We’ve all seen the TV show Shark Tank and watched avidly as Mark, Daymond, Barbara, Robert, Lori and Mr. Wonderful smiled and politely (most of the time) grilled the presenters.
But do you know my favorite part of the program? When the Sharks ask the critical questions about the profitability and financial health of the company.
Could you succinctly answer these questions if asked by a banker, potential buyer or a partner?
- What are your year-over-year sales?
- What’s your average profit margin?
- How much inventory do you have?
- What are your costs?
- Do you have any debt? How much?
- Why do you need our money?
If you don’t have a handle on sales, you can’t possibly put a value to your company. Simply put: know what cash is coming in the door.
Profit is what’s left after paying the bills. Don’t have any? You have a problem.
We’ve railed on about inventory in this space before. It has a direct impact on your bottom line.
Cost of goods sold is integral to any discussion about cash, inventory and the present health of the company. Costs will help you answer the profit question.
What you owe and to whom will tell any interested party the character and condition of your company. Debt can reveal a lot. And you should have a plan on how to mitigate it.
Being able to justify why you need an inventor’s money really can help you shape your answers to the first five questions above. And your balance sheet will really help tell that story.
At the end of the day, to know these details about your company really isn’t hard and, with proper help and guidance, can help you maintain your company’s health and even grow the company substantially.
Call us if you are interested in finding that help and guidance.
(photos courtesy of Upsplash and ABC-TV)