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Appearances matter…don't they?

[This post is part of a series on business…for business owner/managers and their lenders.]

This is a tough one. In a down economy, every expenditure counts. Business owners, managers and CFO/CPAs have (or should have) been scouring the income statement looking for costs that can be cut back.

What not to cut…
Marketing is one of those costs you cut at your peril. In the case of my clients, the banks, training on loan quality is another. And yet some businesses and banks are making poor choices. Either the chain saw is out instead of a scalpel and costs are getting cut across the board. Or you might be keeping your head in the sand and spending money like you were making (more of) it.

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When you first get into sea kayaking, the experienced paddlers have the fancy gear. They have dry suits, sleek boats, dry bags, just the right clothes. But even in the Northwest with water temperatures of 50 degrees, you can get most of what you need at Goodwill for clothes and you can rent the boat, life jacket and paddle. You can check around the house for at least five of the ten essentials. And maybe borrow the rest.

Needs and wants…
Distinguish between what you really need and what is more flash than substance for now. In the book “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, I learned that most self-made millionaires do not wear Rolex watches and drive fancy cars. In fact, you just wouldn’t recognize most of them. I recommend the book.

Some expenditures are necessary to keep up appearances.
Your marketing needs to be continuous and high quality. There are certainly minimums your clients or customers expect as to clothing and cars. The shop or store needs to be clean. We are in an odd time in which some of our customers will actually be offended if we are spending lavishly on what seem to be unneeded items, especially if we are reducing staff (and therefore customer service) at the same time. Witness the furor over lavish travel.

What will bring revenue in the door?
When you are ready to circumnavigate Vancouver Island, British Columbia in the Winter invest in the Dry Suit…and maybe some more classes! Until then, dress warmly from Goodwill and scrutinize every expenditure…will it bring revenue in the door? …will it keep you positioned for the upswing?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.