As you know, I’ve written a few columns recently in my “Fun with Fundamentals” series. As you know, something is fundamental when no matter who you are, how long you’ve been in business, or what you sell, they apply to essentially everyone, every day.
These fundamentals I’m revealing here are no less than operating natural laws, and they’ve served businesses since proto-market was born 10,000 years ago when Og dropped his club and suggested to Gog that they do business instead of killing each other for what they wanted. That’s what’s so great about fundamentals, they’re as handy as they are immutable.
Become devoted to incorporating these non-negotiables into your daily/weekly/monthly management practices and you’ll have more fun because success will come and play in your backyard. If you don’t, well – you know.
1. In business, you can’t get where you want to go if you don’t know where you’ve been. That means you must produce and manage with regular and accurate financial statements: profit and loss statement (a.k.a. P&L, a.k.a. operating statement) and balance sheet. Millions of small businesses with amazing products have failed because they weren’t committed to this non-negotiable, financial fundamental.
2. In every business, someone manages cash every day. The best way to make this responsibility seem less like punishment is to project and manage future cash conditions over the next 12 months on an electronic spreadsheet, like Excel. Since, as the owner, you’re the one who has to cover any future cash shortfall – with more sales, less expenses or a loan – I recommend you for this forecasting job. When you learn the fundamental of projecting cash, your business world will transmogrify from crisis to control.
3. If you don’t know the difference between the number of days you take to pay vendors and how long customers take to pay you, you can succeed yourself right out of business. Understanding and tracking the relationship between A/R-days and A/P-days will teach you one of the most valuable fundamental financial lessons: the impact of time on cash. It will also reveal why growth is not self-funding and prevent you from getting burned by your cash burn rate.
4. As finding qualified employees continues to be a national business crisis, outsourcing is an increasingly powerful management fundamental. Call a meeting with your team and ask “Blasingame’s Outsourcing Power Question” about every task in your operation: “Must this be done in-house?” Everything that doesn’t “touch” a customer directly is a non-core competency, and an outsource candidate. Outsourcing is one of our newest fundamentals, but the efficiencies it delivers positively impacts almost all of the others.
5. After keeping positive checking account balances and making payments on time, keeping your banker informed about business opportunities and challenges is the 3rd most important banking fundamental. As much as they don’t care for bad news, no news is worse. The title of the shortest book ever written is Loan Officer Courage. An uninformed banker is a scared banker, and no one ever got a loan from a scared banker. And if you don’t have a banking relationship with an independent community bank, start one this week. In my half-century in the marketplace, a community bank relationship isn’t a banking alternative – it’s a small business fundamental.
6. Customer expectations are changing faster than ever. This would be scary if whatever your business should be doing tomorrow or next year wasn’t completely knowable. Think of your business as a gold mining company, but the gold you seek is in the heads of your customers. Please don’t complicate this – ask customers what they want and deliver that. This is arguably the #1 business fundamental.
Write this on a rock … Fundamentals are good habits that are fun because they work – every time. Practicing bad habits is the opposite and essentially a business death wish, which isn’t fun. Everybody knows that.