are on top of the performance of their business. When they have a losing month, they do not hide from the bad news. And they don't get careless because they had a banner month. These entrepreneurs know that most successful businesses grow slowly, that a healthy balance sheet comes from adding up profitable months – and absorbing the losing ones. They know that explosive growth can contain the seeds of destruction unless closely monitored so that inventories, accounts receivable and liabilities do not get out of whack.
If you pay attention to your income statements and balance sheets you will greatly increase the chances of owning a business that beat the odds of failure. Before you think I am getting a little preachy, can you answer these questions: What was your gross profit last month? What is your current ratio? How much money do you owe? What percentage of your accounts receivable are over 90 days? Francis Bacon is remembered for his remark, "knowledge is power" it certainly applies to staying in business. Your financial statements are score cards -the score cards of your performance.