Excess costs kill business

There is one outstanding business truism coming loud and clear from this year’s series of ‘The Apprentice’ and Sir Alan Sugar is right to keep banging it home: Managing costs mobilises profit.

Contrary to what Finance Directors would have you believe … business financial management is very, very simple! There are only three fundamental variables; Sales less Cost of Sales = Gross Profit, GM less Overheads = Net Profit. Crude maybe but none-the-less true. And life’s exactly the same. If you always have one eye on the balance of this simple equation as a business leader then you should survive. And I believe a PA should be as equally well versed in reading a Profit and Loss statement as his/her Boss.

In any project, like the one in last night’s show, where the two teams were charged to created and sell toiletries for profit, once the mistake had been made (which Nick Hewer pointed out at the end of Day One) then the team should have quickly focused on the minimum price the product could be sold at to make money. It amazed me when they seemed surprised by their loss when it was announced in the Boardroom.

We have all seen great businesses, with great products, go broke and wondered why, well last night was the classic demonstration of commercial unreality.

Gareth