Blog: Losing Weight and the Health of a Business

If you have ever tried to lose weight, or know someone who has, you are probably aware that there are a lot of different diets and weight loss programs that a person can choose, and that advice from friends can add even more “options” for trying to lose weight. There are diets that do not allow fat, and some that do allow fat. There are some that exclude carbohydrates, and there are some that allow them. Some people say that you should not eat after 6:00 p.m, or maybe 9:00 p.m. Other people say that certain foods should not be combined in the same meal and yet others say that specific foods should be combined. Some diets and advice are even contradictory. How is a person supposed to lose weight?

Despite the large number of different diets, there is one basic idea that I keep coming back to about losing weight: if you burn more calories than you eat, you will lose weight. If you eat more calories that you burn, you will gain weight. Whether you eat those calories from carbohydrates, or fat, or fruits and vegetables, or you eat in the morning or evening, if you eat more than you burn then you will gain weight.

While some of the diets we read about may have some health benefits that are not weight-related, the most straightforward diet that most people can use to lose weight is simply to burn more calories than you eat. This means that you can start losing weight by eating less, exercising more, or a combination of both.

I do not want to imply that the diets that have books written about them, are featured in magazines, or are on TV do not have some truth to them. It may be better for your body if you limit your fat or carbohydrate intake. It may be better if you do not eat before bed. It may be better if some foods are consumed separately, or together. But, for me, the bottom line to losing weight is how many calories you burn and how many you consume.

I am certain that for serious athletes and those who are trying to fine-tune their body to be in the best shape possible, some of these more specific and complex dietary rules may be necessary. However, those people are beyond counting calories – they are trying to balance the different nutrients that are used and different types of energy for different exercises and they are trying to do things that 95% of the people who want to lose weight do not care about. (After people lose weight, their next step may be to fine-tune their body, but losing weight is the critical first step.) For the vast majority of people who are trying to lose weight, the best place to start is eating fewer calories and burning more. In the case of losing weight, keeping it simple may be the best advice for many of us.

For a company (and in particular a small company), cash is the same thing as calories are for a person trying to lose weight. There are a lot of ways that a business can be measured or evaluated – numerous ratios, formulas and key performance indicators that can be calculated for a small business. But, for the health of a small business, the best thing to look at is how much cash comes in and how much cash goes out. Maybe the company has great ratios, high ROI, and other metrics that show the company is doing well, but if more cash is going out than coming in, then the company has a problem. When small companies lose sight of cash flows and start to focus on other things, the company is at risk of going bankrupt perhaps even if “things are good.”

Yes, there are many more advanced metrics than cash flow to measure business performance. For established and mature businesses, maybe those metrics are important to fine-tune their performance and to try to get the most out of the assets invested. But, just like a person and their weight, the best way for a company to improve its health in the short term is to increase cash inflows and decrease cash outflows. After the company has a positive cash flow, then it can turn its attention to more of the specific and detailed measures of a business, just like a person can fine-tune their diet once they have started the process of losing weight by burning more calories than they consume.

Brian Hock, CMA, CIA
HOCK international