My Library and Courses
Last Update: Wednesday June 20, 2018

Key Idea: Understand Your Numbers

This video opens with Bob Orenstein of International Wine Accessories. At 32 seconds, Meeko Mullin, an owner of Hot Dogs on a Stick (HDOS) and an operations manager, discusses key ratios. Every employee is an owner at HDOC and all understand the numbers. More...  Staying power...

Key Question:

A: 

Bob Orenstein is a CPA which gives him a strong background in finance, so, we can learn from him on this point. He has a couple of numbers he looks at to know if he's doing good. Although many of us would rather do anything but look at our financials, Bob insists that at the end of the day, the only thing that really matters is the numbers. Bob says he doesn't have debt and we're happy to say we're in the same boat. We agree with many who say, "cash is king" because it allows you to move on ideas, take advantage of discounts and bulk purchasing and expand when you're ready. By implementing strict financial controls, many of the business owners we study here at Small Business School have built powerful companies with little or no help in the beginning from financial institutions. We have to earn the right to have a banker.

Q:
What kind of financial control is needed?

A: For a very small business, cash flow is the most basic way to look at the financial situation. You must have a system in place to collect and you must be able to pay your suppliers. Often small business owners have to take out personal loans to keep a business going because the cashflow is so poor. The reason is simple. In most businesses there is a time gap between the making of a product and the ability to collect on the sale of the product.

As a business grows, the accountant will develop monthly profit and loss statements. Just as every game has a scoring system, in business, money is the way you keep score.

Q: How does David Milly keep track of his business?

A:
Janet, his wife and CFO, creates a weekly document she calls a, "Flash Report." It tells David everything he needs to know about receivables, payables, new customers, and sales.

Q: How is it that a very young employee at Hot Dog On A Stick knows so much about the cost of doing business?

A:
Hot Dog On A Stick is employee owned and there is continous training which provides everyone with financial data. The training is specific enough so that every employee knows how they are personally contributing to the company's profitability.

Think about it

What system do you have in place to track your financials and what numbers do you track most closely?

Clip from: Staying Power

Key Questions about business: What makes a business work?  Why do some make it while so many fail?  And, in the USA, why are there so many business start-ups every year?  How does a business make it beyond the first year? ...third year? ...and fifth year? These are benchmarks. Milestones. Most startups do not get past them.

So, when these veteran entrepreneurs answer the question, "How did you do it?," there is a lot to learn.

This television special outlines the common qualities found in companies that make profits for decades.

Go to all the key ideas and video of this episode...
Go to the homepage for this episode...

International Wine Accessories, Inc. (IWA)

Robert Orenstein, founder

10246 Miller Road
Dallas, TX 75238
2143496097

Visit our web site: http://www.iwawine.com/

Office: 2143496097

Business Classification:
Home products

Year Founded: 1988

Understand Your Numbers

HATTIE: Number 3. In-depth understanding of the financials. Bob Orenstein is founder of International Wine Accessories.

BOB: The ratios we look at are basically gross margins. We look at the percentage of gross dollars that falls to the bottom line. We'd like to keep it well above 10 percent and, of course, we struggle to try to push it to 20 percent. Most businesses are lucky if they can get 4 percent or 5 percent or 6 percent or 7 percent. We try to keep it a lot higher, if at all possible.

HATTIE: (VOICE OVER): At Hot Dogs On a Stick, everybody knows the numbers.

What is this and why do you have it posted on the back bulletin board?

MEEKO: Basically, this is something that we felt -- we use these equations each week when we fill out our payroll and weekly packet. And we use the labor percentage to find out how much money we're spending on each individual employee to have us working here. And what we do is we calculate our average pay times how many labor hours we had for that week and then we divide it by our sells for that week and then we get a labor percentage which then tells the office how much money we're spending on labor.

VOICE OVER: At Theatrical Lighting, owner Dave Milly, watches key numbers closely.

HATTIE: (Voiceover) Are there numbers that you look at daily or weekly that you go, `Wow, we're going great'?

JANET: Well, we do flash reports and we all go over those numbers.

HATTIE: What's a flash report?

JANET: This is a report that tells David everything he needs to know about receivables to payables, new customers, amount of sales for last week.

DAVID: I don't take risks. I take little bitty, you know, chances, but my odds are stacked in my favor before I go borrow that $1/2 million. I know that even if the deal I'm putting together fails, I've got enough left over, I've got plenty of time to bail it out and put something else together. So I don't feel like we're taking a high risk.

Not a member yet? Learn!  Be empowered! Join us!