Why profit is like paying protection money.

Paulie Walnuts

The other day I wrote a blog about understanding the cost of time and the positive impact this can have on managing cash flow.

What are the chances someone acted on my blog and started developing a new cash management system to mitigate the cost of time on their business?! 

Anyway.

I finished my blog by stating that many small and medium enterprises in Australia were only one event away from running out of time.  In most cases a single event can totally side-swipe a business; hence my quote “everything seemed to be going so well” at the time.

Of course, it’s not ideal to keep operating a business that is only one event away from being in trouble – even if it’s an astute business totally aware of its position.

The idea is to grow out of this stage. **

Accounting profit is a numbers racket.  And like any good racket, profit is the ‘money’ you have to ‘pay’ to protect and grow your business.

Cash pays your dues.  Profit makes the business stronger.

Profit is something you never seem to actually have.  Its goes straight into the business.

Why?  It’s the cheapest source of money.  Profits are re-invested into new assets such as production capacity or IT capacity.

There will always be occasions when things are less-than-profitable for your business.  Not ideal, but this is temporarily acceptable with a well-managed cash position.  For example, Amazon made no profit for 10 years!  A bit extreme and not exactly temporary.

However, unless there is also a strong focus on how your business will return to a profitable position as quickly as possible, your business will remain in a vulnerable position and the 'racketeers' will come-a-calling.

It’s not easy.  Using up valuable resources to keep your business in a steady holding pattern, whilst at the same time also needing lots of resources to eventually break-out of the holding pattern is a tough gig.

So I hope that all helps.  In two simple blogs I’ve given you a new perspective on the cost of time to help understand the importance of cash flow.  And I’ve given a new perspective on the role profit plays on protecting and growing your business.

At all times avoid getting a visit from Paulie ‘Walnuts’ Gualtieri looking for protection money!!

**BTW- If a very mature business is only one event away from failure, then I suggest it has many other significant challenges that need to be dealt with ASAP.

Who loves ya, baby?

Hang on, this just doesn’t sound right.  How can someone be cheaper, yet more effective than a consultant?

It’s the truth.  And it’s fast-becoming the realisation of many small and medium businesses in Australia that have simply had enough of the ‘help’ they’ve been getting.

Here’s what they tell me:

      -          ‘I’m sick of feeling that I’m in a race to the bottom’.

      -          ‘I need help, but I want more bang-for-my-buck’.

      -          ‘Advice just doesn’t cut-it for me anymore, that’s why I’ve stopped getting help’.

Only a different breed of person would enjoy taking on the accountability of working under those challenging conditions.

They are out there.  They are the Kojaks of the business world.

Tenacious and tough, these people have walked the beat.  Forget office politics and bureaucracy.  They are candid - with heart and feeling.

There’s no consulting-speak.  Its man-in-the-street speak.

The type of person that throws the ‘book of consulting poetry’ onto the back seat rolls up the sleeves and says “let’s get this done”.

When the chips are down that’s who you want watching your back.

Someone that’s willing to transfer their knowledge and experience - that will deliver results fast; and close the door on the way out.

Who loves ya?  Interim Managers love ya, baby.

Vote for my blog and I will Pay It Forward

Vote for my blog and I will Pay It Forward.

It’s entirely up to you………..but…………….a vote for my blog could win some really cool camera equipment for my fledgling business.

Here’s the thing.  If my blog wins, I will pay-it-forward for every vote I received, by doing a favour for someone else.

Hold me to my task by subscribing to this blog page, as I will use my blog to keep a record of progress.  Progress updates will drop into your inbox.  I will complete my favours within 6 months.

Vote for my blog and keep me busy!

Here is the original blog.

http://jlofbalak.blogspot.com.au/2012/07/how-i-ate-beating-heart-of-snake-in.html

Here is the link to vote for my blog.  Do it now coz voting ends this Saturday 31 August 2013.

It’s quick and easy.  Simply tick Entry Number 11 and click submit at the bottom.

https://apps.facebook.com/126231547426086/rjijr

How to go broke.....profitably.

Introducing the boogie monster of all start-ups called Uncontrolled Enthusiasm.  Uncontrolled Enthusiasm has a big belly because he likes to feast on your time.

As a new business owner are you sick of hearing that cash is king?

Look at it this way.  You have to believe in the boogie monster.

Most start-ups fail because they ran out of time.

Time is the most expensive thing you need to start a business – and you need lots of it.

What buys you time?  Cash

You need to buy time because you don’t have control of time.

Sounds like a no-brainer.  Sure. 

 

Why then do so many new businesses come unstuck?  By not budgeting correctly - they didn’t budget for the cost of lost time.

A common oversight is to account for a series of events occurring, not including the cost of time.

Thinking that your new business will then perform according to a simple budget is a gamble.

Including the cost of time requires some realistic assumptions about external situations that will inevitably occur.

These assumptions can suddenly make a profitable budget look very sick.  That’s called real life.  Most of these assumptions are the compromises of starting a business.

Ignore them at your peril.  A profitable budget isn’t necessarily bankable.

Things get pretty heavy when you include the cost of time.  Questions about how you will make your business happen get tougher and tougher the more realistic the scenario planning is.

It’s bloody tough.  The romance of starting a new business goes out the window.  But you have to do this.  Survival instinct: how am I going to generate the cash I need to survive the events that cost me time?

Too hard basket?  Remember this: most new businesses went belly-up when according to the owner “everything seemed to be going so well.”

But it's not just start-ups.  At the moment, most small and medium businesses in Australia are operating only one event away from running out of time.

How-well will you spend what little time you have left?

The sky is falling. The sky is falling.

Got chatting in a group at a recent food industry function.

Inevitably, the conversation turned to ‘tough times’ as always happens these days.

I remarked that a major positive of being under pressure, is small and medium business owners will have a much better understanding of how their businesses operate.

A business owner was quick to responded “I only see negatives in negatives.  There are no positives when things are negative.”

This comment startled me.  I have a keen interest in the human aspect of being in business.

It reminded me of the importance of self-speak / self-talk.

Self-esteem and confidence can have a major impact on how a business is going.  Whether you are the Board, management or employee – everyone should practice positive self-speak.

It’s virtually impossible to navigate stormy waters with a bucket over your head.

If your business has a positive ‘inner voice’ you will be amazed how quickly the tone and culture will change.

Then, even more amazing, is how quickly your business will start seeing positive results, in what you thought to be tough times.

It’s certainly not easy to maintain and takes practice.  After 2.5 years into my new business, studying an MBA and IVF I can personally vouch for that.

But I highly recommend it and my business would have failed a long time ago without it.

I mentor other businesses and it’s one of the first things I talk about.

Thanks for hanging-out at my blog.

If anyone has their own examples of positive self-speak they use or a time when positive self-speak changed a perceived outcome, personal or business, I would love to hear it.

Just use the comments section below.

Speaking of being positive, if you like my blog feel-free to share it around your own networks.

Happy Friday everyone.