The Burn Rate, Profit Margins and, Hiring the Next CEO

My very first boyfriend (age 15) remains a dear friend these 40 years later. He gave me great advice while going through my divorce, “Remove the emotion, Cinthia. This is now a business deal. You’re thinking profit margins here.”

Well, obviously divorce is very personal, but it was the best advice I got during that mess. The minute I felt a stage 10 meltdown coming on, I’d repeat to myself: This is a business deal. It’s not personal. Remove the emotion. Mind games, maybe, but true nonetheless. The person who was on my team for 20+ years was no longer on my team, and I had to get the best deal I could for myself. That was when I began to see my financial life as a small business, a mini-corporation. And, since, I was about to be one income short of broke, it gave me a way to view this new financial life without getting so wigged out that I was discussing it with the check-out-chick at the grocery store (who has her own D-I-V-O-R-C-E story, and little time for mine).

Now, when I am paying bills, considering purchases, or updating the budget, I view myself as the CEO of the Cinthia Corporation. It’s got a good ring to it, doesn’t it? Applying business tools to your personal finances is a good way to evaluate the overall health of your little corporation.

Ex: What’s my burn rate (defined as how fast I am running through funds, debt and savings)? Companies that have a high burn rate aren’t given much hope in the business world. For myself, let’s just say, I have prayer on my side.

What’s my profit margin? A simple definition of profit margin is the amount by which revenue from sales exceeds costs in a business. If you’re putting profits back into the business, and not spending it on drugs, which has crossed my mind recently (I’m just talking pharmaceutical prescriptions here, don’t panic), then that would be the retirement account.

Looking at your personal finances this way actually helps to remove the emotion and frustration, and let’s you play fast and lose with the numbers if you’re clever. Sadly, I’m not.

It also helps when evaluating long-term investments. Ex: Furman University, my alma mater, comes in on the tuition front at about 50K a year (that’s almost 10x the amount since I graduated). That’s 200K for 4 years if you’re slow on the math, and we’re not talking incidentals like books, etc. When my youngest was being considered for the Furman soccer team, I was proud but not crazy. We did the tour, and when the tour guide asked for questions, I raised my hand. What’s my rate of return on my investment, the 200K?

Excuse me?

Okay, so the tour guide was a sophomore, probably not the person to ask that question since she was currently contributing to her parent’s burn rate, but I know you hear me. And, was I really the only pareent there with that question? I mean, come on, like Junior is really going to pull that off? They say financial securities are commonly judged based on past rates of returns. Well, there you have it. Past rates of returns indicates I should give that 200k to the local homeless guy who walks the streets with his dogs. I mean, I totally like his dogs.

I knew the burn rate would be high for a couple of years after my divorce. I knew the profit margins would be negligible. I knew the gross margins would have no margins.

Setting up a new life after 2 decades of being in the same place is not cheap. But, I was clueless as to the challenges this CEO would face. After long meetings with the Vice-President of Human Resources (that would be Agapanthus, who prefers her full name in matters of business), I am considering Elon Musk, for the job, CEO for Telsa Motors, SpaceX, and designated the sexiest CEO alive by Business Insider. Hey, that doesn’t mean he isn’t smart. If he can get the job done while being cute: Bonus!

As a friend of mine says, “We is po.” Yes, we is.

Investopdeia suggests that when one is “po,” they should a) get a higher paying job (trying) b) get two jobs (done and done) c) get a roommate (I have one, he’s 20, I’m losing money on him). Investopedia aside, I think I’ll just do what Detroit does; hire the next CEO.  Burn baby, burn.

Or, consider non-profit. I hear they’re doing great these days.

 

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