Hey, it's the Profit Mastery team.
Last week you counted the lines on your income statement. This week, we zoom out even further.
Forget the line items for a second. How does money actually move through a business?
Turns out it's a loop. And once you see it, you can't unsee it…
THIS WEEK'S ARTICLE
How a Business Works
Ask most owners what "accounting" means and you'll hear something like:
Debits and credits (whatever that means)
Something my CPA handles
Accounting = QuickBooks
Charlie Munger put it best: "If you don't understand the accounting, you don't understand the business."
Every hire, every equipment purchase, every lease you sign shows up in your financials. Accounting is the literal output of your day-to-day decisions.
Colin walks through the loop every business runs on, which he calls the financial operating cycle:
Then he follows a new apparel store from day one ($250,000 in assets, funded with $150,000 of the owner's money and a $100,000 bank loan) to show exactly how the loop plays out.
The whole article is free this week. Give it a read…
WORTH A LOOK
A few finds from this week
Profit Isn't Cash
85% of owners hit an unexpected cash flow problem in the past year. And the typical small business brought in 5.5 times as much cash in its best month as in its worst. (Relay)
Growth Needs Capital
54% of owners say a lack of capital is holding back growth, up from 43% in February. Growth requires assets, and assets have to be paid for somehow. (SBE Council)
ICYMI
How high are you flying? The 2-minute check before any financial review. (Last week's newsletter)
UPCOMING
What's on the calendar
PMU Virtual Bootcamp
December 1 to 17, Tuesdays and Thursdays, 2:00 to 4:00pm ET (virtual)
Six live sessions with Colin, recordings included
Free for members; from $495 for non-members
Want the printed workbook? Print orders close Friday, November 20.
THAT'S A WRAP
Colin's homework this week takes 15 minutes. Pull last quarter's net profit and trace where it went.
More cash in the bank? More inventory on the shelf? A smaller loan balance? Or into your pocket?
Track it down and you understand how money moves through your business better than most owners. Hit reply and tell us where yours landed.
Thanks,
The Profit Mastery Team
Know your numbers. Command your cash. Scale with confidence.
This newsletter is for education, not personalized financial or investment advice.