BEP 324 - Discussing Company Performance (Part 2)

Hello and welcome back to Business English Pod. My name’s Edwin, and I’ll be your
host for today’s lesson on how to describe company performance.

Every company’s goal is to make a profit. But how they go about that is different.
Different industries, different business models, different approaches… There’s no
simple recipe for success. And there’s no simple, single way to measure whether a
company is performing well.

Instead, we look at many different factors when we measure company

performance. We’ve also got a lot of different expressions in English for discussing
the topic. And many of these expressions are what we call “collocations.”

What’s a collocation? Well, it’s just a natural combination of words. Ever heard the
expressions “turn a profit” or “boost the bottom line?” We don’t say “grow a profit”
or “up the bottom line.” Those simply aren’t natural collocations. And if you say
something like that, you won’t sound natural.

So studying collocations is a great way to sound more natural with your vocabulary.
You can learn combinations of words, rather than single words on their own. As you
listen to the dialog today, try to pick out some of these collocations, and we’ll
discuss them later in the debrief.

In the dialog, we’ll rejoin a meeting at a private equity firm. Three colleagues,
Maria, Claudia, and Taylor, are talking about some of the companies they’ve
invested in. They’ll use lots of great collocations as they discuss the performance of
these companies.

As you listen to the dialog, try to answer the following questions:

1. What does Claudia think about SmartMoney?

2. What does Taylor think they should do before selling off SmartMoney?

3. What has Claudia been focusing on with Byron Industries?

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Vocabulary

Venture: a new business activity; “I’m hoping to find some wealthy investors to
support my new web design venture.”

To generate a healthy return: to create a good profit, for a business ; “Profits

almost disappeared during the recession, but I’m happy to say we’re back to
generating a healthy return.”

Murmurings: rumors or quiet talk about something; “Management is getting

concerned about increased murmurings around a possible strike.”

To grow something aggressively: to expand something quickly or forcefully; “If we

want to grow the company aggressively, we should look into buying up some
smaller companies.”

Skeptical: doubting whether something is true or accurate; “You have to state

where you got your statistics from Reggie, or everyone will be skeptical about the
information.”

Overhead: ongoing business costs not related to direct labor or materials; “With
increases in property taxes and utilities, looks like our overhead is going up again.”

To scale up: to increase in size or number; “We can’t scale up our production any
more unless we invest in a bigger factory.”

Balloon loan: a loan that is repaid in several small amounts and one large final
amount; “This balloon loan seemed like a good idea at first, but now we’re faced
with a massive payment we can’t afford.”

To see where someone is going: to understand what someone is trying to say or

about to say; “I think I see where you’re going Dan, and let me say right away that
I don’t agree.”

To erode profitability: to make a company’s profits become smaller and smaller;

“All of these little expenses add up, and before you know it they’re eroding
profitability.”

Spot on: exactly right; “A: I’m guessing that sales went up about 5% last month?
B: Spot on. And we’re very happy with that figure.”

To grow the balance sheet: to increase a company’s assets; “One way of growing
the balance sheet is investing profits back into land and buildings.”

To sell something off: to sell something, especially company assets; “I think we

should just focus on our banking activities and sell off the insurance division.”

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Business valuation: the carefully calculated value of a business; “It’s a great idea
with potential, but your business valuation of $2 million is just way too high.”

Rosy: positive or good; “Have you seen the latest revenue numbers? Amazing. I tell
ya, the future looks pretty rosy for us.”

Urgency: a feeling that something must happen quickly or immediately; “Wendy

called for you, and I suggest calling back right away. It sounded like there was
some urgency to the matter.”

To table: to decide to discuss a topic at a later date; “I don’t think we’ll get to the
scheduling issue today, so we’ll have to table it until our next meeting.”

To decrease capital expenditures: to spend less money on land, buildings, and

equipment; “How can we possibly decrease capital expenditures when we plan to
expand our offices?”

To cover costs: to be able to pay bills or expenses; “For the first two years of
business, we just barely covered costs, but now we’re profitable.”

Biotech: an industry in which products are developed from or by living things;

“Several big biotech firms are trying to grow meat in the laboratory.”

Capital-intensive: requiring a lot of money, resources, or assets to operate as a

business; “Capital-intensive industries like oil and gas are just too expensive for
small players to enter the market.”

To turn a profit: to begin to earn money, as a business; “We’ve attracted a lot of

investment, but we still haven’t figured out how to turn a profit.”

To sit on: to have or to own, especially something valuable; “Our cash flow isn’t
huge, but we’re sitting on some very valuable real estate in the Bay area.”

IP: intellectual property, or ideas, inventions, and creations that can be owned and
not legally copied; “If you think you’ve got some valuable IP, you’d better get a
good team of lawyers to help you patent it.”

To buy out: to buy a person or company’s share of ownership; “When my business

partner decided to retire, I bought him out and ran the company myself.”

To boost the bottom line: to increase profits; “The big jump in sales around
Christmas time should help boost our bottom line in Q4.”

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To pay dividends: to give a share of a company’s profits to its shareholders; “Dylan
Technologies is set to pay dividends of 60 cents a share for profits made last year.”

To incur expenses: to spend money; “You’ll have to file a report to get the money
back for expenses you incurred on your business trip.”

Bloody: used for emphasizing that you are upset or angry about something; “You think
we can afford office space in Menlo Park? It’s way too bloody expensive for us!”

To play the long game: to be committed to goals that take a long time to achieve;
“I’m really not too worried about this little dip in the market, because I’m playing
the long game on these investments.”

Ratios: a ratio is one number divided by another number; in business, different

ratios give information about company performance; “Yeah, it sounds like a great
company when they talk about what they do, but have you seen their ratios? Really
rough financial shape they’re in.”

To run the show: to be in charge of something; “Tad is officially senior manager,

but it’s really Quinn who runs the show at the Midwest office.”

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Dialog

Taylor: Okay, so I guess we’ll have to wait and see the report on that… for now,
can we have a look at the SmartMoney venture?

Claudia: Sure… from what I can see they’re doing quite well. Seem to be
generating a healthy return.

Maria: And there’s been murmurings about interest from potential buyers.

Taylor: Yeah, that’s just it. I don’t think it’s there yet.

Claudia: You mean we should grow it more aggressively first?

Taylor: Um… no, definitely not. I’m a bit skeptical about those “healthy returns”
actually. Didn’t you see what’s happening to their overhead as they scale up? And
there’s two more years on those balloon loans they have from before.

Maria: Okay, I see where you’re going with this. You’re worried this is going to
erode profitability.

Taylor: Spot on. And so wouldn’t we be better to grow the balance sheet before
we think of selling it off? In a couple of years or so the business valuation would
be much rosier. There shouldn’t be any urgency around this one.

Claudia: Maybe so… In any case, I think we’ve done almost all we can for the next
couple of quarters… [Fade out]

Maria: [Fade in] Okay guys, I think we’ll have to table some of these decisions
until next time. I’d like to make sure we have time to talk about Byron Industries.
Claudia, I think you’ve got some news for us there?

Claudia: Yeah, well, we’ve been over there a lot trying to figure out how to
decrease capital expenditures. I mean, there have been some months where
they’ve barely covered costs.

Taylor: That’s hardly surprising though. Biotech is capital-intensive. We knew

what we were getting into. We don’t need them to turn a big profit any time soon.
They’re sitting on a ton of IP.

Maria: Even more now since they bought out Life Mechanics.

Claudia: I still think we need to boost the bottom line though. I realize they’re
not about to pay dividends or anything like that, but they’re just incurring too
many expenses at a time when money is bloody expensive.

Maria: Agreed. But we’re playing the long game here. All the ratios are
improving, however slowly. And it’s a bunch of geniuses running the show over
there. I’m pretty confident things are going to work out nicely…

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Debrief

Now let’s go through the dialog again and look at the language and collocations
used during the meeting.

Taylor: Okay, so I guess we’ll have to wait and see the report on that… for now,
can we have a look at the SmartMoney venture?

Claudia: Sure… from what I can see they’re doing quite well. Seem to be
generating a healthy return.

The first “venture,” or company, that they talk about is called SmartMoney. And as
you hear, Claudia is happy that they’re “generating a healthy return.” In business,
“a return” or “returns” are profits on an investment. You can probably guess that “a
healthy return” is a good profit. And “generate” is just another way of saying
“make.”

All together, “to generate a healthy return” is used to talk about an investment that
is making a good profit. Let’s practice a few more ways of using this collocation.

§ I think the market is just too small to generate a healthy return on our money.
§ For the past three years, my investments have generated a healthy return of 15%.

Are the others as positive as Claudia about SmartMoney?

Maria: And there’s been murmurings about interest from potential buyers.

Taylor: Yeah, that’s just it. I don’t think it’s there yet.

Claudia: You mean we should grow it more aggressively first?

If there’s talk about potential buyers, then surely the company is doing well. But
Taylor doesn’t sound so sure that it’s ready to be sold. He doesn’t explain why, but
Claudia wonders if he means they should “grow” the company more “aggressively”
before selling it.

You can grow a company just like you grow a plant. And “aggressively” means
quickly, or forcefully. That might mean expanding, buying up other companies, or
putting a lot of resources into increasing sales.

How else can we use this collocation “to grow something aggressively?” Let’s run
through some more examples.

§ Many entrepreneurs try to grow their companies aggressively before selling.

§ Apple is hoping to grow its mobile payment feature aggressively over the next year.

So, is “growing aggressively” what Taylor had in mind?

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Taylor: Um… no, definitely not. I’m a bit skeptical about those “healthy returns”
actually. Didn’t you see what’s happening to their overhead as they scale up? And
there’s two more years on those balloon loans they have from before.

Maria: Okay, I see where you’re going with this. You’re worried this is going to
erode profitability.

Taylor is “skeptical” – or he has doubts – about the “healthy returns” Claudia

mentioned. He’s worried about “overhead,” or operating costs, and “balloon loans,”
which are loans that have large payments near the end of the term.

What does it mean if a company has increasing costs and debt payments? Well,
these things can “erode profitability,” as Maria says. “Erode” is what happens to the
earth or rock as it gradually wears due to water and wind. So, if some forces or
factors “erode profitability,” then a company’s profits become gradually smaller.

Let’s try some more ways of using this collocation “to erode profitability.”

§ The increase in the minimum wage has eroded profitability for many businesses.
§ If rising oil prices keep eroding profitability, we may have to make some cuts.

If profitability is at risk, what does Taylor suggest?

Taylor: Spot on. And so wouldn’t we be better to grow the balance sheet before
we think of selling it off?

Before selling the company, Taylor suggests “growing the balance sheet.” A balance
sheet is one of the most basic and important financial statements about a company.
On a simple level, it shows a company’s assets and liabilities. Growing a balance
sheet means increasing assets, which are things of positive value as opposed to
liabilities which are negative. Basically, this means the company’s financial situation
is improving and getting stronger.

Let’s practice some more examples of this collocation “to grow a balance sheet.”

§ Several big acquisitions have really helped us grow our balance sheet.
§ Python Industries is trying to grow its balance sheet to protect against another
downturn.

Taylor goes on to explain his opinion in more detail.

Taylor: In a couple of years or so the business valuation would be much rosier.

There shouldn’t be any urgency around this one.

Claudia: Maybe so… In any case, I think we’ve done almost all we can for the next
couple of quarters…

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Taylor’s in no rush to sell SmartMoney because he is predicting a “rosier” – or
better – “business valuation” in the future. A business valuation is a dollar value put
on a company. When you sell a company, obviously you want a good, or rosy,
valuation.

Let’s try a short dialog to practice this expression “business valuation.”

A: Do you think our business valuation is high enough for us to consider selling?
B: No, we should really increase sales by at least another 20% first.

Now let’s get back to the dialog, as the group moves on to discuss another
company.

Maria: Okay guys, I think we’ll have to table some of these decisions until next
time. I’d like to make sure we have time to talk about Byron Industries. Claudia, I
think you’ve got some news for us there?

Claudia: Yeah, well, we’ve been over there a lot trying to figure out how to
decrease capital expenditures. I mean, there have been some months where
they’ve barely covered costs.

The next company the group discusses is Byron Industries. Claudia’s update on
their performance contains a couple of important pieces of information. Firstly, she
says they’ve been trying to “decrease capital expenditures.” Capital expenditures
are the money spent on land, buildings, and equipment. We call these things “fixed
assets,” as opposed to cash.

So, when Claudia talks about decreasing capital expenditures, she means spending
less on fixed assets. Let’s run through some more ways to use “to decrease capital
expenditures.”

§ Combining our operations into one facility has helped us decrease capital expenditures.
§ As fuel prices fall, oil companies try to decrease their capital expenditures.

How does Claudia know the company needs to decrease capital expenditures? Well,
she says that sometimes the company has barely “covered costs.” Costs are
spending. If you “cover” costs, you are able to pay your bills. Barely covering costs
means you can pay your bills, but with very little left to spare. It’s a risky situation
to be in.

How else can we use the collocation “to cover costs?” Let’s try a few more
examples.

§ We’re going to have to use our credit line to cover costs this month.
§ When I started my first business, I had enough in the bank to cover costs for a year.

Let’s hear what Taylor thinks about Byron Industries and Claudia’s opinion.

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Taylor: That’s hardly surprising though. Biotech is capital-intensive. We knew
what we were getting into. We don’t need them to turn a big profit any time soon.
They’re sitting on a ton of IP.

Taylor is definitely less worried than Claudia. He points out that this particular
industry – biotech – is “capital-intensive.” That means that it simply involves higher
capital expenditures than other industries. And because the company has a lot of
“IP,” or intellectual property, Taylor doesn’t think they need to “turn a profit” soon.

You can say “earn” a profit or “make” a profit for both individuals and companies.
But one common way to talk about company profits is to say it “turns a profit.”
Let’s try some more ways of using this collocation.

§ Twitter was in business for twelve full years before it actually turned a profit.

§ Darren has turned quite a profit by fixing up old homes and reselling them.

Now let’s get back to the conversation.

Maria: Even more now since they bought out Life Mechanics.

Claudia: I still think we need to boost the bottom line though.

Even though they have lots of IP, especially after “buying out” or purchasing
another company, Claudia insists that they need to “boost the bottom line.”

The bottom line is the final profit of an operation. A company’s bottom line is its
ability to make money. And “boost” means to increase. So Claudia is talking about
increasing profitability.

Let’s practice some more ways of using this collocation “to boost the bottom line.”

§ A good accountant can help boost the bottom line by reducing your tax bill.

§ Improving factory efficiency has boosted our bottom line by 10%.

Why does Claudia think they need to boost their bottom line? Let’s listen.

Claudia: I realize they’re not about to pay dividends or anything like that, but
they’re just incurring too many expenses at a time when money is bloody
expensive.

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Firstly, Claudia acknowledges that Byron Industries isn’t about to “pay dividends.”
Dividends are payments to shareholders out of a company’s profits. Some
companies pay dividends, while others don’t. But being able to pay dividends is a
sign of a profitable company.

Let’s run through some more ways to use this expression “to pay dividends.”

§ We really need to improve profitability before we start paying dividends.

§ Enbridge has managed to pay dividends to its shareholders for over 60 years.

So, although the company isn’t going to pay dividends any time soon, Claudia still
thinks they’re “incurring too many expenses.” Expenses are what you spend money
on. And “incur” is just the natural verb we use with “expenses.” If you “incur
expenses,” you are spending money.

Let’s try this collocation with a short dialog.

A: Why on earth are our profit margins going down?

B: Well, we’re incurring a lot more expenses for shipping and transportation.

We haven’t really heard what Maria thinks about Byron Industries’ situation. Let’s
finish up the dialog with her thoughts.

Maria: Agreed. But we’re playing the long game here. All the ratios are
improving, however slowly. And it’s a bunch of geniuses running the show over
there. I’m pretty confident things are going to work out nicely…

Well, it doesn’t sound like Maria’s too worried. She thinks things are improving, and
she thinks they’ve got smart people managing the company, or “running the show.”
As she says, they’re “playing the long game,” which means they’re not trying to
turn a quick profit. They’ve got time to wait. And that goes to show that how we
talk about company performance depends on our goals as well, not just how the
company is doing.

Now it’s your turn to practice some of the collocations we’ve looked at in this
lesson. In a moment, you’ll hear a series of sentences with a word replaced with a
beep. Repeat the whole sentence, including the missing word. Remember, a
collocation is two or more words that we commonly use together, so pay close
attention to the words before the beep.

For example, if you hear:

Example cue: Cutting costs is one good way to boost the bottom <beep>.

You can say:

Example Answer: Cutting costs is one good way to boost the bottom line.

After each response, we’ll provide the correct answer. Ready? Let’s give it a go.

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Cue 1: By buying other companies, we’ve managed to grow our firm <beep>.
Answer:

Cue 2: Sales are down, but we should still be able to cover <beep> this month.
Answer:

Cue 3: It takes most new businesses five years before they turn a <beep>.
Answer:

Cue 4: Most investors base a business <beep> on past sales.

Answer:

Cue 5: I’m happy to say my mutual funds are generating a healthy <beep>.
Answer:

Answer 1: By buying other companies, we’ve managed to grow our firm aggressively.
Answer 2: Sales are down, but we should still be able to cover costs this month.
Answer 3: It takes most new businesses five years before they turn a profit.
Answer 4: Most investors base a business valuation on past sales.
Answer 5: I’m happy to say my mutual funds are generating a healthy return.

That’s all for this lesson on collocations for discussing company performance. We’ve
covered lots of vocabulary and collocations for talking about profitability and
growth, as well as expenditures and valuations.

Thanks for listening and see you again soon!

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Language Review

A. Collocations

Match the collocations in the box and then use them to complete the sentences
below. (If necessary change the tense of verbs to fit the context, i.e., to past or
future tense.)

To decrease aggressively

To turn expenses

To incur a profit

Business capital expenditures

To generate costs

To grow something a healthy return

To cover the bottom line

To boost valuation

1. Sales last month actually outpaced costs, so it looks like we’ve finally
______________ !

2. We started with one store five years ago, but we managed to

______________ the company ______________, so now we have 35 stores.

3. I think we need to dip into our line of credit at the bank if we want to
______________ this month.

4. If we can increase sales and lower costs, then we’ll really be able to
______________.

5. We’ve been ______________ far too many new ______________, so I’d like
every department to look closely at their budgets.

6. Blue chip companies are safe and reliable businesses that manage to
______________ consistently.

7. I think you’re asking too much for the business and you should get a
professional in to do a ______________.

8. We can’t keep maintaining these old buildings if we want to ______________

our ______________.

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Answers

Listening

1) Claudia thinks that SmartMoney is doing very well financially.

2) Taylor thinks they should grow the balance sheet before selling SmartMoney.

3) Claudia has been focused on decreasing expenses at Byron Industries.

Language Review

A. Collocations

1. Sales last month actually outpaced costs, so it looks like we’ve finally turned
a profit!

2. We started with one store five years ago, but we managed to grow the
company aggressively, so now we have 35 stores.

3. I think we need to dip into our line of credit at the bank if we want to cover
costs this month.

4. If we can increase sales and lower costs, then we’ll really be able to boost the
bottom line.

5. We’ve been incurring far too many new expenses, so I’d like every
department to look closely at their budgets.

6. Blue chip companies are safe and reliable businesses that manage to
generate a healthy return consistently.

7. I think you’re asking too much for the business and you should get a
professional in to do a business valuation.

8. We can’t keep maintaining these old buildings if we want to decrease our

capital expenditures.

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