The Financial Manifesto
After 25 years as a management consultant and CPA advising private companies on growth and building business wealth, I’ve developed these 12 financial philosophies and strategies that help my clients to accelerate profitable growth, maximize the valuation of their companies, and dramatically increase their personal wealth.
- Don’t minimize taxes. It’s short-term thinking that hurts your balance sheet, hurts your ability to borrow to fund profitable growth, and hurts your long-term wealth.
- Profit is more important than revenue. Profit provides fuel to generate more revenue and more profit. Profit drives positive cash flow, strong EBITDA, and enhanced valuations. Profit is a sign of good management.
- A weekly Flash report that shows sales, production, and cash position will align your management team with your goals faster and better than any other process known to management.
- Reduce your Total Days To Cash™ to improve your working capital and fund your own growth. This metric starts when you pay your employees and ends when your customers pay you. It’s longer (and worse) than you think.
- All projects and strategies have financial metrics. How are you measuring yours? The keys to accountability and progress are clear metrics.
- There is good debt and there is bad debt. Always utilize good debt that optimizes your working capital and matches financing to asset life and generates future earnings or increases capacity.
- Think like a banker and focus on cash flow and equity. These will ensure your sustainability.
- Always have two bankers and change one of them every five years (unless they’re a great strategic partner that has helped you through tough times, then keep them).
- Know your numbers. The best CEOs I’ve worked with know their product costs and margins by line, or even by product SKU. They know their daily or weekly sales, production, and cash position and burn rate. They know their EBITDA. They use Flash reports to align management and focus on results. Do you? Does your CFO?
- A budget doesn’t constrain you; it gives you control on how you invest your money to optimize your results. Winging it is for birds, not businesses.
- Never bet more than you can afford to lose. Know your risks and limits going in to new ventures. Use pilots and testing to prove your concepts.
- Cash isn’t king, it’s the ace. The ultimate metric and resource in business is cash. Cash is a sign of great management.