jpg” width=”383″ height=”254″ />If you’ve ever exercised by lifting weights, you know that the amount of the weight on the bar is only one variable that needs to be considered for a particular exercise
If you’re doing a bench press, you can add more weight because your chest and shoulder muscles help your arms to lift the weight
But if you put 50% of that total weight on each of two dumbbells, you can’t lift either one
You’ve probably also learned that you can’t use the same weight for curls as you do for bench presses
How much weight can you really lift?
“Make everything as simple as possible, but not simpler
” ~ Albert Einstein
Likewise, if you’re going to do only one repetition, you can handle more weight than if you’re going to lift it ten times
If you are lying flat, you can do more than if you’re lying on an angled bench
And if you’re going to do more than one set, you’ll probably have to reduce the weight further so you’ll still be able lift it when you’re in the third set
Are you trying to build strength or develop endurance? Are you trying to lose weight or improve your golf game?
All of these variables make a difference
How do we balance all of the financial variables?
Please note that if you hover your mouse over a defined term that is underlined with a dotted line, the definition will appear alongside
or, do we increase the cash we pay to our shareholders? Is it worth giving up some equity to outside investors to achieve our accelerated growth plan
or is the dilution too damaging to our existing investors?
How do I measure and evaluate all of that? Conversely, how fast can I grow my business without outside capital? For family businesses, it’s a classic conundrum: How do I fund the transition of retiring family members when the business needs that capital to grow?
How do I start to evaluate these issues?
There are a lot of perspectives from which to consider these challenges
Your company’s “
exkalibur com/learning-center/audio/” target=”_blank”>prioritize the Company’s opportunities
com/learning-center/audio/” target=”_blank”>prioritize the Company’s opportunitiesto make the most powerful strategic choices to drive future performance
Being clear about your goals and objectives and what you need to accomplish is the centerpiece upon which the evaluation of these issues must rest
Allocating your limited resources is one of the toughest decisions of all
Of course, these variables are also influential as you make your “capital allocation” decisions, a fancy term for “we don’t have enough money to go around”
so how do we decide how to allocate our limited resources?
These issues become problematic when they’re not managed, and always surface when a company does not prepare a longer-term forecast that allows it to anticipate trends and future results
Many companies ignore this process, usually with a statement that sounds something like “I don’t know what’s going to happen tomorrow, much less next year, so why should I bother trying to forecast the future”?
Ignore Forecasting at your peril
It’s certain that forecasting future results is more art than science, but it’s also true that we can do a lot to “get in the ballpark” of future expectations
Even if you’re going to “SWAG’ an estimate of future sales, you can evaluate the sales cycle, inventory turns, collection periods and other metrics to better understand the range of likely outcomes
If you’re off by even 10-20%, you can still get a pretty good idea of the general direction of the discretionary cash flows available to meet some of your goals
Cash flow is the lifeblood of business and you’ll have the opportunity to become a We’re going to make this as simple as possible
What these issues have in common with weight lifting is as simple as it is complex While the iterative nature of the weight lifting routines is pretty obvious – there are a lot of variables that affect each other, and when one is changed, it changes the other – the failure to embrace those differences can lead to serious and permanent injury
What these issues have in common with weight lifting is as simple as it is complex
While the iterative nature of the weight lifting routines is pretty obvious – there are a lot of variables that affect each other, and when one is changed, it changes the other – the failure to embrace those differences can lead to serious and permanent injury
We’ve started a
exkalibur com/vol-4-its-midnight-do-you-know-where-your-cash-is/” target=”_blank”>Follow the Money
com/vol-4-its-midnight-do-you-know-where-your-cash-is/” target=”_blank”>Follow the Moneyvideo primer that will give you a simple but solid overview of cash flow in about 6 minutes or so
You can’t ignore how these issues interact
It’s clear that when companies fail to consider the interaction of variables like growth rates, leverage, dilution and valuation, unseen currents of conflict gain strength
The longer these issues linger, the more expensive and difficult they are to resolve
Let’s get started together
In our Business Finance series for Non-Finance Executives, we’re going to explore these concepts, their relationship to each other and the impact they have on your business
These are some of the most important concepts you need to understand
We’re going to build a comprehensive framework that will help you think about them
act on them
and literally save your business