Have Conversations That Transform Your Business

How many conversations do you have about your business every month?
You probably have hundreds, if not thousands. They occur all the time with customers, prospects, vendors, employees, advisors, bankers—the list goes on. Over a year, they easily number in the tens of thousands.

Yet, unless you’re in the distinct minority of small business owners, you rarely have the kind of conversations that really transform your business. The kind that gives you an actionable pathway to profitable revenue growth, greater profitability and positve cash flow—three things you say you want.

The business conversations I’m referring to won’t cost you anything. They can happen at any time and only require your willingness to have them on a planned and relatively frequent basis. Oh—and you must be able to speak the language of your business.

We’re talking about having conversations with your business about your business.

Build your business avatar

Start by picturing your business as a person. Someone you can talk with whenever you wish. To better visualize this person, I suggest you create a business avatar and name it. For our purposes, let’s call it “Tom.”

Imagine you’re able to engage Tom in a casual, friendly conversation. This can be at any time, because he’s always available. (Later, we’ll recommend a way to talk with Tom on a more structured and scheduled basis.)

What would you discuss with Tom? Your list of topics is probably endless, but here are some ideas to get you started:

  • How’s our cash position right now?
  • What’s our gross profit margin compared to last year?
  • Can I make payroll next month without using my line of credit again?
  • What will our cash position look like next month?
  • Are we actually making any money other than what our business checking account shows?
  • Can we pay all our suppliers on time this quarter?
  • Can I pay myself more this year than last year?
  • What’s the current financial and operational health of the business?
  • How many customers have we added to our active list this quarter?

I’m betting you’d probably ask Tom these questions and lots more, if you could.

Guess what? You can ask Tom anything, any time you like. Those questions are just the tip of the iceberg.

To make this conversation even better, Tom makes these promises to you:

  • I’ll talk with you at any time
  • I will tell you anything you want to know
  • I will never lie to you
  • I will give you a clear picture of my past, present and my future—whenever you want it
  • I will always give you accurate information (if I have it)

What’s the catch?

Sounds pretty good … maybe too good to be true? You might be asking, “What’s the catch?”

OK, I confess—there is one. Tom will do all these things and more, but only if you can speak with him in his native tongue. Tom’s language is numbers.

Don’t panic or run for the door! Tom’s language is much easier to understand than you think. Don’t worry that you need a business or accounting degree to have these conversations. You don’t. Far from it.

To start learning Tom’s language, ask your accountant to explain the three foundational business performance reports and their specific purpose and uses. They are the basis of many conversations with Tom:

  • Your Income Statement
  • Your Balance Sheet
  • Your Statement of Cash Flows

“We all remember Cuba Gooding Jr.’s immortal line from the movie Jerry Maguire, ‘Show me the money!’ Well, that’s what financial statements do. They show you the money. They show you where a company’s money came from, where it went, and where it is now.”

If you like that quote, you’ll love the article it came from: http://1.usa.gov/1nNASIO

Disclaimer: This comes from the U.S. Securities and Exchange Commission. Don’t be put off! It is a clear, readable and relatively short explanation of the three financial reports. I’ll wager that you like it so much you’ll print and save it for reference!

Most accountants will be ecstatic to explain these reports to you, and how you may use them assess the current condition and performance of your business. (If your accountant resists this request, you have the wrong accountant!)

How to structure and have regular conversations with Tom

Here are some good ideas to get you started:

  • Schedule these conversations in your calendar. Make this the same date and time each period. I recommend monthly, but do this at least quarterly.
  • Have two or three of your most senior managers and/or advisors with you during these conversations. Your accountant should definitely be there, particularly when you’re getting started with these meetings.
  • Review your business’ performance from the last review period and for the year-to-date, focusing on these elements:
  1. Revenue
  2. Gross profit and gross profit margin
  3. Operating expenses
  4. Net income
  5. Cash flow

Get started on conversations with your business. I promise they will be some of the most important and transformational business conversations you’ll ever have.

I’d love to hear your reactions to thinking of your business as a good friend who will tell you everything you want to know and wants to talk with you, if you’ll only ask.