As a CEO, president or business owner, do you ever wonder why some business people really prosper and others don’t? Why some companies last generations and continue to expand and grow but others eventually close the doors, turn out the lights and walk away from their business dreams? Why one company, in the same industry, can have annual earnings of over one hundred million dollars yet another only two million in annual revenue? Is it the products and services offered? Is it the people each company hires? Is it the business plan? Perhaps the economy in their city and state? Yes, all those points can factor into the business equation as well as a host of other elements. Ultimately though, it’s the ability of leadership and management within a company to be able to see and understand the company vision and the risks involved in succeeding. It’s critical to understand the difference between cash and cost for the business to succeed, both in the short term and in the long term.
Throughout the years I’ve heard CEOs, presidents and business owners say: I don’t owe anybody anything. I am debt-free. I just don’t do it if I don’t have the money for it. I then ask: Well, how are you doing with the business? The reply is: I’m making a living and I’m getting by. I’ve talked with other business people and have asked the same question. The reply, for example, is: I’m 10 million dollars in debt. Just made another acquisition. I ask what their personal take home yearly pay is, and the answer is: About three million dollars a year. There is a big difference between “making a living and getting by” versus “three million dollars”.
Why such a vast difference in response from business people?
Answer: How you think about business.
Business people who play it, so to speak, too close to the vest are often too conservative in their business thought process. They may make a nice living but that’s where they’ll stay year after year. If you really want to do well, however you define that, it requires taking calculated risks with your business.
Not stupid business risks.
Not risks that will put you out of business.
As a CEO, president or business owner, to progress forward with your company requires thinking through how to get to the next level; knowing what’s the next thing you need to do. You may need to borrow capital, not to pay bills, but to expand and grow the business. In other words, understanding the difference between cash and cost.
Here’s an example of a business mistake CEOs, presidents and business owners often make:
Let’s say you were going to buy a piece of equipment for your business. The cost to purchase the equipment is $100,000. Some business people will say: I’m not going to take that risk. $100,000 is a lot of money! But the successful business person will analyze the situation and react differently. May say something like this: Wait a minute… $100,000? At the current tax rate I am paying, it’s really only going to cost me roughly $70,000 for the equipment because it is also a business tax deduction. The successful business person continues by saying: This can be a valuable piece of equipment to my company. I can get much more productivity from employees; offer customers more options which will open up other business opportunities.
I acknowledge that every business leader thinks differently and operates within uniquely different circumstances. Regardless, knowing exactly what it is you want from your business requires thinking in a way of total success for you and the company. It’s about having a vision, never giving up on the vision and being able to put the entire business package together in a way that works – for you, your employees, your customers.
Although tax rates may change or vary depending on the year and where you live, the premise described above remains the same. When considering purchases for your business you need to understand what it really means to buy that piece of equipment or other investment in the company.
- Do I have the customers?
- Do I have the business?
- Can I sell more products or services?
- Do I have the space for the new equipment?
- What financial options are available, if needed?
- What difference will this make in the long term to the business?
- How soon will the benefits of acquiring this major purchase impact, in a positive way, the business?
- Do I have the gumption to take a well thought through calculated risk?
The majority of business people show up to work every day and perform a job. They walk through the door, sit at their desk, look at what is on the desk and then on the computer screen. They get out the product or service, whatever it may be, and manage other employees or co-workers. They go to meetings and reply to phone calls or emails. The next day the cycle starts over again. There is no real time put aside to think and plan strategy as to what will move the business forward to more success and more profit. Everyone talks about stress but relatively no time during the business day is spent finding innovative ways to reduce stress and still get the business results wanted. Unless something changes in how you do business, it is a cost to your business that doesn’t bring in more cash.
If you want to make one million – two/three/four or five million dollars in annual take home pay, then you need to restructure your work day, your business and most importantly, how you think about business. Even if you only want to earn $250,000-500,000 yearly, the same holds true.
You won’t make money till you really understand:
- How business works
- How to use capital
- What the difference is between cash and cost
- How you use your knowledge to your business advantage
- How necessary it is to find time daily to sit down where it is not distracting and think about your business vision
It takes more than just one great thought. Successful CEOs, presidents and business owners have a continual flow of ideas and thoughts which leads to a continual flow of action in and around their business. It’s what motivates them to go to work each day.
Remember: Not all your business ideas will work out as planned. That’s why you don’t bet the entire farm, as the saying goes. Instead, take calculated risks. Timing with the right strategy is often everything. Stay on top of your business every day.
When you do find something that works well for the success of your business, really go all in. Make it happen! Then ask yourself:
- What’s next?
Go onto the next idea and the next idea after that.
- Do not have a business that’s stagnant.
- Do not have a business that’s just selling the same products/services and doing the same thing every day.
- Your marketplace is whatever you want it to be.
- Open your mind to the business possibilities that are all around you.
- See the vision for your business.
- Use capital properly by being strategic with your thoughts.
By understanding the difference between cash and cost you will be very pleased with your business results.
May this be the best business year ever!
To your success!
Business expert and strategist, Howard Lewinter, guides – focuses – advises CEOs, presidents and business owners throughout the United States across a wide variety of industries, to MORE success – MORE profit – less stress. Business people trust Howard’s vast business knowledge, intuitive insight and objective perspective to solve business problems and issues. Get MORE from your business. Talk business with Howard: 888-738-1855.
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