Green Grease Makes the World Go Round: Learn to make a difference rather than just a profit.

Green grease makes the world go round. Money is how business transacts and sustains itself. Money is the vehicle for how a company operates. It gauges how customers perceive your value proposition.

Money is how we keep score in business. It’s the measuring tool, and what gets measured gets managed.

Bills need paying, supplies purchased, funds raised, and salaries met. Running a business is all about Revenues (sales), Expenses (costs), and Net Income (profit/loss). This flow of money is organized and measured by accounting. The goal is to sell things for more than they cost you to make or get. It’s simple, but not easy.

This simple statement can get complicated as operations grow and business scales up. Even in a small business, many costs are not directly related to the product. There are indirect costs like the building, utilities, computers, receptionists, secretaries, and travel.

Decisions determine how to allocate those indirect costs to the units sold. These decisions are the realm of Accounting and Bookkeeping. And as painful or tedious as it may seem, these skills are the fundamental lifeblood of business.

Accounting is how you can tell how the business is performing: whether you are making money or not, and how much. Accounting is the measuring stick. As the famous management guru Peter Drucker said,

What gets measured gets managed.

So we need to measure what matters.

The difference between the price you sell something for and its costs to make it is the Net Income. You can also think of it as the value you have created.

The value of money measures risk. A dollar today is worth more than a dollar tomorrow. A bird in the hand is worth two in the bush.

“The importance of money flows from it being a link between the present and the future.”

– John Maynard Keynes

How do you get the money to start? When and how should you expand? Should you perform certain operations in-house or outsource? Should you lease or purchase? The tools and techniques of Corporate Finance will help you answer these questions.

Corporate Finance provides us with tools for valuation and decision-making. Finance applies the Time Value of Money concept.

Business operations focus on value creation and generating awareness. Marketing is about making people aware and creating desires for your product. Branding is about enhancing the perceived value.

Marketing practices create psychological connections between products and deep aspirations. There is a shadow side of marketing. It can devolve into cynical and duplicitous ways of moving superficial goods. Or worse, promoting goods that have harmful side effects. Marketing methods touch on issues of a philosophical nature related to Business Ethics.

Our aspirations should be to use business methods to help people meet genuine needs. Make things of value for people who care.

Learn to make a difference rather than a profit.

It’s easy to get seduced and caught up in the desire to make lots of money. We mistake money as the way to get the prestige and command the respect we seek. We are status-seeking animals.

Don’t give in to these less than virtuous motives and add to the consumer frenzy in less than meaningful ways.

Keep a proper perspective on what money is and can do.

“So you think that money is the root of all evil?” said Francisco d’Anconia. “Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value.”

Ayn Rand Atlas Shrugged 1957

Other than the pronoun “men,” this is a valid view of money. Money is a means, not an end. Money doesn’t buy happiness, but it does buy freedom. Money provides the freedom to do what you want when you want. And it gives the ability to say no to things you don’t want to do.

Maintaining perspective on money as a tool, and not pursuing it for its own sake takes vigilance.

Learn to make a difference rather than a profit.

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