May 222005

Mental Math

Mental Math

One of the most important things a CEO can do when thinking about conversations with Board members or investors is to do mental math. That’s how directors operate. They remember key metrics from time to time and project them forward in their minds. Whatever your financial or operating results, you need to make sure they will mesh with your investors’ mental math.

Looking at your cash balance? Look back at the last financial statement’s cash number and mentally work your way to the current statement: operating profits or losses, big swings in AR or AP, CapEx, and other "below the line" items. Do they add up? Be ready to walk everyone through the mental math at your next meeting.

The same thing applies to operating metrics — the size of your database, your headcount, your sales commission rate. Directors only have so much time to be in the details of your business…make sure you know the metrics they zero in on, and work that mental math!

Filed under: Entrepreneurship