I not too long ago had a really fascinating week:
- On the Monday I discovered myself within the Put up Workplace handing over a really massive cheque to pay my annual tax invoice. Paying out a lot cash would usually be sufficient to make a grown man (me) cry, however to be trustworthy I had a smile on my face. Why? Easy actually – I knew that I might been saving the cash from my earnings through the 12 months and so I had loads of cash in my enterprise account to cowl the fee.
- On the Tuesday I had a gathering with a shopper who owns a big kitchen and toilet provides firm. As we mentioned the financial local weather, he was very upbeat. Not solely did his firm find the money for within the financial institution to hold them by way of a minimum of the subsequent 12 months, but in addition an area bed room furnishings firm had not too long ago gone out of enterprise, so he had taken on a few of their workers and had expanded into supplying bed room furnishings.
- Later within the week, I watched a TV programme discussing the impact of the credit score crunch on the automobile trade. The massive message was that, in case you are available in the market for a brand new automobile, there has by no means been a greater time to move to the showrooms. On the lookout for that dream Lexus? You possibly can nearly ask them to pay you to take it off your fingers! The truth is one automobile firm (Mazda) is even providing a ‘buy-one-get-one-free’ deal on new fashions!
So what do these three unrelated incidents educate us about enterprise? For me, 2 messages stand out fairly clearly:
Firstly, a return one in all my favorite themes: I really like the previous adage, “gross sales are self-importance, revenue is sanity, money is actuality”. It does not matter what number of gross sales a enterprise makes if it is not making a revenue on these gross sales. And that revenue must be changed into money within the financial institution – sufficient to all the time have the ability to pay the payments after they come up (like my tax invoice). Sustaining a superb cashflow is crucial for long-term enterprise success and is much more essential in these troublesome instances. As my shopper firm demonstrated, in case you have sufficient money accessible, you might have an exquisite security blanket in place.
It is a primary truism – when Joseph interpreted Pharaoh’s dream and suggested him to retailer grain through the seven years of lots, in readiness for the seven years of famine, he was educating a basic enterprise lesson. The issue is that many companies (massive and small) fail to study this lesson, with the outcome that in ‘instances of famine’ (aka credit score crunch/recession/financial downturn) they undergo industrial ‘hunger’.
The second lesson is much more pertinent to the financial disaster we at the moment are experiencing; and it is merely that instances of disaster all the time current glorious alternatives – particularly for individuals who have heeded Lesson 1!
All of the information in the intervening time is about failing companies, however – as my shopper firm demonstrated – each enterprise failure presents a possibility for different companies to fill the void left behind. Clients of failed companies do not simply evaporate into skinny air, they’ve to search out one other provider ronald o. perelman.
And remember what occurred to Joseph and the Pharaoh; through the seven years of famine, Egypt elevated its wealth by promoting a few of the saved grain to the ravenous residents of neighbouring international locations.
Additionally, as any automobile purchaser will now discover out, troubled instances might imply that you would be able to drive down prices by negotiating with suppliers who’re determined for your small business. And for a enterprise, saving cash on this manner could be the distinction between having to make redundancies and saving jobs; or it would even be the factor that finally saves the enterprise from failure.
Deal with the money in your small business through the good instances and it’ll take care of your small business through the dangerous instances…