10 Tips to Bottom Line Up Management
By Rich Russakoff and Mary Goodman

Bottom Line Up management is common sense but not often common practice. For Stage 1 Entrepreneurs, many of these tips will be new and compelling. For the more seasoned Entrepreneurs, we hope they will provide the impetus to remain connected and to check that their systems are current, effective, and complied with. We’ve selected these tips through the filter of WIN – What’s Important Now!

1.    CEO: think of it as an acronym for Cash, Equity, & Operations. It’s the CEO’s job to make sure the company has enough cash to meet its obligations, build equity, and maximize profits through operational efficiency and excellence.

2.    Scrutinize your large &/or past due receivables. Are there any accounts deceivable? Even if the economy has little or no impact on your business, some of your customers may not be as lucky. We doubt that Circuit City or Mervyns were completely current with their vendors and suppliers when they closed their doors.

3.    Create Profit focus through Margin Focus. Just as sales are the leading indicator of revenue, gross margins are the leading indicator of profitability. You get the behavior you exhibit, expect, tolerate, and reward.

4.    Identify profit drivers, not just revenue drivers. Incorporate the profit drivers into bonus and commission structures.

5.    If looking for bank loans, consider smaller, community business banks. They may be more aggressive and accommodating. They’re under less regulatory scrutiny right now and therefore may have fewer constraints.

6.    To reduce debt, follow these three steps: 1) Get cash flow positive. 2) Don’t add to debt – keep current on payables. 3) Prioritize by balance size. Pay as much as possible to the smallest balance, when that’s paid off, roll that payment amount into the next smallest balance, then roll both those payment amounts into the next, etc.

7.    Waste erodes profit. Know the impact that it has on your bottom line. If you have a 10% profit margin, for every $1000 in wasted expenses, you have to generate $10,000 in additional sales just to break even. And if you are operating on a 5% profit margin you need $20,000.

8.    Set targets and ranges by P&L expense line. We like to display them similarly to the way blood work is displayed from the lab. It’s bolded and highlighted if it’s outside of range. This creates a smoke alarm. Sometimes, there are reasons for it. Other times, it’s a red flag that needs investigation and/or intervention.

9.    Go deeper with your customers. Identify your niche and dig as deep as you can. This is imperative to survive and thrive in a retracting economy. Just like trees in a storm, those that grow wide and shallow will be uprooted while those with deep roots will continue to stand.

10.    Connect to the customer. Talk to them, and not just to sell, service, or solve a problem. Use specific and disciplined dialogue: What can we do to make it easier for you to business with us? What can we do to create a better buying experience for you? What other problems do you have? It stands to reason that if you’re trying to create solutions you should talk to the people with the problem.

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Mary Goodman
December 18, 2008
Our world has changed. It’s no longer business as usual.
The economic meltdown is rocking our world and will destroy us if we don’t react responsibly.

I believe that “we ain’t seen nothin’ yet!” In 1930, a full year after ‘Black Tuesday’ and the start of the Great Depression, unemployment was at 8.7%. It wasn’t until 1933 that it hit 24.9%. I’m not predicting that is where we are headed, only pointing out that economic waves take time to hit the opposite shore.

Where we can draw a comparison is that the Great Depression happened because people bought into companies with NO UNDERLYING VALUE. The dot-com bust happened because people bought into companies with NO UNDERLYING VALUE. The residential real estate crisis happened because people bought into properties with NOT ENOUGH UNDERLYING VALUE. The mortgage market collapsed as dramatically as the Twin Towers because banks bought and sold mortgages with NO UNDERLYING VALUE. Then investors created Derivatives that seduced investors into buying all of this garbage with NO UNDERLYING VALUE. We are starting to see hedge funds on their knees. It is frightening to think that the Madoff Ponzi scheme may be more an exemplar than an anomaly. What will be next? What trap doors lie ahead?

To make matters worse, our government has injected us with heroin by printing more money. Give the addict more dope and there’s no problem – right? Wrong: You can’t have a strong economy with a weak dollar.

Does anyone really know what happened to the seven hundred billion dollars?

We have become addicted to debt and, like all drugs, the high is immediately gratifying and fundamentally destructive. We have become bloated, fat, complacent and greedy.

It will become worse before getting better – that’s for sure. We are being thrown back into the primordial ocean. Who among us will grow legs and what shape will they take?

Babylon, Mesopotamia, Maya, and the Roman Empire – It’s not hard to see history repeating itself. The stages of civilization are the same. They are:

Stage 1: Cooperation – We depend on each other to survive.
Stage 2: Competition – We depend on each other to challenge us to become better.
Stage 3: Corruption – The end justifies the means.
Stage 4: Collapse – The end really didn’t justify the means.

I think we are seeing the collapse phase. We are being thrown into the evolutionary quagmire, swimming in chaos and crisis. Many businesses will drown in either arrogance or fear.

Even those that survive will be affected. They will crawl out of this weakened and nee help. In the emerging economic ecosystem, we will re-enter the cooperation stage.

It’s survival of the fittest. It always has been and it always will be. With every cycle of adversity, there is opportunity. We evolve by solving problems. We can no longer expect to survive by solving our problems at the expense or disregard of others. Those who will thrive will do so by creating solutions that benefit their stockholders, suppliers, employees, customers, and their communities.

The fittest won’t be the biggest or baddest. They won’t even be the strongest or the stealthiest. They will, simply and humbly, be those companies that offer UNDERLYING VALUE. They will be committed to cooperation, providing value for each of the stakeholder groups.

Giving and receiving is the same: Not giving and taking.

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