How important is the use of words? Is it important for business owners to be precise in their use of business and financial terminology? Can distorted or inaccurate communication lead to incorrect conclusions and actions that are harmful?
Ask the average business owner if he or she wants to make more money and the answer will be yes. Ask that same question of a more experienced or sophisticated business person and the answer might be, ?Just what do you mean by more money?? As you might now imagine, the term ?make more money? has different meanings to different people.
We?ve all heard a newscaster say things like the movie Unbroken made $47.3 million during its Christmas weekend opening or the auto maker GM made $39.6 billion in the second quarter of 2014. To be accurate, the reporter should have said Unbroken grossed $47.3 million in ticket sales and that GM sold $39.6 billion of autos and other products. The ?making of money? is an expression that refers to profit, the money left after paying all operating costs and expenses. The figures quoted in the newscast represent sales made during the period, not profits.
At this point you may say, ?So what? Does it really matter?? Let?s look at a different scenario.
A business owner at a cocktail party talks about how much money he made. Most listeners recognize he is boasting a bit and they pay no attention. But what if the same statement is made to his banker, a potential investor or lender, an important supplier, or a prospective customer? The meaning now becomes critical because the credibility of the owner will be judged based on his use of business and financial terminology.
A banker or investor won?t make a loan or investment solely on the ability of the owner to use an accurate vocabulary. On the other hand, an inaccurate usage of terms and an inaccurate communication of business results, however unintentional, will cause them to wonder about the knowledge and acumen of their applicant.
If a vendor has a choice of two customers to promote and sell their products or if a customer has the choice between two sources to supply their needs, credibility may be very important. If the decision is low risk, meaning the acumen of the owner is of no import, the usage of terms may not matter. On the other hand, if the reputation, stature, and sophistication of the business are important to the vendor or customer, the impression created through vocabulary may be critical. Although perhaps an extreme example, the former CEO of a large St. Louis corporation would not consider suppliers if the representatives were sloppy in their use of language. We know a supply chain manager at a Fortune 50 company declines to use suppliers in critical areas if they cannot speak knowledgeably about their financial situation.
Think of it this way. There is no disadvantage to using business terms in a correct and proper manner, but there may be advantages to creating the image of a person who knows what they are talking about. Using improper or imprecise language runs the risk of damaging image or reputation. Why take that risk?
Our suggestion is to avoid using the term ?making money?. Instead, refer to ?making a profit?. After all, isn?t making more profit what the financial aspect of business is about?
Ronnie owns and operates a media sales business. He is the only employee. He works hard and is told he is successful. I put it that way because Ronnie isn?t sure. We met for an initial visit and, after a pleasantry or two, he told me this, ?My tax return says I made a profit, but my checkbook says it lies.? I?d never heard it put quite that way, but I immediately knew what he meant.