Dr. John Psarouthakis, Executive Editor
The Business Thinker. LLC Internet magazine and Founder and Managing Director of JP-Management Center, LLC.
A Lecture Given at Hillsdale College
some long time ago that I believe is relevant today
The subject was
Small Business Growth
I am pleased to be at Hillsdale College for many reasons not the least of which is that the subject of this talk seems particularly appropriate. I am concerned about the factors that lead to employment growth, something that should be of vital interest to every student. So often discussion about employment or business focuses on the largest companies. Yet I think that we have not looked at the relationship of company size to employment growth and value to the society as a whole. I’m sure you were all pleased to see that Money magazine ranked Hillsdale College among U.S. colleges and universities as a best value. One can raise the question of whether Hillsdale College is a best value for its size or does its size make it a best value. This relationship of size to value is an important one that is often distorted by mythology and misperceptions.
“Small business is the economic backbone of the nation.” “Small businesses are the only ones that are creating jobs in our economy,” “The future belongs to the person working at home connected to the outside world with a modem, computer, fax machine and a cellular telephone.” If all this has a familiar sound to it, it should. The last few years have produced endless streams of prose about small business and the new economy. Most of it glorifying the role of small business. Yet, for all the discussion, the concept of small business is more of an ideological construct than an economic or analytic one. One could argue that the ideological pull of small business is not a new phenomenon but a cultural mainstay of American life.
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In today’s technologically driven world there is access to more information than ever before, but navigating through the abundance of material available can be incredibly overwhelming and time consuming. Also Information and facts are not enough to indefinitely sustain a business. There must be knowledge. Knowledge is born when facts and information come together to create a deep understanding of an idea, concept, principle, model, or design—the type of understanding that helps the individual, company, or corporation to make decisions that produce sustainable profitable growth.
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Dr. John Psarouthakis, Executive Editor, www.BusinessThinker.com. Founder and former CEO, JP Industries, Inc, a Fortune 500 industrial corporation. Adjunct professor, Strategy and Acquisitions, Ross School of Management, University of Michigan.
This is the 6th of short articles of my thoughts about Leading and Managing winning companies.
Analysis Framework: Financial
Financial ratio analysis will review, in part, the health and strength / weakness of the company and help decide the strategic direction of the company. The ratios such as: Liquidity, Leverage, Activity, and Profitability are basic to the analysis. To determine the risk in the company, the above ratios do not provide a measure directly. These ratios are descriptive and not prescriptive. We’d need to look at the “degree of operating leverage” and the degree of “operating leverage”. The product of these two ratios is the “degree of total leverage” which measures the company’s overall risk.
Evaluating the above sets of ratios to determine the operational and financial health of the firm an d project into the future the strategic set of ratios for a healthy growth.
In the final analysis decisions will be made, essentially, as to the direction of the business / company: the choice will be in determining the most desirable direction for and by its owner(s): i.e. Current direction with as much improvement as possible; Chart a new direction considerably different from the current one; Consideration of a strategic merger, or sale of the company to a financial group.