Dan's Papers - March 28, 2008 - Dan's Book Review: Take No Prisoners

From its title, you'd think that Marvin Davis's book Take No Prisoners is another macho business screed that advocates smashing competitors to the ground by fair means or foul, then stomping on them. Fortunately the book's contents belie its title. It's actually a thorough review of what it takes to increase a company's bottom line. It could serve as a text for Business Management 101, or as a CEO's secret reference to make sure he's touched all the bases.

There are no startling breakthroughs. Rather, the reader finds a detailed analysis of the basics, the blocking and tackling of business. That's not to denigrate its value. Top business execs are prone to forgetting how they reached the top, or letting complacency get in the way of detecting incipient problems or opportunities.

The lengthiest chapter advises mining a company's profit and loss statement, especially overhead items. By comparing a breakdown of current expenses against a year of previous profits and losses, it's easy to spot costs that are creeping up and eating into profits. Davis talks at equal length about studying vital symptoms of corporate health, especially cash flow, which he calls the "lifeblood of a company."

Right up front, the book lists common lies that company execs tell themselves. They'll be familiar to any experienced businessperson - we're better than competition, we're charging the maximum we can get for our products, our organization is at its optimal level, complacency is not a problem in our company, fraud couldn't happen here, our bank loves us.

These self-deluding lies spawn Davis's 12 deadly failures of management. Among them is failure to recognize changing market conditions and act on the, failure to resolve conflicts and resistance within the company, arrogance, overspending during good times, failure to act on sub-standard performance, failure to delegate, failure to define market strategies and follow them, and failure to plan for cash needs.

Once he scares us with the negatives, Davis takes the reader step-by-step through the practices of a profitable organization. He leads off his tutorial with market strategy, or where best to put your energies, identifying promising markets through "slice and dice" analysis of potential market size, margins, competition, growth possibilities, and cost of entry. Growth can carry its own perils, and Davis includes a chapter on keeping the balance sheet balanced. He cites several ways to improve margins through niche pricing, and advises shedding unprofitable customers and market sectors. (The latter can be particularly difficult for management. An old joke in business tells about the widget company that loses money on every widget it sells, but makes up for it in volume.)

A chapter on controls, complete with schedules and templates, emphasizes the importance of early warnings, using benchmarks for ongoing examination of sales, margins, operating costs, net profit and cash management.

Selling, of course, is at the heart of business success and Take No Prisoners reviews possible causes for poor sales. Sourcing and globalization have been hot topics for years and Davis devotes a chapter to their pros and cons, giving valuable tips about developing an export business without being burned.

Davis goes into extensive detail on productivity for both manufacturing and service companies, describing the effect physical plant, people, materials and assets, financial and production controls, and incentives have on them. He says most managers consider equipment and facility costs as fixed, whereas "turn-around" specialists realize there are no true fixed costs. Everything is negotiable.

In the crucial area of finance, he reviews how to manage your banking relationship, remarking that to a certain extent the bank is a vendor like any other. He advises taking a close look at the specific terms of loan documents, especially sections that look like boilerplate. No company is immune from fraud and Davis covers precautions in its own chapter. He claims that bankruptcy no longer has quite the onus it once did and points out the advantages and disadvantages in taking this serious step.

For the executive who wants to cash out of his or her business, Davis says it can be as difficult as achieving success in the first place. He recommends choosing an investment bank that is right for the size of business involved and describes what it can bring to the party. (So that's how they earn those big fees.)

The author constantly mentions feats he pulled off in guiding companies out of the wilderness. A cursory count turned up 25 different businesses that he helped out of tough spots, but perhaps that's not infeasible for a "turn-around" specialist, as he characterizes himself.