Imagine attending a football game and you find that no one is keeping track of the score or the line of scrimmage. Chaos.  Uninteresting. What’s the point?
There are ways to measure progress, success, and competitiveness in sports — and in business.  Like other sports, football has developed measurements that we all know and use in order to keep track of the game. We know exactly where both teams are at each moment as the game and the season unfolds — simple numbers that we understand.
Business is much the same. We keep score to know how we’re doing and whether or not our business plan is working as intended.
In the very short term in football, the line of scrimmage and moving the chains are critical to staying in the game. In business, cash flow is the measure of how we’re doing in the here-and-now. Are we selling more dollar value than we’re spending? You can’t stay in the game or keep the ball unless the cash flow is averagely positive. It’s our first and most frequent measurement.
If we keep moving the chains consistently and make that occasional big play, we put some score on the board. In business, we know we’ve put score on the board when we study our income statement (also called profit and loss or P/L statement). We’re going to study these each month and also for quarters and years. This analysis will ensure that when all our costs are considered, our business plan and our results are delivering a reasonable profit. Over time, our business has to put score on the board (profit) if we’re going to survive and grow.
We measure football longer term by season wins versus losses. In business, besides our longer termed P/L we’ll study the progress we’re making in creating owner or shareholder wealth with our balance sheet. (We’ll use the balance sheet for other purposes, too.)
So the game of business has these three key financial measurements: cash flow, income statement (or p/l), and the balance sheet. Get comfortable in using these key measurements to keep score for your business. If you need a little help interpreting these scores, talk with your accountant or your SCORE counselor.
Used properly, they can help you improve your business results and sharpen your business plan.
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SCORE is a national, nonprofit organization that offers confidential and free counseling to small businesses. In the greater Washington area, contact SCORE representatives by leaving a phone message at 252-974-1848, by visiting the website at www.EastCarolina.Score.org or visiting the office on Tuesday and Thursday mornings in the JobLink building, 1385 John Small Ave., Washington.