The Ultimate Blueprint for an Insanely Successful Business

by Keith J. Cunningham

Sustainability always comes from knowing what you are doing and measuring your progress.

For a business owner, the right business skills and tools are mandatory. So is practice.

Measure Results, Change Activities

Your financial results are simply a numerical reflection of the business decisions and operating activities in your business.

Measuring Time and Thinking Time are the two highest forms of business leverage available.

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for example, or add pennies per unit to your revenue.

It looks simple, but what it really means is that you need to be very effective at acquiring assets that maximize and service revenue, then be very efficient at converting those revenues into profits, and finally be very productive at converting profits into cash flow.

As business owners, we want to have as few assets as possible (regardless of how “assets” is defined) producing the maximum amount of revenue.

Ultimate

They have understood that money is never spent, it is only invested.

Your job as a business owner is to maximize the operating cash flow your business generates and minimize the amount of assets it takes to do it. To the extent your assets creep up, you will damage your

The fundamental strategy for maximizing profits is to optimize before you grow. Scaling a cancerous business simply means that you’ll have a bigger tumor.

An accurate accrual accounting-based report card is the only way to go if you expect to be able to accurately measure your results and subsequently reverse engineer the numbers to figure out which activities need to change to create optimal and sustainable success. (This is the definition of business optics!)

But if you find yourself wide-awake at 3 a.m., the only problem worth worrying about is, “What could disrupt my future stream of earnings?” These are the risks that will destroy the value of your business and make you obsolete.

nonfinancial business owners who don’t want to get a degree in accounting or an MBA from Harvard or hire dozens of financial

will want to monitor and maximize both. Profits ÷ Assets is the fundamental measure of a business’s ability to convert assets into profits. OCF ÷ Assets is the ultimate measurement of a business’s success. Measuring the trend line of these relationships is also critical to understanding and having optics on a business’s financial condition. A business which is experiencing a deterioration of its Return on Assets trend line is in jeopardy. For businesses that do not have significant assets on the balance sheet, an alternative definition of assets is “employees” or “payroll dollars,” i.e., Profit per Employee or Profit per Payroll Dollar (Chapter 8). Return on Assets, in which return is defined as profits, can be expressed in the form of two ratios multiplied together: Measuring and “trend-lining” both the effectiveness (Revenue ÷ Assets) and efficiency (Profits ÷ Revenue) are mandatory for understanding and diagnosing the underlying financial issues of a business. This ratio model can be expanded to determine the productivity of asset conversion into operating cash flow (OCF). Said another way: Business