Scorecards: Keep One And Achieve An Increase In Profitability

Japanese looks at business as war; but Americans prefer to look at it as sports. In both cases, the objective is to win.

In this sense, Americans, contrary to their global image of ruthless aggressiveness, are not inclined to draw or shed blood over the prospect of a fine bottom line. I think this goes with other businessmen wherever part of the world they reside.

They don’t want a gladiatorial match to enjoy the sight of maimed, lifeless bodies being dragged out of the coliseum. Businessmen, though, enjoy monitoring the score of a competition and, preferably, a spectacularly bountiful victory when their team wins.

Yes, business people and institutions like to keep scorecards.

It is a convenient way to know where you are in a particular point in time, especially when the deadline for the quarterly sales report nears. A well-kept scorecard that is in black gives shareholders a good, sound sleep in the next three months, at least.

But not all businesses keep one. And I bet most of the single proprietors are the singles biggest sector who are guilty of this neglect.

That is why, perhaps, the fatality rate of sole proprietorship businesses are the highest. Once money comes in terms of sales, the proprietor assumes his or her business is profitable. And increased sales means to increase profitability with that.

Not necessary so. Of course, the money from sales are not all profit. Part of it will go to overhead expenses like rent, salaries, supplies, etc.

But this is easily overlooked because of the lack of proper recording of business transactions. In other words, no scorecards.

I know somebody who dislikes paper works (who does, anyway?) but just so happens to be a businessman. He has a gift shop, which is run by a store manager with several other workers around. Customers come, well, not in droves, but they do enter the door regular enough, I thought.

By pure perception alone, the business is doing well. My friend lives in a relative comfort, taking the liberty of enjoying some luxuries every now and then.

Last year, however, the bubble burst! After two years, the business was gone and he was bankrupt.

He was down, but not out, he pledged to me. He learned some important lessons, he said. Heck, he even told me this apparent “tragedy” might be the best thing that ever happened to him as a businessman!

I asked him what is the most important lesson he learned out of the rough experience, and he said: “From now on, I’ll keep a scorecard.”