What can a sculptor teach you about making net profit and cash flow? A lot.
Think about how a sculptor does their work. Obviously they start out with a block of stone. But no matter how beautiful the stone may be, it does not mean the sculptor will end up with a pleasing statue.
The stone is nothing more than the raw material – the potential – for the sculptor to create the desired end result.
To create the statue they want, the sculptor uses a variety of tools to remove only what is necessary – things that don’t contribute to the end result they want.
And that’s where you can learn from the sculptor. Because you are a sculptor too – a sculptor of net profit and cash flow.
In your case, your raw material for sculpting net profit and cash flow is your revenue. This is your starting point.
Like the sculptor, your raw material does not guarantee a pleasing end result. In your case, simply having revenue is no guarantee that you will end up with financial performance that you will be pleased with.
By taking three lessons from our sculptor friend, however, you can give yourself much better control over how you transform your block of revenue into net profit and cash flow that you will be pleased with.
Start with a clear vision of what the end result should look like. The sculptor knows in advance what they want their finished sculpture to look like – what it should do when it is complete.
In your business, you need to clearly define your target financial outcome – how much net profit and cash flow your business needs to create in order to meet your goals.
These goals should include defensive goals (making enough money to help you weather economic rough patches), offensive goals (making enough money to build a war chest to take advantage of opportunities that may arise), and hygiene goals (making enough money to allow you to execute on your current strategic plan).
It is the process of carefully defining your targeted financial outcome that allows you to deduce how big a block of revenue you need to start with. You can decide if you need to get a bigger block, and how much, and where, you need to carve away to create the net profit and cash flow you want.
Avoiding this fundamental step is like the sculptor starting to chip away at the block of stone without a clear picture of the end result. They could chip away with all the positive intentions, all the optimism, and all the energy they can muster, and STILL wouldn’t end up with the finished sculpture they really wanted.
Get familiar with the necessary tools and be able to use them effectively.
Imagine our sculptor’s performance if they only knew how to use one tool – let’s say one a one-inch chisel.
They might have a crystal clear vision of their sculpture. But having just that single tool available would result in a sculpture that would, at best, be an approximation of what they envisioned. And producing that rough approximation would be so much more difficult, less fun, and require much more effort than it needed to.
In your business, the tools you need to be familiar with and be able to use properly are things such as pricing plans, profitability analysis, product margin analysis, customer profitability mapping, breakeven analysis, and scenario planning.
If you aren’t familiar with these tools, don’t worry. You will be receiving training opportunities to learn about these tools in the near future.
Control who has access to your studio.
The sculptor would NOT allow anyone to walk into their studio and randomly chip away at their sculpture. If they allowed other people to randomly chip away at the sculpture, there would be no way they would end up with what they wanted.
All the vision, effort, and knowledge would be wasted because they would end up with a worthless lump of stone.
You need to control who is allowed to remove chunks of your “stone” (your revenue).
Don’t simply add expenses to your business on the assumption that “it will pay for itself.” That’s like letting anyone into your studio to chip away at your sculpture.
Do some analysis and decide if removing that piece from your revenue is necessary to accomplish your envisioned end result – the net profit and cash flow that aligns with your target financial outcomes.
So art and business do intersect. You now have three lessons learned from a sculptor that you can start to apply in your business and create net profit and cash that aligns with your strategic financial targets.
About Steve Wilkinghoff
Steve is a leading global expert helping private companies, and their owners, managers, and teams find, unlock, and leverage hidden financial performance.
He is a bestselling author of two books – Found Money: Simple Strategies to Uncover the Hidden Profit and Cash Flow in Your Business, and Found Money Roadmap – The Small Business Owner’s Guide To Making More Profit, Cash Flow and Fun.
Using a combination of unique processes, tools, software and systems, developed by over 25 years of experience working with thousands of private companies around the world, Steve makes the guarantee that ANY business has hidden financial performance, profit, and cash flow just waiting to be unleashed for good into the world.
He delivers his consulting, training, and tools through the company he founded, BizDogGroup.com
Interested in learning more about how to better use Dynamics GP to help Sculpt your business. Register now for Steve Wilkinghoff’s free webinar on July 26th, 2017.