What is operating leverage and why should you care? Ignoring the financial mumbo-jumbo, operating leverage represents how having debt can affect a company's bottom line profit. In some cases, Operating leverage can improve a company's profits and in others, it can destroy it.
The other day we talked about mass-produced products being the only ones making it to the market. We stated that this was because they require high sales volumes to break-even. However, we also discussed that some manufacturing was able to be customized and more easily distributed. In the past, it required large capital investments to […]
Most business cultures follow a predictable path as the business progresses and grows. In addition to the business culture, the role of a business leader must also develop or the business gets stuck. Sometimes the founder adjusts his style or adds partners who have the skills the company needs. Over the next few posts, we […]
Leap of faith assumptions needs to be identified and tested early on so that the company can make better decisions instead of incurring significant expenses by going down the wrong path. Unfortunately, our government does not subscribe to testing assumptions before spending billions of dollars of taxpayer money. For example, take the main assumption that […]
When I grew up in Massachusetts, I remember reading a story about Joe Kennedy. He would go up to owners of older drafty apartments in downtown Boston and make them a unique proposition. Many of the units were poorly insulated and cost a small fortune to heat in the winter. Joe would agree to insulate […]
It is always good to have some investment funds so you have the ability to execute when you see a good deal. One of my boys bought his motorcycle with cash after he bought a Ford Ranger with a blown engine the owner could not afford to fix. He bought the truck for $500 and […]
Are you risk adverse? Most people work hard for their money. Therefore, when it comes to investing their hard earned money, they tend to play it very safe and conservative. Entrepreneurs know that money doesn’t come from work but from ideas and one’s personal knowledge. They know that even if they lost all their money […]