HeaderMMN

RESIDUE, Part II

By Chuck Violand

February 3, 2014

Borrowing from a page in the orientation handbook of Quicken Loans, Inc.: “Numbers and money follow; they don’t lead.” In other words, numbers in business are the residue of the decisions that are made and the activities that take place ahead of those decisions. If you want better numbers in your business, make better decisions and engage in better activities. Changing the numbers any other way is generally referred to as cooking the books. This applies to all the numbers in your business: top line, bottom line, and those in between. Here’s a look at just a handful.

Top-line Sales:

The company with the most top-line sales isn’t always the winner in business. Just ask the guys who have big top lines but small or non-existent bottom-line profits. They can tell you all about the lunacy of chasing top-line sales simply for the sake of a bigger top line. Top-line sales are the residue of the thinking you bring to your business and the decisions you make based on that thinking. Some owners are hard-wired for big top lines. Some aren’t. Either way, the sales you generate in your business are the residue of your beliefs and the decisions you make based on those beliefs.

Net Profit:

I’ve written about this subject from several different perspectives, but it always comes back to the same bottom line: profitability in our businesses begins with the beliefs we hold between our ears. These beliefs are the residue of how we feel about money and profits. If we think marginal profitability is acceptable, then that’s what we’ll settle for and all the business decisions we make will reflect that thinking. If we believe we deserve and are capable of earning deep profits, then our decisions and actions will reflect that thinking and help us as we make the tough calls, even the tough calls that can bind your guts up in a knot when you make them, but are necessary in order to earn those deep profits consistently.

Cash Flow:

Abundant or poor cash flow is also the residue of our thinking. The litany of reasons business owners give for excusing lousy cash flow could fill a book, but it all comes down to how we think about cash flow. If we accept that lousy cash flow is just part of the game of business, then our actions will reflect that thinking. It will determine how quickly we turn jobs and get them invoiced, and how aggressively we pursue money that’s owed us. It will also determine the customers we pursue and those with whom we choose to do business in the first place. All of these are choices and decisions we make based on our thinking. All produce a residue we either choose to live with or decide to change. At the end of the day, it’s our call.

Dan Gilbert, CEO of Quicken Loans, goes on to say in his orientation handbook: “Don’t chase money. Chase the skills that will make you great at what you are doing or what you are building. Become an expert. Become the best. Then, and only then, do the better numbers or the good money follow you.” Amen to that!

If you’re not happy with the pace of growth in your business, the people with whom you’ve surrounded yourself, the profits you’re earning, or the direction your cash is flowing then pay close attention to the decisions you’re making and the discussions you’re having, especially the ones with yourself.