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Daily Leadership Thought #59 – Get the Math Right

November 23, 2010

Free Serious female teacher wearing old fashioned dress and eyeglasses standing with book while pointing at chalkboard with schemes and looking at camera Stock Photo

It’s amazing how many people can’t do (or ignore) basic math when it comes to their business (or their personal lives):

  • Revenues minus expenses equal profit and a business can’t survive in the long-term without a profit unless there is a subsidy in place.
  • You can’t sell something for less than it costs you to make/deliver it.
  • Not all products and services are created equal. Make sure your internal investments match the external market realties.
  • Cash inflows must exceed outflows or there needs to be a strategy in place to cover the shortfall (and this should only ever be a short-term problem – 120 days or less).
  • The status of your work backlog and sales pipeline are a good indicator of your future.
  • If your Days in Accounts Receivable exceed your Days in Accounts Payable, you are creating a cash flow problem.
  • Your cost of capital should be less than the return on your investment opportunity.
  • Debt is never a good strategy to cover up bad management decisions or business model flaws.
  • Minimize overhead expenses relative to revenue results.
  • Ensure adequate investment in revenue-generating positions (e.g., sales and marketing) to leverage opportunities.
  • Your level of productivity should always exceed the rate of inflation.
  • Don’t pay yourself more than the business can afford.
  • Keep enough capital in the business so that you can handle short-term emergencies and/or take advantage of unforeseen opportunities.
  • The compound value of interest over time is an amazing thing.
  • Businesses and families should have an operating budget and live with their means.
  • Have money set aside for emergencies because they do happen.
  • If you don’t invest and save for your future, you may not have enough money to live on when needed.


Hope is never a good strategy when it comes to your business or personal finances.