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The bottom line in any business is the financial bottom line. Proficiency in financial management separates successful businesses from unsuccessful businesses. The Road to MegaSuccess is written to help entrepreneurs understand how to make, measure and maximize money from operating a business venture. Companies that are progressing financially emphasize planning and growth control and implement a well-conceived and delicately synchronized business plan. The financial components of the plan are integral to success. The Road to MegaSuccess has 13 chapters, a glossary and end-notes. It would have been helpful if the author had included an index, as there are business concepts and jargon that may be hard for the uninitiated to understand. The book uses a case study approach. Each chapter begins with “The Journey” and features two fictional characters, BJ Armstrong of Matrix, Inc., and Taylor Made, of Potomac, LLC. These two entrepreneurs met in college and later decided 98 BOOK REVIEW The Road to MegaSuccess: Simple Strategies for Enriching the Bottom Line By Brother Louis G. Hutt, Jr. Columbia, Maryland: Joy Publishers, 2008 (258 pages). $24.95 Reviewed by Dr. Joseph T. Durham to work together. BJ Armstrong’s company, Matrix Corporation, distributes housekeeping, cleaning and maintenance supplies. Potomac, LLC, provides software development and IT consulting and technical oversight to business and government agencies. The aim of The Road to MegaSuccess is to make entrepreneurs more confident and knowledgeable about profitably managing the bottom line. Managing profit requires a well-defined financial strategy and a strong support system. The survival of a business hinges on how well resources are invested, managed and monitored. A precursor to success is a clear financial strategy. Every CEO must possess the ability to navigate the numbers. He must be able to authorize purchases of equipment, approve funding for bonuses and sign for the acquisition of real estate. In a sports perspective, the CEO would be the coach. He must be able to exhibit thorough planning, keen judgment and systematic control in supervising the game from beginning to the end. In Chapter 2, the entrepreneur is urged to evade the fault line and avoid Fall • Winter 2008 The Sphinx: www.APA1906.net the classic pitfalls. Taylor’s company peaked with its annual volume at $5 million but has been flat for the past two years. She seeks advice from BJ. For new businesses, the highest risk of failure comes in the first four years of operation. For established businesses, the risk of failure can go well into maturity. For companies that reach puberty and beyond, the greatest hurdle is to produce a profit on a consistent basis. Regardless of age or seniority, in order to enrich the bottom line, the CEO must work through various layers of financial, operational and other strategies as well as sales and marketing sectors of the company. Managing the financial affairs of a business requires a systematic approach that both measures and manages the flow of resources. A good business has a monitoring system that provides an accurate read on the flow of money. Cash in the bank is no sign of profitability or viability. An entrepreneur must have a variety of financial support systems, including having access to financial information. This will allow a business to bypass the fault line and steer it into a positive direction. Brother Joseph T. Durham Entrepreneurs should avoid a crisis style of management. Such a style results when a company finds itself racing to borrow money in time to meet payroll or to refinance overdue accounts owed by key suppliers. Management should resist accepting real time decisions as a matter of practice. The author deals with early-warning signs to determine if a company is in danger of failing. Among these signs are: profits are decreasing although sales are increasing; the company is operating in the red despite having achieved sales goals; and incomplete financial documentation detracts from otherwise accurate, reliable and complete information. One should avoid these pitfalls. Chapter 3 focuses on effective cash flow management techniques and solutions. A merchant’s worst nightmare is running out of cash. Adequate operating cash is a matter of business survival. An insolvent business is unable to meet its obligations. Despite the value of assets on their books, cash-strapped businesses struggle to support their day-to-day
need for cash. The first test of financial vitality is a company’s ability to convert non-cash assets into hard cash. Managing cash flow is extremely challenging and stressful. The filing of a bankruptcy by a major customer can cause cash flow to hemorrhage; also events such as equipment breakdowns, a major customer dispute or an interest increase on a bank loan can cause difficulties in cash flow. The effects of cash flow deficiency can be quite serious. Sometimes Draconian measures must be used such as selling off equipment, eliminating staff or cutting back in other areas. Aside from securing cash from the outside, the only way to avoid such dire consequences is to realign cash flow. This takes a thorough understanding of the techniques for measuring, forecasting, and managing cash resources and uses. Businesses must hunt for ways to accelerate cash flow from operation. Tweaking financial policies and practices offers a way to achieve tight cash flow alignment. For instance, one could bill customers bi-monthly rather than weekly. Likewise, a company can delay inventory and supply purchases nearer to actual usage. These procedures will tighten the operating cycle. For emerging and growing businesses, Cash is King! In business, profit is important. A business should be able to make a profit on virtually every sale. One should be able to make a profit from every widget that is sold. A critical threshold for sale of products and services is the breakeven point, which occurs when sales match expenses. Financially speaking, a business should not sell a product or service below cost, except for promotional reasons. Calculating the breakeven point is a major milestone towards increasing profitability. The breakeven calculation provides the building blocks for a profitable operation. Different types of companies calculate breakeven differently. For example, a product and merchandising company expresses it in sales dollars. Healthcare services measure breakeven in terms of patient visits. Throughout the book, Brother Hutt cites 12 principles, which he calls the Mantra. One such mantra is “Perform a Reality Check. Examine your Financials.” In discussing this mantra, Brother Hutt relates that Taylor Made was being considered for the awarding of several large contracts. In preparation, she decided to talk with her banker about short-term financing. However, she was anxious about meeting with her banker without having her accountant present. She needed to know more about her company’s financial statements. Financial statements usually contain three ledger sheets: Income Statement; Cash Flow Statement; and a Balance Sheet. Financial statements represent a periodic report card and serve as a handy guide for making financial decisions. Using financial statements can supply answers raised by management as well as external parties. To ensure universal comparability, conventional financial statements use certain basic accounting standards and methods referred to as Generally Accepted Accounting Principles (GAAP). CPAs are required to use these guidelines when preparing financial statements and when rendering financial opinions about them. Frequent reporting of financial statements is very desirable. When financial statements over a period of time are compared, one can get a good sense of the financial condition of a business. Financial oversight and monitoring should be an every day function. As valuable as a financial statement is, rarely will a banker or financier rely exclusively on them. Financial statements are designed for a general audience. Financiers want a more detailed account of the DNA of a business. Usually when a large amount of BOOK REVIEW funding is being requested, no stone is left unturned. Credit standing of the principal owners will be examined, and even documents relating to valuable property such as licenses, leases, and royalties will be examined. It may be helpful to have a second opinion regarding a company’s financial health. An outside perspective serves as another type of internal control over the accounting and financial reporting process. Companies can shop for money to finance a business. One way to acquire capital is to use other people’s money but this method requires jumping through hoops as well as an ability to deliver a return on investment. Securing capital requires strategic planning and attention to detail. A CEO seeking capital must have a creditable business plan that outlines clearly his financial needs and requirements. One lesson a CEO learns is that it is difficult for a newly formed business to attract capital. A start-up company may begin with the owner tapping his personal savings. They may be able also to get family and friends to chip in financial support. Funds provided to a business at a specific rate of interest with a definite schedule for repayment is referred to as “debt”. Money obtained by a business with a more flexible repayment schedule is referred to as “equity”. Equity is thought of as “patient money” because future repayment is tied to future earnings. Equity funding is usually the preferred method of raising a relative large amount of capital. In contrast to equity, debt capital fixes certain repayment obligations. Debt financial requires amortization— that is regular payment of principal and interest until the balance is fully repaid. The Sphinx: www.APA1906.net Fall • Winter 2008 99
Page 1 and 2: OLYMPIC GOLD MEDALIST BROTHER JESSE
Page 3 and 4: ALPHA ATHLETE: ALL AMERICAN PENN ST
Page 5 and 6: Above: Brother John Woodruff. Photo
Page 7 and 8: onships while attending Seton Hall
Page 9 and 10: citizens home, known as Brookline,
Page 11 and 12: gave remarks and presented certific
Page 13 and 14: Louis community. The mission of CTO
Page 15 and 16: NU MU LAMBDA Decatur, GA Mentoring
Page 17 and 18: the Dallas Morning News and feature
Page 19 and 20: FRATERNITY’S FIRST CAUCASIAN BROT
Page 21 and 22: Editor’s Note: Thirty-second Gene
Page 23 and 24: “ I am told that this group of me
Page 25 and 26: “ America knows we are here. Amer
Page 27 and 28: CONVENTION HIGHLIGHTS 3 4 8 9 8 Bro
Page 29 and 30: 102ND ANNIVERSARY CONVENTION NBC’
Page 31 and 32: 102ND ANNIVERSARY CONVENTION G.P. D
Page 33 and 34: 102ND ANNIVERSARY CONVENTION Brothe
Page 35 and 36: 102ND ANNIVERSARY CONVENTION Army C
Page 37 and 38: GOING WHERE WE SHOULD BE Editor’s
Page 39 and 40: What scientists will also tell you
Page 41: Board, was applauded by the March o
Page 45 and 46: Success by Instinct: What Animals A
Page 47: members to be supportive of other t
Page 50 and 51: OMEGA CHAPTER Brother Kermit H. Bos
Page 52 and 53: OMEGA CHAPTER tice in Portsmouth in
Page 54 and 55: CORPORATE DIRECTORY 110 The Seven J
Page 56 and 57: LEADERSHIP DIRECTORY ALPHA PHI ALPH
Page 58: NEW ORLEANS COME BACK TO THE BIG EA

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