Articles

Rich Russakoff and Mary Goodman
May 29, 2009

Ten Tips to Bottom Line Up Management

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.