Category: Business Planning

I expected this chapter would be either a snooze or a chore – having read accounting principles since I started learning about business, and having been through 1500 of 2200 ASX-listed small cap companies, I’ve read and interpreted more financial statements than some people have had hot dinners. But I found this chapter to be the most enlightening chapter in the book, and perhaps the only one I will review, because it yielded a simple insight.

The chapter starts out with the simple A = L + OE equation, then dovetails into financial ratios. The point is quickly established that while a CPA would follow a process to create accurate financial statements, an MBA’s skill is to use financial statements to understand the story that is being told. An example is given of a statement of cashflows, and the reader is then asked to read the financial statements to determine whether the business is living or dying. In other words, to interpret the financial data to determine what is really going on.

I have always thought financial ratios were a bit of a chore. While some ratios such as return on equity made perfect sense to me, were easy to figure out and were highly useful once applied, I never really understood the need for calculating asset turnover per period, or return on sales.

But what became clear to me through reading this chapter was that the life or death of a business is foreshadowed by the change in financial ratios.

It’s the way that the individual ratios change over time that is the best indicator of good management. One needs to calculate the ratios not just at one snapshot, but to view them across multiple sequential snapshots, in order to divine whether management and market conditions are determining success.

This goes to the heart of what I was actually trying to achieve by reading a book like this: is an MBA worthwhile? If I study an MBA, what will it teach me?

Good management effects a positive change in select financial ratios. That is the purpose of MBA training. That is what business administration actually hopes to achieve.

This is just a list of Cliff Notes coming from recent dealings with large scale fashion brands. There are a number of technological and marketing advantages in this age that mean you can give yourself a big advantage in buying a business if you know what to look for.

Due diligence

Look for a large email database

● Check the terms of in-store discounts
● Check the regularity of email offers

Look at the Facebook presence

● Check the number of Likes and Subscribers for the page
● Look at what audiences and marketing systems they have in place at the moment

Look at existing Google Analytics data

● Check New vs Returning sales online
● Look at average conversion value and lifetime value

Look at any available in-store data

● Check New vs Returning sales in-store
● Check in-store conversions
● Check average sale value, and other stats

The most successful retail entrepreneurs I know are frequently creating events for people to come into their shop.

The physical premises are less important than the reason or incentive for the customer to cross the threshold.

The same physical premises might have great or terrible stock turn – and it all depends on the ability of the entrepreneur to create reasons for the customer to enter.

On that basis retail is the same as event design.

From there it’s just a question of leverage. What advertising methods can we use to reach customers to inform them of the event and the payoff.

The market will decide for itself who is meant to be your customer.

The concept of Kaizen suggests that one should make continual miniscule improvements in order to yield a long term result.

I am all for this idea, and wonder how it would apply to dieting.

On the face of the earth there are many forms of produce, and many cultures have derived ways to extract nutrition from them.

What is the way that I can best nourish myself and others? Is there a way?

Eat local, but how local?

How specific can I get and should I get with nutrition?

What’s the most I can derive from the least? How can I make myself full?

Continual improvements in self-sustaining food preparation, planning and processing.

How can one go from this to nourishing family or a community?

What impact might this have on reducing carbon emissions?

How scientific can one get?

If the whole world’s a garden, and no rules are written, and one remains curious,

Then refinement of food and flavour yield a bounty of opportunities. Imagination plus produce.