Business Alchemy Lesson 2–Upgrading from a Compact Car to a Luxury Car

Why are numbers important outside of requesting loans from banks and preparing taxes?

The answer to this question is vast, but I would like to use an analogy to summarize the answer to this question.  Would you rather travel across the country in a compact car or a luxury vehicle?

I certainly hope your answer is the luxury vehicle, because if not, I wonder if you are being honest with yourself.  Your balance sheet is your business vehicle and you will be driving that vehicle for countless hours each week, month, and year upon year.  So what kind of vehicle do you want to spend that much time driving?

Naturally you will want to be in the luxury vehicle equivalent for business.  This requires a healthy balance sheet.

In the lessons to follow I will explain the different major components of the balance sheet—Assets, Liabilities and Capital— and go over some basic philosophies for upgrading your vehicle from a compact car to that coveted luxury vehicle.  For now I will end with the basic equation of the balance sheet which is that Assets equal Liabilities plus Capital (A = L + C ).

I like to end each lesson with the reminder that:

Without Foundation, your business fails!

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