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By Lisa Bergson I've never had a head for numbers. As a teenager, I did so badly in algebra, I wound up in summer school. (Ironically, my husband is an actuary and my father was a physicist and math whiz, who tossed his Hewlitt-Packard calculator because it was "too slow".) Yet, my life in business has taught me to respect the numbers and to value the seemingly arbitrary time periods that bracket them. You need a way to keep score.
FISCAL FITNESS. You also need guidelines to stay on track. A couple I know, two wonderful artists with grown children, have decided to start a business. "You've got to understand the balance sheet, the income statement, and cash flow," I advise, exhorting them to hire a bookkeeper or use QuickBooks to get these reports. But the husband has no interest, and the wife maintains, "As long as we have $5,000 in the bank and plenty of work, I figure we're O.K."
"But, you might be better than O.K., if you knew how you're doing," I argue, to seemingly deaf ears. "You might even choose to spend the $5,000 and take on debt to grow the business." I gave her The Great Game of Business, Jack Stack's lively tale of numbers in action. But, with the holidays and the children home, she hasn't had time to read it. Not that or the Accounting for Dummies she bought on her own.
To my friend, numbers are linear, boring, restrictive, and confusing. But, ultimately, you must know your numbers to defy them. The great abstractionists, from Picasso to Pollack, mastered representational art before they turned it on its head. Only through a deep understanding of your company's numbers and the factors that affect them can you make informed decisions and take educated risks.
Your decisions may even have the bean-counters up in arms. My new business, Tiger Optics, is developing a line of groundbreaking products that we need to market. To do so requires us to hire sales and marketing people we can ill afford. "How are we going to pay them?" frets Eileen Jacob, my CFO. A small, energetic woman, she uses almost every management meeting to rail against my profligacy. I'm more worried about the opportunities we'll miss without an active sales force. And you know what? If we make the right hires, they'll pay for themselves.
GO FIGURE. After years of sustaining a delicate, niche business in a perilous, cutthroat market, I have confidence in my own judgment. Having just completed its 2002 fiscal year, MEECO continues its record of consistent profitability since 1985, my turnaround year. Thanks to my employees' dedication and sacrifice, we did so despite the steepest and longest downturn in the semiconductor industry, our major market. That phenomenon did not have such a good impact on volume, however, which was down 20% year-to-year. These numbers and their context I reported at our annual shareholder's meeting last week.
Those present in our mahogany-paneled library added up to two: our secretary/treasurer and Terri Lasher, a 26-year employee, who never misses a meeting since they take place during working hours. Perpetually preparing for the day I run a public company, I always present past performance, projections, and future plans. "These efforts serve as a springboard to make 2003 our best year ever," I concluded, smiling at Terri, facing me across the wide wooden table.
"Very good!" she exclaimed, encouraging me to repeat it for all the employees.
At MEECO and Tiger Optics, we keep our staff well informed about financial performance. Every Wednesday at 9:00 a.m., Eileen holds the "Open Book" meeting in the back of the plant. Everyone gathers for her PowerPoint presentation on cash flow ("Cash is Queen"), orders, backlog, distributions, and so forth. In the front office, for all to see, is a poster where each unit sale for the month is recorded in a different color, depending on the sales person responsible.
FISCAL FITNESS. Awareness of our numbers, to me, is the key to running a healthy operation, just as watching your weight, blood pressure, and cholesterol promote a healthy body. After a while, this awareness becomes innate, allowing seasoned managers to make decisions by the seat of their pants. Though I don my glasses and dutifully scan the sheets of tiny numbers Eileen gives me early every month, I don't rely on them anymore. I know how my business is doing. I feel the numbers.
I want my artist friends to have the same assurance. Trying to run a business while ducking the numbers produces more sleepless nights than a straight-up assessment. How do they know how much to pay themselves or whether it makes sense to rent a work space or buy one? Business makes the numbers real in a way that the new math never did. So, if I can make sense of accounting, they can too. After all, it's their money. Lisa Bergson is President and CEO of both MEECO and Tiger Optics. Before joining MEECO in 1983, Lisa Bergson worked as a business journalist at BusinessWeek and freelanced for many business publications. You can visit her companies' Web sites at www.meeco.com and www.tigeroptics.com, or contact her at firstname.lastname@example.org