Getting the order right
26 Jan
In any business, ultimately the aim is to be profitable. You need to figure out how to make money so that you can break even, expand and keep it running.
At the beginning, the order of the day is to save money. Why? You need to figure out how to use less and get more. A trader will buy goods at a lower price and sell for profit to consumers. A barber will charge an amount that he will be able to pay his rent and have some left over for food.
Once you figured out how to make money, the next step is how to spend the money to grow the business. Investing in more goods and a bigger warehouse will allow the trader to increase revenue and generate more profit. The barber can hire helpers to increase the amount of haircuts per hour.
Some businesses (e.g. funded companies) seem to have the order reversed. These companies start with a bunch of cash in the bank normally from investors and venture capitalist. They will hire more people than they need and spend on things simply because they can. To make matters worse, most of them don’t really know how they will generate income.
After a few years (if lucky), money will start to run out and the management panics. They will frantically attempt to save money by cutting costs, firing employees and scaling down operations. All this happens because they thought, with the money given to them, they can somehow skip the first step and ignore the whole point of doing business, which is to generate wealth not consume it.
This don’t only apply in business. You need to get the order right in things you do. As they say, you can’t run until you can walk. And most importantly, don’t forget the bottom line.
this post deserves a sticky and maybe even emailed to a few friends for reminder sake.
WIN!!!
Very common for well funded business ppl to just throw money into the pot and expect ROI soon…
Thats why some blogs agree that being funded could be a curse as well
Also a lot of people think too big in their ideas of making money, whereas the best way would be to start with something that works and start really really small and grow with it.
A department store selling daily goods makes far more margin of profit compared to an airline service of the same size networth. Think about that.
Honestly, being funded from the start normally clouds the objective of making money in the first place. So yeah it’s a curse & worse, because you have money, you tend to slack off as well until it’s too late.
Some businesses do need a starting capital but people need to get their priority straight, which is to make money regardless how you start. It’s odd that many forget that. They think they are given a license to ignore it.
As you said, at the end of the day, the bottom line…
order u say? errmmm…. pants b4 underpants?
@moebius tell that to superman =)