Science of Business Wealth

Through our observation and studies, we have identified 7 stages of evolution that an organization goes through when it comes to working ON the business.

These stages are not definitive many organizations show tendencies to mix components of each stage yet the successfuls master each stage before progressing in an effective manner to the next.

There are many conditions that determine the velocity of the evolution but in the main the key variables that create either constrains or rapid progress include

• Leadership
• Culture
• Money

Are you a small business owner with 5-25 employees or aspire to grow to that level? 

You probably chose to be an entrepreneur so you could work on your own terms and build a great lifestyle. Sadly, many business owners just like you feel like employees trapped in a horrible nightmare.

• Do you lurch from paycheck to paycheck?
• Does your income statement say you made a net profit at the end of the year but you have no cash to show for it?
• Are you frustrated that as your grow you expect life to be easier yet you find yourself working even harder?
• Do you find you find you can’t even leave the business at the weekend because there are so many things for your to do?
• Has your family forgotten your name?!

Look- You don't need to work like a slave to live the life of a millionaire”

“Management doesn’t get paid to make shareholders comfortable. 
            -We get paid to make them rich”
                        Robert Goizeuta former Chairman & CEO Coca Cola Company

Here at the Science of Business Wealth we want to help you develop great answers to the following questions:

1.  Are you making money?

2. Do you have enough cash to run your business?

3.  Are you building long term wealth?

This post focuses on question 1.  There are three levers to increase profit and we will examine each in turn to show you how to make more money.

“When I was boxing I made five million and wound up broke, owing the government a million.”

Joe Louis

Over 60% of the businesses we work with consume precious cash when they grow.  Sadly, most of them did not know this fact.  They happily celebrated their increasing revenues and rising profits until one day they ran out of cash.  Game over.  Done.  

We term this malady “Growing Broke”.  

Have you and your business been infected by this sly and debilitating illness?  It quietly eats you up.  As you struggle to make sales you breathe a sigh of relief blissfully, but dangerously not realizing that the cash rash has spread all over your body and you are really like one of the zombies in the series “The Walking Dead”.

We don’t want this to happen to you so we are giving you an easy way to tell if you are healthy and wealthy or you have the cash rash—if you are infected we will give you an early diagnosis and course of treatment.

Each of the sharks above have a different personality and propensity for risk.  Mr. Wonderful want to know you know your numbers or else he retorts "you are dead to me!"

Mark Cuban mulls quietly and pounces quickly often shutting the other sharks out.

Even though they are billionaires they worry if they invest with you, how will they get their money back?  They want to know what kind of risk taker you are and how safe their money will be.

In our last blog (Making Money from Other People’s Money) we discussed the role of Debt in helping you with your wealth creation strategy.  

The key insight was if your business generates a significantly greater return than the interest rate at which you can borrow money then increasing your debt is an effective strategy for growing your company.

Now we are going to layer on a second component to managing debt, something the sharks look for, are you disciplined in the way you consider overall business risk.

Wouldn’t it be great if you knew your business was a well-oiled machine capable of building wealth? All you need to do is to go the bank borrow their money at say 5% interest and put it into your business machine which converts it to a 20% return.

You pay back the bank and enjoy the fruits of your 15% return and you never needed to use a dime of your own money!

It is possible and requires you set up your Balance Sheet as a Wealth Creation Engine. Of course it is not straightforward, but there are basic disciplines you must master to get there.

Our research of successful business owners shows they are very comfortable and capable of leveraging debt (other people’s money). This post shows you how to use good debt and not fall prey to bad debt.

“I hired a counterfeiter the other day. I told him, “As for your salary, how much you make is really up to you.” I love a business model where the employee pays the employer.”       Jarod Kintz, This Book is Not For Sale

As a small business owner you are often the employer and the employee. If there is ONE thing you need to have a maniacal focus on, it is CASH.

You can survive if your revenues dip a little or a key employee leaves or you lose a critical customer. But you cannot survive without cash. Cash is to your business as oxygen is to your vitality.

No cash. You die. Period.

Business growth can be exhilarating. But growth sucks cash. Fast.

You need an easy way to calculate your cash and your cash flow. This post gives you a method and tool to do this.

Good to Great by Jim Collins is a great book that explains “Why Some Companies Make The Leap and Others Don’t”.

The challenge for small business owners is much of it may not be relevant as the average size of the 28 companies in the study was over several billion dollars.

The startling fact is 50% of small businesses fail within their first five years. We wanted to know how to avoid that failure and what successful owners did to consistently grow their business.

So we launched our own unique multi year study of 164 small businesses whose revenues ranged from $500,000 to $10,000,000.