Mark Kuta's book goes beyond a company's P &L, Profit and Loss statement by taking a close look at the environment that a company is operating in. This involves looking at the SEC reports of not only the company that you are selling to, but also of other companies that are competitors in an industry. We can gather this information in the 10-K reports, and a lot of other reports that are filed with the SEC. These reports discuss a company's strategy. Especially, in emerging markets, whether in the United States or outside, market share may be the big thing that is fought for, not immediate profitability. You have to understand a company's profit strategy to understand the thinking of its CEO.



Another problem that a lot of really good companies have is lack of control of inventory. They may think that they have 5, 10 or 15-percent profit margin, and that they are doing very well. The problem is they don't realize that they have sometimes even double or triple they amount of goods tied up in inventory that they need to. That in turns means that major amounts of cash that could be re-invested into the production process, or taken out as profits are likewise tied up. If you are attempting to make sales to such a company, the inventory figures are not likely to be accessible in any of the reports filed with the SEC. You can learn about long-term fixed assets, but not things like how much inventory is hanging around warehouses and factories. To find out how much there is, you will have to make a physical tour, as an invited guest presumably, and talk to enough people and look around, and that way make an estimate of how much inventory there is. If you are selling software of various sorts for inventory and production management, as Mr. Kuta was at one point, this may be your one point to break in and clinch the deal.

Overhead is another thing that businesspeople have to worry about ? Overhead is all the indirect expenses that businesses incur to be able to sell our product or service. Anything that is an expense that we incur that is not directly related to the product or service is overhead.

Understanding the competitive environment of the company you are analyzing will allow you to try to understand the possible challenges that the executive is facing. It is important to look beyond the current operating challenges and try to broaden the scope of what the executive could be facing.

One way that we will quickly be able to see how companies are competing in the same markets is to do a results comparison. Understanding how companies stack up will give you an understanding of areas to investigate and weaknesses to exploit in your sales cycles.

Since any company you will be calling on operates in a competitive environment, we will want to understand as much about the industry as possible. Some of this analysis we will get from the Form 10-K that all public companies file with the Securities and Exchange Commission (SEC) and some will come from the financial statements of the industry players you identify.