Everything in the universe was created in opposites. No matter what you look at in physics, nature or our daily lives, everything has an opposite. The old folk understood this factor well and that is why they always used to say ‘anything in moderation, and nothing in excess’. They understood the need to maintain balance!
If this is a truism in life, can you not appreciate that it is also of vital importance that we maintain balance in the business? In this post we look at some of the areas where the simple laws of balance play a vital role in business:
- Sales: Goods or services are either sold on credit or on an immediate payment basis (COD). As a rule of thumb, credit sales should not exceed that percentage of your total sales that total costs represent as a percentage of total sales. The balance is to have the percentage of COD sales to total sales equal to at least the same percentage as your gross profit percentage. An even more advantageous position is to build your COD sales to as high a level as possible.
- Debtors: The top 20% of your customers, in number, should not account for more than 80% of sales value. Extending this balance principle, no one customer should owe you (at any point in time) more than 15% of your annualised gross profit.
You might counter this by saying this is impossible to achieve! No, it is not impossible – the only reason you think it is impossible is because you have not laid the necessary plans and strategies to make it a reality.
- Creditors: Why place all your eggs in the one basket? For any goods/services you procure, you should have at least 3 suppliers and allocate your business between them on a ratio of 60:30:10. Have the credit facilities established and continue to play the one off against the other. Let them all know that they are not getting all your business!
Applying this principle not only ensures that you continue to get the best price and service but assists you in ensuring your supply line stays open when those tough times hit, and you need to negotiate delays in payments to your creditors.
- Borrowings & Savings: Businesses today have the bizarre idea that whenever they need money all they need to do is go and borrow it from the Bank. Unless you have been able to prove to the Bank that you know how to manage money by maintaining a good credit record and by building savings (free cash), your chances of raising the money from the Bank are minimal. Besides, if you have built your free cash kitty, the chances are that you would not even need to borrow the money and would therefore be able to self-fund.
Savings should be built at a minimum rate of 20% of Net Profit after interest and tax. Even if you have accelerated debt repayment, maintain this rate of saving. Over a five-year period, you will have built a sizable war chest!
- Time spent IN & ON the Business: Very few people recognise the difference between working IN the business and working ON the business! It ties in exactly with the concept of working hard versus working smart – nobody ever created a successful business by only working hard!
At least 20% of the time you allocate to the business (earning a living) should be spent ON the business. This translates into the time you spend strategising, planning, gathering intelligence, and assessing progress made to date. To put it very simply, working ON the business is all about where we are today, where are we going to and what we need to do to get there. Too much time spent ON the business will, however, take you away from that all important aspect of acting (working IN the business), so keep the balance!
- Planning & Executing: Before any objective or project can be implemented it needs to be thoroughly planned. Only once the planning stage is complete are you ready to put those plans into action. It is very sad to see just how many businesses fail to plan. Is it any wonder that these businesses are the same ones who are always bemoaning their poor returns and productivity levels? Image the effect of shaving just 10% off the cost of any one project – 10% is achievable with your eyes shut!
Please do not confuse this with working IN and ON the business. The principle is much the same, except that at least 25% of the allocated time should be spent in planning your projects – planning and executing is very much a part of working IN the business.
- Taking Action & Procrastinating: Whilst acting is the vital prerequisite for the attainment of any goal, procrastination is the devil that is going to keep you stuck in the quagmire. If we spent as much time acting as we do procrastinating, just imagine what we could achieve!
For your own sake, examine yourself and everybody else working in the business. Where you identify procrastination taking place ruthlessly attack it and ensure that it is replaced with actions. It is better to act, even if that action turns out to be wrong. If the action proved to be the correct action you would have gained by it. If it proved to be the wrong action you would have learned by it. Act!
- Needs & Wants: Clearly identifying the difference between these two emotions is very often the difference between highly successful companies and those that end up in liquidation. Companies that focus on survival are the ones who automatically get the needs principle right because each decision is examined on the scale of needs and wants. Those that display the primal instincts of giving in to instant gratification are focused primarily on wants – success has softened their muscles resulting in the atrophying of vital resources.
Obviously, allowance must be made in small measure for satisfying the ‘wants’ as this can sometimes stimulate people towards greater achievement, so don’t be miserly – keep the balance!
- Work & Family: The most important thing we have in life is our family. They do not want the material things money can buy – they want to spend quality time with us! Too many people get the balance equation on this aspect totally wrong, thinking that the more they work, the more money they will earn, the more ‘things’ they can give to their families.
If you are not balanced in managing the relationship with your family, how do you ever think you can be balanced in managing your relationship with colleagues and customers? Value those employees who value their families because they will put the same effort into building relationships for the good of the business. Encourage them and keep the balance in your business!
Balance is all about moral values and, sadly, these seem to be teachings relevant only to the past – fast becoming extinct. The quest for ‘things’ has fast overtaken the quest for inner peace and happiness – true balance. If you want to have a stable business, ensure you keep the balance in those aspects we have mentioned above as well as in 16 other areas we have not even touched on in this post!
Remember that internal misjudgements are six times more likely to cause business failure than external factors. The message is clear … keep objective help close at hand at all times, and if you don’t have it, get it without delay.
Success in business is all about getting the business fundamentals right … and the actions you take!
QUOTATION:
The dominating thoughts of a man’s mind attracts people whose thoughts are similar. Apply the Law of Attraction and you will soon see and understand why unhappy people attract unhappy people. (Unknown)