Profits Aren’t Everything, They’re the Only Thing

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3 Sentence Summary

Author George Cloutier shares 15 practical, unapologetic, and sometimes unorthodox rules for how to manage a successful small-medium size business. Rules such as, “love your business more than your family,” “delegate, don’t abdicate,” and “give up golf, retreats, off-sites, and trade shows” make up short, easy-to-read chapters that are equal parts entertaining and smart. You may not agree with all of Cloutier’s maxims, but his ideas are worth reading if you’re an aspiring entrepreneur or struggling business owner who wants to grow a successful company.

5 Key Takeaways

1. Run your business by the numbers.
2. Do whatever it takes to become profitable.
3. You cannot be afraid to cut expenses ruthlessly.
4. Pay for performance and invest in activities that generate growth.
5. Guard your time against distractions like golf, conventions, and trade shows. Stay focused on the key activities of running the business.

Profits Aren’t Everything, They’re the Only Thing Summary

Introduction

• Don’t blame the economy. Recession or no recession, if your business is failing, it’s your fault!

Rule #1: Profits Are the Only Thing

• Run your business by the numbers. Profit and cash are the only true measure of the health of your practice.
• Do a profit and loss statement weekly.
• Focus on cash flow and expenses NOW. If money is tight, cut costs viciously. Then cut some more.
• Collect on those receivables. Make profits on the books translate into cash in the bank.

Rule #2: End Denial

• Snap out of your coma today. Open the books, look at where you are financially and face reality.
• Look for red flags.
• Eat your vegetables first. Procrastination is denial’s best friend. If there’s someone you need to fire, deal with it!
• Take the truth test: Ask yourself honestly where you think the business is doing well, and where you need major surgery.
• Ask your managers to do the same, anonymously. You might be surprised by their answers.

Rule #3: Forget Sweat Equity

• For small business owners, what venture capitalists call “sweat equity” is no more than working for nothing and being a fool.
• Take care of yourself first and the rest will follow. You can’t lead the way if you’re behind the pack.
• If things are tight, don’t be the only one to take a pay cut. You’re not in business to be everyone else’s benefactor.
• If you can’t afford to pay yourself the first few cents on every dollar, there’s something seriously wrong with your business model. Fix it!
• Money talks. Show who’s the boss by paying yourself like one.

Rule #4: Love Your Business More Than Your Family

• Your business is not a part-time job. Be fully committed and ready to put in the hours.
• Don’t work from home unless you can be fully focused.
• Weekends are for work.

Rule #5: The Best Family Business Has One Member

• Blood and business don’t mix. It’s a recipe for office dysfunction.
• Don’t restrict yourself to a pool of untalented brothers, sisters, sons, daughters, or in-laws for key roles. Get the most qualified job candidate.
• Gifted members of the lucky sperm club are rare.
• Firing family members might cause strife, but they’ll end up thanking you for creating the legacy of a business that’s thriving without them.

Rule #6: Delegate, Don’t Abdicate

• Don’t delegate to the point of abdication. Catch the errors before they happen, because bad mistakes are too costly in small business.
• Use flash reports: one-sheeters that give you daily updates on the status of each flashpoint in your business.
• Delegate, but verify. Trust no one.

Rule #7: Live & Die by the Plan

• Think about where you stand on your financial and operating plan every day of the week.
• Estimate your profits for the year ahead and set that money aside.
• 15 cents profit for you; 85 cents for the business. Or 10 cents and 90… whatever the top of your industry standard happens to be.
• Put profits first. Always.
• If you’re having a bad year, adjust expenses accordingly and never spend beyond the original plan. Save to earn.
• Let employees know the plan and hold them accountable to it. Give them financial incentives to exceed expectations for budgets and timelines.

Rule #8: Pay for Performance

• Everyone should be on 30 percent to 100 percent pay for performance, especially your outside sales team.
• Fire and hire faster. Don’t tolerate mediocrity.
• Review performance monthly and quarterly and adjust pay accordingly. Pay for performance isn’t some year-end bonus entitlement.

Rule #9: “I am your work god”

• It’s okay if your employees don’t like you, as long as they respect you. Earn it by getting in the trenches with them.
• Don’t act like a king; be a general and command the respect you demand with a clear direction and a precise operational plan.

Rule #10: You Are Not in Business to Pay Your Vendors

• Never pay your vendors on time.
• Your vendors are your best source of interest-free financing. Use them aggressively.
• Keep a list of A-list, B-list, and C-list vendors. The most important suppliers and service providers get paid first, but still late.
• Be honest and fair. Don’t duck calls. Be a diplomat: get on the phone to stall and negotiate, politely. You’ll be surprised what you can get out of them, especially in a recession.
• The same goes for rent. You won’t get evicted if you’re thirty days late. Your landlord needs to keep you as a tenant just as much as your business needs its four walls.

Rule #11: When Filing for Bankruptcy Is Your Best Option, Do it Early!

• Timing is everything in a successful Chapter 11 Reorganization.
• Get over the shame of it and put survival first.
• Make sure you have enough assets and sources of income left to survive and rebuild your business.
• See Chapter 11 for what it is: a legal and financial maneuver that will help you deal with a tsunami of debt.
• Chapter 11 takes time, hard work, and sacrifice, but you’ll come out stronger.

Rule #12: Don’t Treat Sales Like Your Mother-in-Law

• Don’t view sales like an unwanted guest. Focusing on sales is the easiest way to grow your business in good times and sustain it in bad times.
• Get out from behind your desk, roll up your sleeves, and shill!
• Expand your geographical footprint and diversify so you’re not dependent on one big company for the bulk of your business.
• Breathe down the necks of your sales team. Go on sales calls with them. If they’re not performing, fire them.
• Wrap your clients in a warm and fuzzy cocoon. If you don’t, and your top sales guy leaves and takes your customers with him, shame on you!
• Stop being “fat, dumb, and happy.” Get lean and hungry. It’s time to fight for every last dollar.

Rule #13: Give Up Golf

• It’s a waste of time. So are conventions, trade shows, planning retreats…
• Let your competition play golf while you stay in the office stealing their customers.
• If you must play golf, do it after-hours.
• Be wary of any activity that takes you and your employees away from work. Payroll is too expensive to squander on useless activities.
• Skip the motivational seminars. Money doesn’t care how warm and fuzzy you feel.

Rule #14: Forget Teamwork

• A team is only as strong as its weakest link.
• Focus on individual performance. Your employees are answerable to you, not to each other.
• Team meetings should be quick and informational, not motivational. Group hugs don’t improve performance.
• Employees crave strong leadership and structure.
• A business is not a democracy.

Rule #15: It’s Not the Economy, Stupid, It’s You

• Don’t use the recession as an excuse. If you’re not surviving it’s because you weren’t doing all that you should have during better times.
• Resist the bunker mentality. If you wait until the tide turns you will drown.
• Take action. Cut costs, get aggressive about sales, and fire mediocre workers.
• Continue to invest in areas of your business that will generate growth.
• Don’t play the victim. As long as your business still has a pulse, it’s in your power to turn things around.

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