REALITY CHECK

I enjoyed the article by Roger Doost in the February issue, in which he suggested that the conventional advice to entrepreneurs does not hold up to the intuition of a young man attempting to make a start-up business a success. It made a number of good points. However, it also omits some significant information for businessowners.

I've spent 15 years as a partner in a CPA firm and as a business consultant. They were separated by a 10-year "reality check," during which time I was owning and running manufacturing and distribution companies. Your view changes when it's your own money at risk, and you are helping your own salespeople improve their sales.

When we sold our companies, we had the highest gross profits and lowest DSO in our industry. We used properly prepared comparative monthly income statements to highlight business changes and to prove the accuracy of our cost system. These statements also tied into gross profit by product and customer group to help our salespeople spend their time most productively. We used daily exception reports to alert us when an order had a gross profit that was too low, when book inventory quantities were different than shown by a physical count, or when customers failed to honor a promise to pay us.

Many businessowners do not request this information because they are not aware of how to use it. Therefore, they rely upon the 90% of the business knowledge they learned through experience and trial and error. They don't realize what they are missing is worth $100,000 for every $1,000,000 of sales. Their "reality check" arrives when I ask them the amount of new sales they need to obtain this much more net profit. *

Howard Reiss, CPA

Howard Reiss & Associates, Inc.

Huntington Beach, California