By now we know that the current recession is here to stay for a longer period than expected - very similar to the mother-in-law who has initially indicated that she would only stay for the weekend... :)
Now, my question today is this: With the recession in mind, what is your ultimate business objective?
I bet you would like to say: "I want to achieve business success" (i.e. business success as you have defined it - e.g. a specific profit objective + social responsibility contributions etc.).
Now, my next question is this: Is your business objective (which you most probably have defined during the pre-recession period) realistic? Unfortunately, I think, not (by just considering my own situation).
Most probably you and I won't be able to become these success stories as we wished... in any case, not soon.
The deeper we go into this "deep" recession, and the more I read and observe, the more I realize that business owners would be happy if they can only manage to survive - forget about business success (e.g. huge profits etc.) The only objective now seems to be business survival... normally defined as "manage to stay in business" - whatever this might entail.
However, on the other hand, we know that we just have to start preparing for the UP after this recession! We need to plan and prepare for our business success that was postponed and interrupted by this unwanted recession.
Fortunately, there is a solution. A solution and tool to assist you in not only surviving the recession but also to get your business ready for success after the global recession!
I call it profit protection planning (or the more academic, not so practical, description is risk management). With profit protection planning you can enhance your chances of business survival AND business success. "Profit protection planning" is what it is - you protect your profits!
I cannot put it better than Warren Buffet did:
"Getting your money to compound for you...
"$100, 000 compounding at 15% for twenty years will grow to $1, 636, 653 in year twenty, which gives you a profit of $1, 536, 653.
"But let's say you lost $90, 000 of your initial capital... you... could only invest $10, 000. Your investment would then only grow to $163, 665 in year twenty, for a profit of $153, 665...
"The larger the amount of money you lose, the greater the impact on your ability to earn money in the future." - Quoted from The Tao of Warren Buffett - Warren Buffett's words of wisdom explained, Mary Buffett & David Clark, Pocket Books, 2007, page 3.
Bottom line: the more profit you save (by dealing with the profit erosion agents in your business), the better your chances to:
b) Grow; and
What is profit protection all about? In order to survive, grow your business and succeed you need to do the following (and we address these points in our Business Survival Guide):
a) Create a sound foundation of thorough business planning, profit protection and business developing strategies. NOTE: Failed medium and small businesses performed extensive business planning on how to pursue (and profit from) their opportunities... only to discover, later, that their profits had evaporated into thin air because they neglected to perform thorough profit protection planning too (i.e. to enforce risk management in their businesses). They were unaware of the silent war against their profits... ignorant of the enemy eating their profits like hungry bears.
b) Identify and assess your current and potential business risks (i.e. the profit erosion agents in and outside of your business).
c) Calculate the negative financial impact of these risks (i.e. the profit erosion in monetary terms).
d) Identify and assess current or possible countermeasures (controls) to minimize the occurrence or impact of these risks.
e) Calculate the cost of current or possible countermeasures (controls) - so as to determine whether or not these countermeasures are justified on a sound economical basis.
f) Design, implement and maintain adequate business strategies and systems (including policies, procedures, standards and structures) in your business; with the purpose of protecting and growing your company.
I am of the opinion that the world has had enough of short term business and economic solutions and that the only true solutions require commitment and time.
So, as with many other worthwhile causes in life, you will be challenged to commit your time and energy to make risk management work for you!
Profit protection should not be seen as a quick scheme "to become rich." Any valuable, profitable solution, like this one, is usually a systematic plan aimed at the future, spanning years, while profits snowball year after year. Though Warren Buffett has lost $25 billion since this economic crisis has started, he is still the 2nd richest man in the word (according to new statistics)... Why? It is because he acquired the skill of profit protection a long time ago.
And this is exactly what I advocate - a step by step protection plan for your business, in a deliberate and in a conscious way.
To conclude: I make a distinction between survive and achieving business success. In order to achieve business success, you have to survive the dangers of the business world (obviously!). However, survival is not the objective. Your objective is (should be) to survive so that you can achieve your business objectives.
Is it a worthwhile course? You can answer this question. But I know that for most entrepreneurs their businesses are like their little "babies". If it is the case, you need to keep in mind that babies need a lot of attention and care and that you can only achieve success with your children (business) if you spend the time and energy...