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Learning About Net Profit And Cash Flow From A Sculptor
Posted By Steve Wilkinghoff On June 7, 2012 @ 11:00 am In Finance | 3 Comments
What can a sculptor teach you about making net profit and cash flow? A lot.
The sculptor starts with a block of stone. But that doesn’t automatically mean they 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.
You are a sculptor too. A sculptor of net profit and cash flow. And your revenue is your “block of stone”. It’s your starting point. But simply having revenue (large or small) is no guarantee that you will end up with a beautiful result. Learning these three lessons, you can give yourself much better control over how you transform that block of revenue into net profit and cash flow that you will be proud of:
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 dream lifestyle, and how much net profit and cash flow your business needs to create in order to serve that dream lifestyle. Only then will you truly know 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. . . if they only knew how to use one tool – a one inch chisel. They could 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. It’s not your fault because there haven’t been very many opportunities for small business owners to learn these things before.
The good news is that, even if they sound creepy, they are easy to learn and apply once you are aware of your need to use them.
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. They could have a clear vision of the finished sculpture, and could be an expert with the necessary tools and techniques needed. But 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” (you 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 will allow your business to serve your dream lifestyle.
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 you can be proud of.
Stone Sculptor  Photo via Shutterstock
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URLs in this post:
 Stone Sculptor: http://www.shutterstock.com/pic-60908512/stock-photo-sikkim-india-may-the-tibetan-sculptor-yanchong-lodil-works-in-his-workshop-on-may.html