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What is the “business of business”? After the skills for your industry or trade have been learned, after you’ve proven that you can bring a quality service or product to market, after doing what you do best, comes the MOST challenging part of owning a business… the “business of business”.

This is true in vast majorities of businesses in America today. Regardless of the industry, regardless of what field they came from, most small business owners started by working for someone else honing and developing their skills. They may have moved up in the ranks being promoted for the work they had done. They learned what they liked and didn’t like about their employer and the way the business was run. Then low and behold the day came that they felt that they could do it as good if not better than their employer. Their mind saw what they perceived to be the opportunity to make the “Big Bucks”, and went into business for themselves.

For most business owners it didn’t take long to realize that there was much MUCH more to running a company than producing a quality product or providing the highest quality service in their industry. “Where did all these additional expenses come from”? “How do I track where all my money is coming and going”? “Why does my financial report show that I am making money but there isn’t anything any money checkbook”? Or, “There is money in my checkbook but that income statement that my bookkeeper printed says that we have lost tens of thousands of dollars… how can that be”?…”This financial report MUST be wrong”.

Business would be easy if you did not have to deal with the problems of tracking inventory, managing employees with different personalities and skill sets, tracking the company’s billings and managing the finances, making sure the company is staying compliant with the legal corporate formalities and of course making sure that the business is IRS compliant.

Not only is it not easy, but for many business owners they have worked for five, ten, even twenty years in their business and have not been able to develop the systems of controls that would streamline these areas and give them the information that they would love to have.

In years past, with a better economy, a business owner could work hard, have great customer service and bring a quality product or service to market and if they truly did these things, nine out of ten times, was assured to produce some kind of profit. Unfortunately for most businesses this is not as true today. Businesses are working just as hard; they are providing great customer service and bringing that same high quality product or service to market and yet NOT making any money. How can this be? It’s a very frustrating mystery to many businesses and their owners all across the country. Not only is it a frustration but to many companies, including second and third generation companies, it has been the final nail in their coffin, bringing many years if not decades of hard work to an end.

There comes a time for every business owner to swallow the bitter sweet pill that forces them realize that the business of business has become more important than the business itself. At the end of the day if they don’t manage that properly there is no business to manage. So where do they start?

A simplified reporting system, a dashboard if you will, now that would be beneficial. A business of business “dashboard” is much like the dashboard of an automobile that tells vital information to the driver of the vehicle without them being required to have the skills of an auto mechanic. This business of business “dashboard” could assist the business owner in making quality, informed business decisions without having to be a CPA or have their MBA. Imagine having a snapshot of all the vital areas of the company in an easy to read business layman format that any business owner can read and understand. Information about the companies break even, accounts receivable, cash-flow management, margin mix comparisons, benchmarked productivity, even return on investment tracking can be looked at with simplified matrixes that are essential if your going to maximize your profitability today.

As simplified as this business reporting can be, it’s NOT easy for most business owners to develop. Having this business dashboard developed and implemented is where the disconnect comes in. Most business owners would agree that they would love to have something like this. Others would go as far as to say that they have been trying for years to develop this very thing. Since the development of these systems is not the owner forte, the order has been given to bookkeeper and attempts are made to little or no avail. What most business owners don’t realize is that it’s not a bookkeepers forte either. There is a large difference between bookkeeping compliance that collects information and puts it into a historic report and managerial accounting that takes a much more aggressive forward proactive approach. This kind of managerial accounting and simplified dashboard reports is usually best developed and implemented by a specialist in that field.

To break things down very simply, a company with sales of just three million dollars annually, for every one percent that they cannot retain as profit, there is thirty thousand dollars of profit lost! THIRTY THOUSAND DOLLARS!! That’s only one percent relative to that size company. What if there are small fractions of percentages in multiple areas of the company that add up to be three, four or even five percent. Do the math… that’s ninety to one hundred and fifty thousand dollars that came in the front door but through things like a lack of efficiency or a lack of productivity, was LOST! Ultimately, it was a lack of systems and controls to identify where these fractions of percentages were that resulted in the loss. How can you fix something that you can’t see is broken? And let’s be real, a fraction of one percentage point is hardly a big gaping hole that is easily identified.

Let me give you this analogy. Let’s say there is a small warehouse that a business uses for its entire inventory. Visualize there are boxes piled up everywhere, racks and shelves throughout. Now, I am going to take five pennies and randomly hide them in that warehouse and expect the business owner to find them without giving them any information, any clue as to where I hid them. How realistic of an expectation would that be for the owner to find those pennies? That is the same unrealistic expectation on a business owner that does not have the proper systems and controls to identify where their fractions of percentages of profit are being lost in their company.

There are various business consultants, business advisors, managerial accountants and or business professionals that can assist setting up these systems and controls and developing a simplified “dashboard” for the owner to understand.  This is where the business owner must realize that every dollar spent in their business is a form of investment. Like all forms of investment, it’s not as much about how much the investment costs as it is about the return on investment. By having accurate, up to date information the business owner can capture small percentages or even fractions of percentages all across their income statement that may translate into very large dollars. How large of a financial investment would it be worth to capture somewhere between ninety and one hundred and fifty thousand dollars in profit in that three million dollar company?

The practice of tripping over dollars while trying to pinch pennies must stop if the business is going to maximize its profit or, as was mentioned before, even survive in today’s business world. It comes back to what was established in the beginning. There comes a time when the business of business is more important than the business itself.

This article was used with permission from the author.

About the Author:

This article, The Business of Business, was written by Chris Amato. Chris has worked with over 500 companies all across America as a Business Consultant for 8 years. He specializes in helping small to medium sized businesses through an extensive list of services that are proven, effective strategies. For more information please visit http://tritonba.com/