Unlocking the Power of Your Balance Sheet

Date: 18 April 2017
Category: Uncategorized, ROO - Return on Operations
Tags: ROO

Do you understand the power of the information contained in your balance sheet?

It may sound like a silly question, but your answer depends on your viewpoint. I typically hear midmarket CEOs and CFOs say (or think) one of the following:

1. What power? We don’t even use the balance sheet. Cash flow and the P&L are the only statements we need. Cash is king.

2. This guy is silly. We run the balance sheet every month and review the assets, liabilities and equity.

3. Of course. We create the standard balance sheet because we’re required to, but we follow the DuPont model (just like every other public company in the world) to recast our receivables, inventory, fixed assets and payables to determine how much is invested in our business and how well our managers are performing to produce a return for our ownership.

Which bucket do you fall into?

Cash is king, so most entrepreneurs and small business owners fall into bucket #1. And, most public companies and large private companies fall into bucket #3.

But I see mid-market companies falling into all three buckets.

Sometimes, I even hear their accountants tell me that you can’t forecast the balance sheet into the future. And you shouldn’t change your balance sheet, because you must adhere to GAAP!

I don’t mean to be critical, but if you fall into bucket #1 or bucket #2, and have interest in learning about the more sophisticated methods for unlocking the value in your business, they’re available. Would it be valuable for you to understand, in real time, how much value you’re creating in your business, and how that will change in the future by the decisions you make today?

We’ve been doing this directly with clients for over a decade. And coming in May, we’ll have a new web app that will allow small to midmarket companies to move into bucket #3 by following a few simple procedures.

You can learn more and RSVP here.

(And if you want to explore the DuPont analysis, you can do so here.)