by Jim Blasingame
Fundamental. I like that word and everything it stands for.
As you know, something’s fundamental when, no matter who you are, what you’re doing, or how much time elapses, that thing is valid and essential.
As humans, we know that oxygen is fundamental for life, as is water, for example. As competitors in any game, we know to heed the fundamentals – the rules. And in politics, even when you control everything, compromising will still be fundamental.
Alas, for some reason over the years, I’ve witnessed people trying to start and run a business without understanding that there are fundamentals that must be heeded. And just like oxygen, three strikes, and not letting the perfect be the enemy of the good, sustained success in business requires you to recognize and operate with the fundamentals.
The fundamentals I’m revealing here are no less than operating natural laws, and they’ve served businesses since proto-market was born 10,000 years ago when Og dropped his club and suggested to Gog that they do business instead of killing each other for what they wanted. That’s what’s so great about fundamentals, they’re as handy as they are immutable.
Become devoted to incorporating these non-negotiables into your daily/weekly/monthly management practices and you’ll have more fun because success will come and play in your backyard. If you don’t, well – you know.
1. In business, you can’t get where you want to go if you don’t know where you’ve been. That means you must produce and manage with regular and accurate financial statements: profit and loss statement (a/k/a P&L, a/k/a operating statement) and balance sheet. Millions of small businesses with amazing products have failed because they weren’t committed to this non-negotiable, financial fundamental.
2. In every business, someone manages cash every day. The best way to make this responsibility seem less like punishment is to project and manage future cash conditions over the next 12 months on an electronic spreadsheet, like Excel. Since, as the owner, you’re the one who has to cover any future cash shortfall – with more sales, fewer expenses, or a loan – I recommend you for this forecasting job. When you learn the fundamental of projecting cash, your business world will transmogrify from crisis to control.
3. If you don’t know the difference between the number of days you take to pay vendors and how long customers take to pay you, you can succeed yourself right out of business. Understanding and tracking the relationship between A/R-days and A/P-days will teach you one of the most valuable fundamental financial lessons: the impact of time on cash. It will also reveal why growth is not self-funding and prevent you from getting burned by your cash burn rate.
4. As finding qualified employees continues to be a national business crisis, outsourcing is an increasingly powerful management fundamental. Call a meeting with your team and ask “Blasingame’s Outsourcing Power Question” about every task in your operation: “Must this be done in-house?” Everything that doesn’t “touch” a customer directly is a non-core competency and an outsourcing candidate. Outsourcing is one of our newest fundamentals, but the efficiencies it delivers positively impacts almost all of the others.
5. After keeping positive checking account balances and making payments on time, keeping your banker informed about business opportunities and challenges is the third most important banking fundamental. As much as they don’t care for bad news, no news is worse. The title of the shortest book ever written is “Loan Officer Courage.” An uninformed banker is a scared banker, and no one ever got a loan from a scared banker. And if you don’t have a banking relationship with an independent community bank, start one this week. In my half-century in the marketplace, a community bank relationship isn’t a banking alternative – it’s a small business fundamental.
6. Customer expectations are changing faster than ever. This would be scary if whatever your business should be doing tomorrow or next year wasn’t completely knowable. Think of your business as a gold mining company, but the gold you seek is in the heads of your customers. Please don’t complicate this – ask customers what they want and deliver that.
This is arguably the #1 business fundamental.
Write this on a rock ... Focusing on the fundamentals is one of those success non-negotiables.
JIM BLASINGAME is one of the world's foremost thought-leaders on business and entrepreneurship. Jim is a marketplace futurist helping businesses anticipate what’s coming at them over the horizon. And he helps them get out of their own way. Jim’s last two books have won multiple international awards: The 3rd Ingredient -- the Journey of Analog Ethics into the World of Digital Fear and Greed and The Age of the Customer – Prepare for the Moment of Relevance. http://www.jimblasingame.com/