What's your financial cadence?

Business owners have a typical financial review process that goes something like this:

1. Bookkeeper or CPA sends financial statements
2. Owner stashes financials in a drawer/folder
3. Those financials are never touched

Financial statement analysis is the primary tool ...

What is capex and why does it matter?

How well do you understand the concept of depreciation and capital expenditures (capex)? Can you relate it to your own business or another business owner?

It's a tough one even for seasoned finance pros.

This is the best explanation of capex I've ever come ac...

Taking the quarterly view

It's not too late to review 2024 annual financial statements. In fact, most public companies are still reporting Q4 and full year results.

Like other business owners, I have a strong preference for monthly financial statements; but, with yearend in full swing, it felt lik...

It's a seller's market

The typical business sale goes something like this:

1. Seller is burned out and wants a quick exit
2. Broker hired to market business
3. Business isn't ready for sale (messy financials, weak processes, etc.)
4. Offers come in lower than expected
5. Seller feels stuck, unsure of next ...

Getting things done

The basic steps for getting things done could be summed up as:

1. List all things that need to be done
2. Rank or prioritize those things
3. Decide what to do and when
4. Start working

I'm always looking for new ways to compartmentalize work and life. Lately, I've been using a simp...

EBITD-ahhh, that's what it is!

Last week, at a well-known franchising convention, I saw a person wearing a hat with "EBITDA" stitched on it and had to have one of my own.

Charlie Munger famously called EBITDA "bullsh*t earnings" (I don't completely agree with this). So it had me thinking about thi...

What can you learn from Netflix Q4 results?

As an SMB owner (and avid student of good investments), the public markets offer an excellent source of lessons and benchmarks for us small-time pikers.

Let's take a look at Netflix Q4 results to find some nuggets of wisdom:

• ​Netflix Q4 shareholder le...

An SMB tech stack

An organized technology "stack" (tech stack) can save dollars and hours when it comes to running your business. A tech stack is simply the collection of software and tools powering your business, and the right collection can:

• Save time and reduce headcount
• Minimize (or elimina...

What's your margin?

Does anyone ask what your margins are or tell you to watch your margins? What does that actually mean?

Understanding margin(s) starts with which one you're looking at. Here are the "big 4" that are worth your time:

1. Product margin
2. Gross margin
3. Operating margin
4. Net margin
...

How do you define success in your business? To me, it means the ability to take consistent cash distributions from a company.

1) Repurposing prices

This tactic could work for both inventory and service based companies. Get creative on pricing. Instead of taking your slow moving inventory and deepl...

Writing out a yearly plan is a fairly simple process. In a nutshell:

• Review and reflect on how last year went
• List out all of the things that went right (and went wrong)
• Gather up your numbers for 2024 (and prior years if you have them)
• List all of the things you want to accomplish in the next...

Planning for profits in 2025

As I'm prepping for the end of the year and starting to write my annual letter, it's reminding me this is hands-down the best thing you could do for your business today — write out a plan for 2025.

"Send me your financials."

What I receive in response to this question is typically a mixed-bag.

Maybe there's a different answer depending on the recipient, but I'll share my 5 favorite financial reports. These are the ones I'd want to see in order to really help someone.

The 5 best financial re...

Business breakdown part III

This is the final installment of a multi-part case study on Starbucks Corp. We previously covered the business model, profit model, unit economics, and financial statement analysis (links below).

1. ​(Part I) Business model and unit economics​
2. ​(Part II) Financial state...

Last week, we kicked off a multi-post series working through a case study, Starbucks Corp. to be precise. We covered the business model, profit model, and unit economics and today we're moving onto financial statement analysis.

1. (Part I) Business model and unit economics
2. (Part II) Financial state...

Business breakdown

We've covered a wide range of topics this year and it feels like a good time to work through a case study for added practice. To keep things simple, we'll break this into a multi-part series covering:

1. (Part I) Business model and unit economics
2. (Part II) Financial statement an...

Continuing on the theme of financial analysis this week – we've already dug into the Monthly Financial Review and Rolling 12-Month Analysis – this week we'll work on spotting trends in our business...

A recap from last week's Financial Review post – we're honing in on #3-5 from that checklist:

Models

To run a successful business, you need 3 essential models:

1. Business model — what you do
2. Profit model — how you make money
3. Revenue model — how you charge for it

Sounds simple and you probably have a sense for these in your head.

If you're managing a large team, trying to grow, or cli...

If I were to "drop in" on your business today, could you tell me how things are going this week?

Most business owners don't have a formal tool or process for monitoring early warning signs (both good warnings and bad warnings). These "tools" go by many names: KPIs, scorecard, dashboard, balanced sc...

Big Picture Thinking

Can you give a quick and straightforward answer to questions like:

• What are you working on this week/month/year?
• What is your business model or profit model?
• What are your goals for the next 2-3 years?

If you’re anything like most business owners I know (myself included...

Seeking help

Ever feel like running a business is a lonely endeavor?

When starting or running a business, going it alone certainly allows for more control but comes at the expense of added stress. I've heard some experts say that every business owner should have a coach, or mentor, or some other s...

You need a good set of books. Period.

When working with a new client, I typically start with 2 questions:

1. Are you consistently getting financials reports on a timely basis?
2. Do you believe the numbers you're looking at (i.e. are they reliable)?

Don't worry if you answered "no" to either quest...

We're wrapping up a 3-part series (here's part I and part II) on capital allocation – the effective use of profits and cash flow – with a concept called Return on Invested Capital (ROIC). [Sometimes just called return on capital or ROC.]

First, a quick reminder of our balance sheet – we buy or buil...

Sources & uses of cash

This is Part 2 of a series on capital allocation. A quick recap from last week: We defined the 3 uses of profits as capital allocation. They are:

1. Buy more assets (with the intention of growing sales)
2. Pay off debt and other liabilities
3. Pay dividends to owners

Where we ...