The Only Number That Matters in Business

You're getting flustered with the hundreds of financial ratios/terms/yaddas, preventing you from understanding the full measure of your company.

What do you do?

Think: Football game.

Quarterback rating, ^ of turnovers, the ^ of penalties, ^ of Pro-Bowl players on each team.

What matters most?

^ of Points.

Nothing else is a 100000000000000th as important.

How Do You Track ^ Points in Business?

Profits.

• Not sales.
• Not ^ of employees.
• Not ^ of products.
• Not ^ PHDs on your staff.

Profits.

Profits.

Profits.

Companies mistakenly focus too much on making X revenue, according to Google's CEO, that they're forgetting what matters most at the end of the day.

The only number that ultimately matters to Google's management team?

Profits.

You can achieve ridiculous revenue, but if you're leveraging your business with freakish debt that puts your company into the red every-frickin-quarter (see the bank catastrophe, and Detroit):

• Your company = The suck.

Don't let the freakish number of terms on complex financial statements and a kajillion finanical ratios confuse the mothereff out of you:

• Focus on the bottom-line figure. See how it's trending.
• Use everything else (e.g., cash flows, turnover ratios, the yaddas) as the reasons why your company achieved that bottom-line figure.

What Profits Tell You

In a free market world, profits tell you:

• how much output you're getting from every input
• how much value you're giving the world

If you're in the red every quarter, your business is causing a freakish drain on society as others pick up your slack to help you survive.

It's like 38-year-old Billy B. still living at home while his mama provides for his couch-sitting @^!$@ Cheetoh-eating behind.

BOO.

"BUT PROFITS ARE EVIL! OH NOES!"

First, the moral issue:

Companies that are profitable:

• pay taxes (which funds 987956875609875 things)
• fund philanthropies
• provide many more jobs (for employees who pay many more taxes)

Point: Profits = crucial for a free society.

Now, peep this from a business and social perspective:

• The free market lets Consumer X choose where to spend her hard-earned dollars.
• If Company Z is a freakish bizattchi to Customer X, Customer X will choose a competitor.
• Company Z then better get its act together, or it'll run out of customers.

For the financial freaktards:

• Like water, companies need profits to survive.
• If Company Z can't sufficiently provide for Customer X's needs, Company Z = no profits.
• Without profits, financially smarter competitors will destroy Company Z -- draining its number of jobs/contractors/vendors/projects/RFPs/the-yaddas.

(The same model applies for a company's employees.)

Moral:

• Serve customers and employees to the fullest ^@!$@!, or die.

Focusing on short-term gain will destroy your company's long-term future (see: Enron, Lehman, Bear Stearns, Krispy Kreme, et. al.).

Two Steps to Measure Your Business

This:

1. Track your net profits every quarter.
2. Improve on your net profits every quarter.

Ta-^^@!-da.

What do you see?

• Upward net profit trend? You're building a sustainably superdupergood company. (Warren Buffett congratulates you.)
  
• Fluctuating trend? You're building a company that is the market's beyotch (i.e., unsustainable).
• Downward trend? FIX.

Focus.

Profits. (Upward.)

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