We recently discovered an article written by our partners at Profit Mastery that was originally published in 2008. We think that it is still relevant and have edited it a bit to reflect our current business environment. Additionally, we have added comments (in italics) that call attention to the value of Profit Gap reports. It is worth noting that Profit Gap was not available to answer many of the “unsolved mysteries noted below at the time the article was originally written.
What Are You Pretending Not to Know?
Watch TV news, scan a few TV commercials, flip through any newspaper, follow news on Social media these days and it would seem that there are no mysteries any more. Let’s face it, we know way too much about too many people’s habits, problems, and proclivities. We’ve got more factoids, tidbits, inklings, stats, blogs, tweets and so-called expert opinions (legal and otherwise) than we can use in a lifetime – except when it comes to the inner workings of our own business. It’s often our single biggest investment; the entity into which we’ve poured our efforts and yet at the core, paradoxically, it can be as mysterious as the continent of Africa.
Unsolved Mysteries: Here are some of the more interesting unsolved mysteries we’ve encountered from conversations with business owners:
“Why am I so confused over what my profit was for the last three years and what my actual inventory is at year-end?”
“Why does my balance sheet show a negative net worth and what can I do about it?”
“Why does my new banker insist that I pay off my credit line now?”
“When are mom and dad finally going to retire and which of my siblings will inherit the business? Is there a written buy-sell plan in place somewhere?”
“Why do I feel like my Dad’s CPA gives me the run-around when I try to get answers?”
“Why do I have so many problems with bookkeeping?
We’ve found there’s a consistent process in the unearthing of and resolution to these mysteries:
Catalyst Events:
Death, illness, and infirmity bring transition issues to a head. No prior planning usually brings unpleasant surprises. (Profit Gap’s goal setting process coupled with the organization of the report makes it a lot easier to “get a handle” on the state of the business in event of a catastrophic event.)
New banker in town:
Credit lines need to be paid off, timely and accurate financials submitted, and questions need to be answered. (A banker will LOVE Profit Gap- and it shows that you have a solid understanding of the numbers in your business.)
Joining an industry peer group:
Especially when you have to share your financial data and, as they say in the biz, “Get naked in front of your group.” You start seeing your business, muffin tops and all, and think about a plan to get in shape. (Profit Gap can be essential here as its decision relevant format will help organize your thoughts and give you the tools you need to talk about business finances with confidence.)
Declining markets/increased competition:
There is nothing like that new competitor coming to town to get you on your toes! (Profit Gap gives you the information you need to run your business with maximum efficiency.)
New outside Advisor, CPA or coach:
A good sign is when you hear them ask, “that’s interesting – can you tell me why you handle X that way?” way before you start hearing any advice. (Profit Gap provides a tool and a format that helps facilitate communication with advisors.)
Defining Moment:
If it doesn’t come from outside influences or events, sometimes it comes from within. A great book, a peer who has successfully faced the same issue, or someone who kept their head in the sand until it was too late.
The simple question, “What am I going to do today to make things different tomorrow,” is where it all starts. (A great place to start is to run Profit Gap reports on a monthly basis! Profit Gap is designed to identify key opportunities that will help improve things for tomorrow.)
Where Do You Go From Here?
You can’t do it alone. Get help. Join a peer group, find someone who’s been there, done that, and/or assemble a great team of advisors…and, use your Profit Gap reports to identify and track opportunities for improvement in your business.
Bring in an outside party if appropriate:
We can’t tell you how many times we’ve seen an apparent irresolvable family business dispute resolved when a skilled intermediary is brought in.
Be determined, don’t take no for an answer, but be patient. If your financial statements are a mess, it will take some time and patience to get them accurate. Keep the faith that it will happen, just not overnight.
Hire a competent bookkeeper:
Yogi Berra may have said it best: “When you don’t know where you are going, you might end up someplace else.” Many business owners hire the least expensive Bookkeeper they can find and often they get what they pay for. We have seen so many Profit Gap reports over the years with questionable data in the Balance Sheet and Income Statement and we realized that some of the people that enter the data into the company’s QuickBooks are not trained in accounting. In those cases there are clear violations of Generally Accepted Accounting Principles as the books are not GAAP compliant. We are adamant about the critical importance that your Bookkeeper provides to the health of your company and we will be using this subject in our next Profit Gap letter to illustrate the point.
Realize it’s usually the question you are most afraid to ask that must be answered. Take a minute now to write down the answer to this question…
What am I pretending not to know?
Note: If you are receiving this letter, you may (or may not) be using Profit Gap. If you are, congratulations! You are well on the way to answering the above questions. If you are not, what are you waiting for? The first month is free!
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