I look at the financial statements of a lot of different small businesses. Different in every way – business type, industry, size, longevity, financing methods, ownership styles, and financial performance (or lack thereof).
If there is one common thread, it is that the vast majority of their financial statements are hard to look at.
Imagine a doctor looking at test results, like those from X-ray, MRI or EKG machines. These measurements allow a doctor to diagnose biological disorders and they constitute a first step in discovering what ails the patient. That determination must be made before treatment can be prescribed.
Now, imagine if the details in those test slides, readouts or screen shots were blurry, distorted, or severely ink-smudged. How can a diagnosis be made? If the best image a test can give to the doctor is a cloudy one, what good is the test? Might as well listen to the patient’s imprecise self-description of the problem and make a guess.
Guessing about the problem can lead to expensive and disastrous outcomes.
As a small business consultant, my job is much like a medical doctor. “Where does it hurt?” A long answer that amounts to “just sort of all over” is quite common – and why? Because if a small business manager knew precisely where it hurt and why, self-diagnosis and treatment in many cases would be much quicker without the need to see a professional who specializes in pain management and curative treatments.
I am very fortunate because, unlike the medical profession, my test methodology costs a whole lot less than medical ones, and the results are perfectly accurate. You see, financial statements are perfect tests. They reveal exactly where it hurts and why – but only when they are clear!
And yet, virtually every set of financial statements I see are not clear. They are blurry, distorted, and difficult to professionally interpret, diagnose, and formulate remedies from. This condition, like chronic disease from lack of proper diet and exercise, is completely avoidable! (And, unlike many diseases, quickly and completely curable with guaranteed 100% recovery.)
The first [business] project … is a colon cleanse