September 03, 2006
Inexperienced business people can some times get carried away as turnover increases.
A simple rule: Turnover is Vanity - Profit is Sanity.
I was reminded of this fact earlier this week. Three friends and I went off for three days golf. On the first day as pairs we played a simple match play format. Win a hole it counts one. So you progress, my partner and I gradually got to 7 and 6. Which is 7 up with 6 to play. We had won, a thrashing in fact.
In the process I had won a 'bit' at a par three hole. I had won 20cents, high rollers we are not.
There are 4 par three holes in a round of golf. After we had won our opponents challenged us to play for the same stakes on the bye. The remaining holes.
We scented a way to increase our winnings and took up the challenge. You've probably guessed we lost the bye and we lost the remaining 'bits' which meant we ended up paying out 40 cents even though we had won the original match. Great fun and a lot of joshing!
On the way home I was thinking about this weeks' bulletin and Turnover is Vanity - Profit is Sanity came to mind.
If a business is growing turnover it has to finance the work in progress, possibly take on addition staff plus other costs heat, light, power etc. Almost certainly margins will be reduced.
This can mean that the cash reserves become depleted and it is not unusual for a company to fail when it is apparently very busy. Sometimes known as being 'silly busy'.
This is why Turnover is Vanity - Profit is Sanity. Maintain your margins, keep profitable and manage your cash flow. Cash is King.
Our vanity led us to think we could beat our friends as easily the second time and before we knew what had hit us we were out of pocket.
We were vain and maybe a little bit arrogant. Don't get carried away, remember Turnover is Vanity - Profit is Sanity. Bank your profits and grow cautiously. There is more on cash flow control at the link
Tip of the week.
Cash IS KING!
That's all for now. I hope you will enjoy your next issue of 'byobe' Bulletin - helping you to succeed.
Best wishes,
Michael Harrison.
You can contact me at anytime on Bulletin@be-your-own-business-expert.com If you think this article would interest a friend or collegue please feel free to pass it on.
Use it on your web site or in your publications. All you have to do is place the following 'resource box' after each article.
Article by Michael Harrison, Author, Consultant and Business Builder. Learn from an expert. Go to: http://www.be-your-own-business-expert.com OR; Subscribe for your Free Business Building Newsletter at; http://www.be-your-own-business-expert.com/Bulletin.html In addition to the information in the Bulletin you can access Free Stuff Here!