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3 Strategies for Thriving in 2009
(Part 3 of a 3 Part Series)
In Part 1 of this series, we began with the assertion that many businesses and individuals will thrive in 2009. The big question is whether you will be one of them.
We then reviewed the first two strategies as outline below:
Strategy 1: Provide Value.
We concluded that the best way to provide value is to 1) know who you are and what you have to offer and 2) know who your customer is and understand what they value.
Strategy 2: Operate With INTEGRITY
Given today's turbulent economy, we discussed how it is more important than ever to operate with integrity. We concluded that integrity involves "doing the right thing" even when no one is looking.
Now we will take a look at our third and final strategy for thriving in 2009:
Strategy 3: Make A PROFIT!
While this seems to be a "given", it's amazing how many companies overlook the fact that they must make a profit in order to stay in business.
Profit is quite simply the money left after all expenses have been paid. Or in a another form it can be stated as:
Revenues - Expenses = Profit.
Yes, this is a very simplistic equation. And it is not with the equation that people fail. Rather, it is with the two key pieces of the equation that companies fail: Revenues and Expenses. Let's take a look at each.
REVENUE$$$$
By nature, entrepreneurs are optimistic, and tend to overestimate the revenues their company will produce. Quite often they tend to "shoot from the hip" and fail to produce a systematic and sustainable business plan of "how" and "where" their revenues will be derived.
Is it possible to accurately predict revenues? With the right systems in place, then yes, it is very possible to accurately predict revenues. They key is to have accurate systems and sales processes in place that behave consistently over time. The second key is to measure those systems and processes and make adjustments as necessary. The third key is to provide tremendous value to the marketplace (Strategy 1) while operating in integrity (Strategy 2). Are you beginning to see how these 3 strategies are all inter-related?
Unfortunately, there is much more to this subject than can be covered in the space allotted. The important fact to understand is that you can accurately predict your revenues just as confidently as you can predict the sun will rise in the east.
EXPENSESSSS
Just as entrepreneurs tend to overestimate their revenues, they tend to underestimate their expenses. If you have been in business for any length of time, you understand that your capital expenditures and operating expenditures almost always exceed your budget or forecast.
I've heard many small business owners laughingly use the following rule of thumb on estimating costs..."Just double it - and then double it again for good measure!" Well, I might not go that far, but sometimes it is close to the truth.
While there are many resources to help you control expenses, that really should not be your prime focus. Instead, focus on having a positive ROI for every expense. In other words, don't get so consumed with "cutting costs" that you kill key revenue generators (such as sales).
For every expenditure you make, you should have an answer to the following questions:
1) Is this expense absolutely necessary to produce revenue? Why and How?
2) How quickly will I receive a return on my investment?
3) What is my return on my investment?
If you can't provide succinct answers to these questions, then you need to revisit the necessity of the expenditure.
Cash flow shortages are one of the top killers of small businesses. Hmm, given the lay of the land with AIG, Lehman, and the Big 3 Automakers, it appears that cash flow shortages are a pretty big killer of mega-businesses as well.
Therefore, it is critical to maintain revenues greater than expenses to ensure your company continues to make a profit...and continues to be around for the long haul.
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