In Episode 059, Jack has invited Ms. Ruth King, who is a serial entrepreneur owning or having owned 8 businesses since 1981, to explain how entrepreneurs can have the courage to be profitable in their businesses. This will be the Part I of the interview.
Ruth has a passion for helping businesses get and stay profitable utiliSing the latest technology that makes sense to use. Ruth is also the #1 Best selling author of The Courage to be Profitable and three other award winning books.
What is profitability and why is it important?
"The key is really and truly understanding that yes, you've got to have profitable sales. If you sell something for a dollar, you have to have it cost less than a dollar. And you have a little bit left on the bottom line, but you also have to collect for that sale. So you can have tremendous profits and no money in the bank or you can have a loss in one month and have a lot of money in the bank. Now, multiple months losses caused problems obviously, but one month or something like that is ok."
Which is more important, the balance sheet or the profit & loss statement?
"The balance sheet is more important than the profit and loss statement because the balance sheet tells you about long-term profitability. You're going to say, wait a minute. my profit & loss statement tells me about profitability too but it does only for a month or only for a specific period of time.
Your balance sheet actually talks about the history of your business from the time you started your business or through the time you dispose of it or closes its doors through what is called retained earnings or that amount of profit that you keep in the business. As long as retained earnings keep going up, your profitability will keep going up as a general rule. So the balance sheet tells you whether you can pay your bills on time. Your balance sheet tells you whether you're taking on too much debt. for those of the listeners in your audience who have inventory, it tells them whether there's, they're building up too much inventory. So those are the types of things that the balance sheet actually tells you every month. And you think, wow, am I able to pay my bills or not? You know, and that's, I think just as important as whether I have profit or not."
You can tell whether a balance sheet is wrong in about 30 seconds!
"If the balance sheet doesn't balance, there is something wrong. If you have negative cash on the balance sheet, there is something wrong because you can never ever have negative cash in your business. If you have negative loan payments or anything that's negative on the liability side of the balance sheet, there is something wrong.
As a general rule, somebody is either cooking the books I eat, not doing things right or stealing from you or they are just don't know what they're talking about. And if you have a bookkeeper who is incompetent, get rid of him or her."
Ruth 's Most Favourite Quote
"When tough things happen, pick yourself up, dust yourself off, and keep going."
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Jack HM Wong Is an author of his Amazon bestselling book Cracking the Entrepreneur Code: 7 Tips to Build the Business You Always Wanted. He has been featured on CBS News, Fox, ABC News and NBC News. His mission is to improve the quality of lives of over 1 million people worldwide. His message to people who are stuck in the rat race is straightforward - "Anyone can start Any Business, Anyhow, Anywhere and Anytime".
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