This book is written for business owners, operators, and managers. No matter what your position in your business, no matter what your product or service, and irrespective of your talent, skill or experience, the principles presented in this book can make you more profitable!
Every chapter is filled with principles and concepts that you can use immediately to become more profitable in your business and to enhance your expertise — and wisdom — in business decision-making.
Gain Business Wisdom
In the Black introduces the concept of the Wisdom Pyramid. It is a way of modeling the assimilation of data into meaningful and predictive business decisions.
You will learn how accounting is the primary source of data and how to use this data to work your way up the Wisdom Pyramid using reports and statistical analysis of your business data.
Every business decision that you make should be based upon experience (wisdom gained from past analysis of information) or upon current information. Without specific metrics to gauge your success, you will have no data to determine what things that you try are working.
To move up the wisdom pyramid, you have to experiment with new approaches. The difference between an company that is performing well and the true successes stem in large degree to how willing its management is to try new approaches and measure their success.
Without constantly reinventing yourself, you could find yourself in the same position of buggy whip manufacturers at the dawn of the automobile’s popularity. Even though the product they made fit a former need well, the world moved on without them. No company can afford to find themselves left behind. Continued measurement and course adjustment will assure that you never are.
Under the Universal Business Model (UBM), communication between the three basic functions of all business increase profitability.
In the Black explains how each department must communicate with every other department, and how it directly affects profitability.
In the Black introduces a model for increased profitability, the Universal Business Model.
Any business functions that act independently of the other three can single-handedly doom a company. For example, if Marketing has not been informed by production as to what it currently manufactures, marketing dollars get wasted. Likewise, if manufacturing is not told by accounting what products are profitable to produce, they may operate at a loss.
A good example of this is a frame shop that bragged how much business that it was bringing in and how much it was taking business away from its competitors. Upon further analysis, it was found that they were operating at a loss on every sale. They could undercut their competitors only because their competitors couldn’t afford to sell the frames at the price either. The key difference is that their competitors were are aware of the fact.
In the example above, the most disturbing thing is that the frame shop was not even aware of its failure. Often, without communication between divisions of a company, each function of a company may be doing well in and of itself, but the company as a whole suffers.
Metrics within each function of a company should reflect its contribution to the whole, and not independent of the other business functions. When one basic business function is working well, but independent of the success of the company as a whole, it is a bit like two people on a small boat out to sea. One person says to the other in an accusing manner, “Your half of the ship is sinking!” When the boat goes under, it will be of little comfort to the accuser if his half of the boat sinks last.
In much the same way, if production is cranking out widgets at a record pace and marketing can’t interest customers in it, the company suffers. If the product is not making the company money and the accounting function doesn’t report it, likewise the company as a whole suffers from lack of key business knowledge. A company’s functions win or lose together. Finding the source of fault only provides useful information when there is still time to do something about it. A coroner wastes his time scolding bodies on his slab when he tells them they should have exercised more. Make sure that you don’t wait to analyze your accounting data during a “post mortem” exam.
Be More Profitable
As you learn to increase communication across the business functions of marketing, production, and accounting, you become more profitable as a natural consequence.
When production knows from the marketing function what products and services that customers want, they know what to produce to make the company more profitable. Likewise, if the accounting function of the company informs marketing that costs have risen for a particular product, marketing now knows to raise the price of the product to maintain profitability.
Many examples of these cross-function interactions are given in In the Black to give models from which to apply the principles to your own business.
Of course, profitability should be the goal of every business. Regardless of how well that marketing, production, or accounting work on their own, it is only when they work well in concert that profitability is achieved. A business that cannot sustain itself by staying in the black cannot hope to stand the test of time, and the most basic measurement of a company’s success is its very survival.
Don’t be content to merely survive. With the process of continual improvement outlined in In the Black, you will find ways to maximize your profit that you had never dreamed of. Continually monitoring the effectiveness of your efforts through good accounting practices will help you to achieve the business wisdom to know what works and what works better.
After reading this book, you will:
Know how to make the three major functions of business – Marketing, Production, and Accounting – work together more effectively.
Understand a process of gaining knowledge – even wisdom – to help you make better business decisions.
Know how to become a Profit Expert within your business.
Improve your understanding of the financial position of your business.
Understand more clearly how accounting information can help you manage your business more profitably.
Be able to develop action plans to implement these Nine Principles immediately in your business.
Benchmarking is the process of comparing your internal performance metrics to objective industry bests or standards.
Benchmarking can help drive your profit improvement strategies.
Diagnose your strengths and weaknesses compared to your industry peers.
Learn which areas of your business need the most improvement.
Create profit projection scenarios to improve your competitive position.
Train your managers to take action based on performance results.
Position your company name more favorably for financing.
Our reports will Interpret and explain your industry benchmarks
Executive Summary highlights strengths, weaknesses and key points
Industry percentile rankings shown for 20 major financial ratios
Interpretation of variances from industry norms
Bold Graphs that show comparisons
Profit improvement “what if” financial capabilities
“Discussion Ideas” section that provides a springboard for action
We want to help you build profit improvement strategies and competitive financial performance in your industry.
Benchmarking and strategic planning are “hot” management techniques that survived the boom of the 1990’s.
Benchmarking is the best way to uncover performance gaps in an organization.
Benchmarking against competitors helps keep managers focused on their markets.
Benchmarking takes the guesswork out of competitive analysis.
Benchmarking provides a yardstick for improving competitiveness.
It is not enough to know yourself in the world of business. You need to know your competition as well. One of the most important decisions you can make to improve your profitability is to have a system that helps you understand what your competition is doing.
You owe it to your business to get a complete financial picture of how your business compares to others in the industry. Add to your business assessment an hour of expert business consulting, and you have a winning combination. Having your accountant do this kind of analysis would cost hundreds more, and most accountants do not even have access to this kind of industry-specific information.
Find out how your company measures up to its competition and discover those areas where you can improve your bottom line.