The business that was never opened.

Twenty-five years ago, a relative asked me a simple question.

He wanted to open a small clothing store and asked if I could help him with the numbers.

At first, I did what most people would do. I started building the financial statements.

Then I stopped.

I realized the real question wasn’t “What will the income statement look like?”

It was:

How many times does the inventory need to turn each year?

What gross margin is required?

How much working capital will the business need?

Can it generate enough cash to pay the owner a reasonable salary and still create value?

When we worked through those questions, he decided not to open the store.

That experience changed the way I think about business.

Since then, I’ve never looked at financial statements as isolated reports.

I’ve looked at them as the visible result of many connected decisions and interactions.

That simple conversation, many years ago, is one of the reasons I started building Managers Lab.