In any business (that's any industry, any size, any product), there are generally only 3 ways to use profits:

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

Most finance pros refer to this mix of profit usage as capital alloca...

How do you know whether you have enough cash in your bank account? This is a common question in both business and personal finance. My guess is you're taking one of the following approaches:

• A random amount of money that "feels" right
• Don't think about it until you realize it's time to run payro...

When it comes to managing a business, there are typically 2 schools of thought with staunch defenders on each side:

1. Delegation
2. Hands-on management

(The latter is sometimes referred to as micromanagement.)

In his recent article Founder Mode, Paul Graham (founder of startup incubator, Y Combin...

With Labor Day promotions behind us, it feels like a good time to talk about the financial impact from discounts, promotions, and marketing campaigns on your business.

It goes something like this:

1. We want to get rid of slow-moving inventory, how about a 30% off sale?
2. Sign up for our email newsl...

Most business owners have a loose idea of their unit economics (margin at the product level), but it's usually:

1. Stuck in their head; and
2. Crude back-of-the-napkin math.

Your pricing strategy can make or break profitability... generally, I see companies fall into 2 buckets: those with revenue o...

Use visuals to spot trends and patterns

There are only 3 ways to convey information:

1. Words
2. Pictures
3. Numbers

If we rank them from easiest-to-hardest-to-understand, then it probably goes: 1) pictures, 2) words, 3) numbers. So why are we exclusively using numbers to understand our financial po...

I'm tired of seeing crummy articles about building a budget, forecast, model, etc. so I decided to create this incredibly simple yet practical guide to budgeting. [In case you didn't pick it up, I use the terms budget, forecast, and model interchangeably.]

What are the steps?

You likely already kn...

What are unit economics?

Today we'll cover a topic near-and-dear to every business owner – unit economics – we love thinking about how much we make on every sale!

What are Unit Economics?

Don't be fooled by the fancy term... unit economics are simply the profits you earn on a per-unit, or per-ser...

We've covered working capital a few times in the past...

• 101 – What is working capital​
• 201 – Working capital drivers​
• 301 – Optimizing & analyzing working capital​

But today we're covering probably the all-time most useful ratio when it comes to managing working capital... the Cash Conversi...

Installing a Financial Operating System

We're big fans (and users) of Gino Wickman's EOS (Entrepreneurial Operating System), which outlines a useful framework for business management. I'd highly recommend if you're in need of a basic structure for meetings, people management, and setting a company ...

Let's study turnarounds

You might see this title and scratch your head, wondering why you'd want to read about turnarounds or business failures.

It turns out there are incredibly valuable nuggets of wisdom in these stories.

How efficient are your labor costs?

Let's look at a concept that can help both service-based businesses and product-based businesses with managing arguably their largest expense line.

It's called the Labor Efficiency Ratio (LER).

What is it?

It's a simple but powerful metric used to measure the ...

There’s a type of business (and owner personality) that I like to refer to as a GrowthCo (short for high growth company).

We can learn a ton from these rare breeds.

These businesses want rapid sales growth above all else, and they aren’t afraid to outspend their profits to achieve it.

How do they...

Building a selling program

Focus on sales every day.

This oft-touted advice is cliché but imperative to business success.

Read the first few chapters of Ready, Fire, Aim by Michael Masterson and you’ll get the urge to start selling. You should dedicate some level of effort to selling, every singl...

1) The indirect method of cash reporting

The indirect method of reporting cash flow is what you'll see most often. It's the standard format across QuickBooks, other financial software, and for publicly-traded companies.

How it works

There are 3 sections of cash flow

• Operating cash = profit + d...

Let's talk metrics

One challenge in managing finances is the overwhelming amount of numbers and metrics available to look at.

Scoreboards in professional sports generally display only the most relevant stats, and your business should do the same.

How do we handle it?

Stick to 6-7 key metrics wit...

Ask 10 different finance pros what their monthly review process looks like and you'll likely get 9-10 different responses.

So what is it?

Monthly Financial Review (MFR) — Checklist of financial data and review procedures conducted every month (or 30 days) after your books are closed and financial ...

The Rolling 12-Month Analysis

Today's newsletter covers one of the greatest tools in all of finance, the rolling 12-month analysis.

A rolling what?

We're simply looking at 12-months of financial information in every column of a financial report. This can be an incredibly helpful tool. Imagine hav...

How to Optimize Working Capital

This is part 3 in a mini-series on working capital (check out part 1 here and part 2 here).

Let's recap the basics so far:

• What is working capital? Receivables (A/R) plus inventory minus payables (A/P). Don't forget to include credit cards.
  ​
• Why is it important?...

Profit vs. Cash Flow

Ever feel like your business is profitable, but you're still struggling to pay bills and cover day-to-day expenses?

Today we'll build on the Working Capital 101 concepts we covered last week and drill deeper into the differences between profit and cash flow.

Remember: Profit ...

Your Finance Team

Every company has a different-looking team running their finances.

Here's a quick rundown of the three most common players and what they are (usually) responsible for:

1. Bookkeeper (Accountant): They handle the day-to-day transaction recording, invoicing, bill pay, etc. These ar...

What the Heck is Working Capital?

You're probably sick of hearing about working capital.

Every business has working capital and next to cash, working capital is the lifeblood of every business. (If you think you don't have working capital in your business, please send me a note, I want to hear abo...

Financial Frequencies - Zoom In / Zoom Out

There are probably 30-40 skills required to be a finance/accounting pro, but to manage a successful business you really only need to master maybe 10 or so... today we'll cover one of those 10 skills...

I call this zooming in and out on your business. It w...

What makes a great business?

When I worked in the investment industry studying and investing in public companies, I was often searching for "great businesses" and over my career developed a short list of characteristics that (I think) make a company great.

Why should this matter to you?

1. For sta...