Thursday, June 7, 2007

Business Fundementals...

Cash generation, growth, margin, velocity, and customers are all key parameters that determine the performance of a business. Dr. Ram Charan discusses these extensively in his book “What does the CEO want you to know” (

All of the metrics described above are measurable and they provide a ton of information about the health of a company. The question is: Is your small businesses able to measure these accurately and derive inferences that can lead to short term and strategic benefits?

Keeping a close tab on what dollars are coming in and going out is one of key tenets of maintaining a good cash flow. Synchronizing accounts payable and receivable, identifying late paying customer and promoting and retaining profitable customers are some ways in which cash generation can be improved to healthy levels. What is the inventory position, how quickly the inventory is turning-over, are the margins too high or too low. What are the fast moving products. How are we doing with respect to customer retention? Are we acquiring new customers and increasing our market share? Or are we stagnating?

A small business must be able to answer these basic questions for itself. And this is just the tip of the iceberg...


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