Business is quite simple when you boil it down to the basics. You buy [or make] something and you sell it. Whatever is left after the transaction is yours. Simple, isn't it? Yet we do our best to complicate issues, don't we?

If we get it right we Buy Now, Pay Now, Sell Now, Collect Now - and whatever remains at the end of each day is profit. But we all know that if we can play with the flow of the money we can win even more so we try to Buy Now, Pay Later, Sell Now, Collect Now. This is great because the cash piles up quickly [because we're only going to pay the bills at the end of next month]. Unfortunately, human nature being what it is, we almost always forget that there are some big bills looming, so we do our best to spend the cashpile in the meantime - usually on some essential piece of equipment along the lines of a ML430! [By way of explanation, that's an expensive Mercedes 4X4 for those of us who are automotively impaired.]

Much more honorable, and far more common, is the business model in which we Buy Now, Pay Now, Sell Now, Collect Later! In this model we small business owners run out of money immediately, and need to head for a bank to get what our accountants euphemistically call working capital. The bank kindly condescends to lend us just enough money to strangle by and as security they graciously accept our homes, policies, and everything we have worked for thus far in our lives! [Despite their overdraft being more than 100% secured by our life assets they will still demand a huge interest rate because 'your business is so risky'.]

Then, of course, there is the Buy Now, Pay Later, Sell Now, Collect Later style of entrepreneurship which most of us lapse into after a while. The government loves this one because we now need to employ staff to handle all the administration and reconciliation. Accountants love this because it means they too will now have a role in our businesses. Attorneys love it because they get to sue everyone who doesn't manage to quite make the payment dates. [Ever wondered why nobody is interested in helping to make it simpler?]

How do we get back to the simplicity and joy of running our own businesses? May I share a couple of simple points that may or may not be easy in your own circumstances? Firstly, focus on those numbers that will give you a quick feel for how your business is doing at any moment. Don't wait for your accountant to give them to you 6 weeks after you're already bankrupt! Pull them out yourself. In any business the most important number is the cash number. How much is in the bank; how much goes out at the end of the month; and how much is left [or needed]? The business game is simple: run out of cash, or cash resources, and you've lost the game!

Once you know that you're going to survive this month end you can move on to the next important number - sales. My sales goal is written at the top of every page in my diary. That keeps me very focused in amongst all the other stuff that seems to invade each day. The business game is simple: have no sales and you're going to lose the game sooner or later.

The ideal business model: Buy Now, Pay Never, Sell Now, Collect Now. And that's where the internet is taking us. Maybe more about that next week if you're interested. In the meantime, the last seminars for this year happen in the next 45 days, and then nothing until February and the next round of price increases.

© Peter Carruthers, www.petesweekly.co.za

Back to www.bizland.co.za