Over the past month, I have been presented with three new clients. All of them can be defined as small or medium sized established family businesses, operating around Jerusalem, Israel.

As a business mentor, with a specific interest in commerce and strategy, I was thrown the financials. I was supposed to come up with expressive excel spreadsheets that would explain away what had happened. From there, I was required to  shine some light on the solutions.

Well, there were no prizes on offer when I proved that sales were stagnant (or worse), as the costs pushed upwards. As the clients took on loans, the finance line also bulged outwards. The cash flow….was not flowing freely.

My attention turned to the line of ‘gross profit’. This is often defined as the difference between revenues and the cost of goods sold. These costs can include purchases of raw materials and production workers. It was noticeable that in all three cases, this profit ratio was under 30% and dropping. In other words, there was not enough money to pay for overheads and fixed costs.

A business coach like myself automatically knows that an experienced CEO has already rushed to clamp down on costs. He (or she) knows how to squeeze his suppliers. He will fire workers if needs be. He will compromise on a price in order to achieve a sale. So what more can be done?

One person actually told me that he did not want to see my numbers. He had spoken to so many analysts in the past. What was he do with more percentages and comparisons?

I have previously commented on how many firms rashly slash advertising expenditure at this period. It is simple to do, incorrectly seen as a less painless option. However, what the financial statements do not reveal are the time management skills of the CEO. Very often, when a business is in trouble, the CEO finds himself stuck in the office, ‘putting out fires’. That is how he keeps control, but of what?

By staying inside, the CEO has no time to go on the road. He does not meet new clients. And that means extra sales are never seen by the accountants. Thus the cycle of commercial doom enforces itself.

All three CEOs winced visibly when I suggested that they come up with a work schedule that releases 20% of their time to direct marketing. They wriggled even more when I asked them to consider the alternatives – a further reduction in revenue.