Why does economics seem so confusing?
There seems a lot of confusion on the topic of economics throughout the world. Regularly governments go into debt as a solution to avoid recession and businesses throughout the world often go bankrupt.
Recently I wrote an article that made the point that the leaders in Australia were not doing a good job having achieved a government debt of AUD144 billion dollars in six years from zero and at least three people tried to claim that this was in fact good economic management.
What is real and what is in fact poor financial management and how does this relate to you and your business?
Most people who run a household know that economics is quite simple to them:
“Spend less money than you make and you’ll be fine”.
To be able to do this in your business you can either make more money or spend less. There are natural laws that apply on which one to put more attention on, and they tell you when to focus on sales and when to cut costs and be more economical, check out my article Cut Costs or Increase Sales? to find out when you should be focusing on either and why.
To understand the subject in full there are a few things you need to know and words to understand:
What is Viability?
– The first thing to put attention on in any organization – government or business – is whether it is viable or not. Viability suggests that something is able to live and grow on its own. To be able to do this you would need to be making a profit and not relying on bank handouts or handouts from other sources to survive. You’d also have to have systems and structures in place that allow the organization to grow and survive. In terms of a small business you might ask questions such as “If the business owner was out of the business for one month what would happen?” or “Is the business making a profit after paying the owner a wage”? For a large organization you would ask “Is the organization generating more revenue than it spends”? or “Are the systems in place going to create future expansion and growth?”
So you should see that you are losing if an organization is spending more than it receives or it is cutting out future planning and systems for short term cash. Either way there is something to fix.
What is Solvency?
– Solvency simply refers to the idea that you can pay the bills when they are due. Small business owners talk a lot about “cash flow” and this is a key point in being able to pay your bills when they come in.
The key part is being able to be cause over these two factors. A lot of small business owners get into trouble on these points and solve their problem with things like overdrafts, bank loans etc that can, if not managed, create even more problems for the business now that they have to pay large amounts of interest etc.
The basics of economics are the same no matter what size organisation you are running.
Get your organisation solvent and viable and keep it that way and you will succeed.
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Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2013
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Who is telling the story?
I was interested to open the Melbourne newspaper this morning to find an article criticising the Richmond Football Club and giving “expert” advice on what it would take for the team to improve. The advice was supposed to be given with the intention of helping the current coach understand that the team was not improving and needed to make certain changes if it wanted to succeed.
The article seemed very logical and well-meaning unless you understand the full story underlying it. The author was David King – a former premiership player with North Melbourne – who was once an Assistant Coach at Richmond and one of the leading candidates for the job that the current coach Damien Hardwick got. So with this in perspective we now have a story written by a guy who was a coach at the club when it was doing very badly and then he was overlooked for the main job to the guy he is now criticising.
History is riddled with so-called facts that upon full investigation don’t really stack up.
Even such well known facts such as the US government telling us that millions of lives were saved at the end of World War 2 by the bombing of Hiroshima and Nagasaki.
Fifty years later, when confidential documents were released we found out that the US government knew that the Japanese were trying to surrender anyway and the bombs may have even lengthened the war.
This happens in every group unless it is watched out for and investigated.
I was with a client recently and got told that a staff member had left because of the boss and it was all his fault. The facts were that the person was not producing enough to even justify their pay, despite being spoken to many times and had been told to improve their production or the role was unviable. That person then went around the organization when the boss was on leave and told the other staff how bad the boss was.
So when you hear bad news, or something alarming my first suggestion to you is to investigate for yourself.
1) Who is telling you the story and why.
2) What condition is the area that is being talked about in.
Is it productive or is it really in trouble?
3) What needs to be done to fix the situation?
You may even find the person who is perpetually bringing you bad news and problems is the one to handle or even get rid of, but don’t be fooled into accepting the wrong story.
If you would like to receive the Dynamic Business Mentors regular email newsletter email your details to newsletter@dynamicbusinessmentors.net
Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2013
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Should You Be Avoiding Mistakes in Your Business?
Throughout my years in business I have come across two basic approaches to the idea of taking risks in business and various shades of grey in between.
Some business owners live off the thrill of taking risks and handling the problems that come their way after that.
I had a client a few years ago who loved creating new things and building new parts of the business. Some of his ideas were gold; the business had been very successful for a long time but this was mixed with instability for both the staff and the customers.
The end result was the staff didn’t know quite what they were delivering today and the delivery suffered because the staff were never quite sure of how to do their jobs properly. The company could only grow as far as the owner could run the day-to-day actions of the business because he was the only one that was sure of his idea as he would come up with a new plan as soon as the staff around him got familiar with the old plan. He was and is a brilliant man himself but cut the growth of his own business and it stayed small.
Alternatively I have a friend who is never satisfied with the quality of her product and would rather spend years developing it than release it to market without it being perfect. Sure her customers love what she ended up producing but she struggled financially all the while she was developing her products and services.
The solution is actually neither extreme. Get your product to a point where it adds value and go and promote it, when you get some customers you will always find that there are some things that don’t work as you expect; they will need improving, then work like hell to make sure that every customer you sold too is delivered exactly what you offered and more whilst constantly looking for more customers to deliver to and developing your product even further. The money from your customers will give you the wherewithal to improve your quality and you should, which will bring more clients.
Finally when you have a new product idea never let it take resources from an existing product or program that is working. Develop it alongside what you are currently doing well and make sure you build your business with new products that work.
Always come up with new things and embrace change whilst you continue to deliver what you have promised and grow your business.
I hope this helps.
If you would like to receive the Dynamic Business Mentors regular email newsletter email your details to newsletter@dynamicbusinessmentors.net
Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2013
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The Most Important thing to Look At When Hiring Someone
Regularly when I am out seeing and talking to business owners and managers I find that a lot of attention gets stuck on the people that have been hired.
There is an old saying that says that “the staff are the most valuable asset a business have”. If this is true, then why do so many business owners and managers have stress on hiring new people, shouldn’t they be something you want to have if they are such a great asset.
Well, the truth actually is more like productive staff are the most valuable asset that a business has. I would suggest some staff are not an asset and some are even a liability in the business.
How could this be the case when in the last fifty or so years we have seen psychometric testing in recruitment, Human Resources take more of an importance in the business world. Shouldn’t this have the solutions to getting productive people in the workforce by now.
Motivation, experience, personality, education, formal study; we can assess all of these things but they don’t seem to come up with a sure indication of who will be a good staff member and who won’t.
Well I’d like to tell you something that I am sure productive people already know. If you want to hire someone who is going to be good for your business the most important thing is to look for someone who is productive.
What results have they gotten in the past is a good indicator of what they will achieve in the future.
All these other indicators that we are told about:
What motivates them, their education, their experience, personality etc are all secondary to the question of whether the person works hard and gets things done or not.
So next time you are in an interview with someone trying to find out if they would be good to work with ask them what they achieved in their last job and find out for yourself if they can get results or not. Then check out the rest if you want, but if you get rid of all of the unproductive candidates first you will be well on your way to success.
If you would like to receive the Dynamic Business Mentors regular email newsletter email your details to newsletter@dynamicbusinessmentors.net
Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2013
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The 5 Most Important Things to Do in 2013
It’s the time of the year when we see a lot of lists published in newspapers and online telling us what were the most memorable events of 2012 and what we should do to prepare for 2013.
Some people will have started reading this article to find out what my wisdom was on the five things that will be my standout predictions for 2013, some will have started reading it because they want to prove me wrong yet again, some will have just started reading it because they were bored with nothing else to do.
I will let you in on a secret, there is no five standout things that will make a difference to everyone in 2013.
What is important though is knowing what the things are that you should be achieving in 2013 for you and the people around you.
Make sure you have your goals for 2013 sorted out. Take the time and work out what your most memorable events were for 2012, enjoy your successes for a moment and then work out what your goals are for 2013.
Once you’ve got your goals and targets worked out then create plans to achieve them, don’t just hope that they happen the way a lot of people do. Realize that you have to make them happen.
I hope to see you sitting down at the end of 2013 and enjoying the successes of the year and preparing for 2014 the same way; I know I will.
By the way; why did I say 5 important things you might ask, there was no real reason but it seemed to sound good. What I really want you to do is work out what the goals that are important for you in 2013, it might be 5, it might be 10, it might be 1 but make sure that they are right for you.
If you would like to receive the Dynamic Business Mentors regular email newsletter email your details to newsletter@dynamicbusinessmentors.net
Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2012
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The Two Biggest Mistakes Small Business Owners Make.
Whenever I encounter a small business owner who is having trouble I have never failed to find that he has underestimated what was needed to create the success that they wanted and what they set out for.
I have found that this comes fundamentally from one of two key mistakes that they can make:
1) They have a particular skill and can make a success of it on their own and think that it’S simply a matter of hiring some more people and they will have more work done and then as a result they will have more money.
This one happens a lot, you find there is a plumber who is very successful working a subcontractor or working from someone else who thinks all he needs to do is hire some staff and he will have more money. What he doesn’t see is the skills needed to run a business and to run staff are quite different from the skills needed to install a shower.
2) They start a business because they think that he will have more time and money as a result.
The top two reasons people in Australia get into small business is for more time or more money, they often then find they have less time and less money, the truth is they simply underestimated the amount of work it takes to create a business that is successful.
I often am astounded by the number of people I meet who want to start a business for a passive income. I want to let you in a secret, there is no such thing as a passive income. If the guys that run seminars to tell everyone else how to make millions from doing nothing were correct wouldn’t every person who attended one of these seminars be rich by now, but if that were the case why do they keep having to go to more seminars. Yes there are the few who are a lucky and got in at the right time but they’re often the guys that are delivering the seminars.
WHAT IS THE SOLUTION?
Whatever you are planning to do there are some simple actions that need to be done to be successful. Like plumbing, painting a house or doing someone’s accounts; running a small business has certain rules and steps that you need to do to be successful.
Unfortunately most people don’t know what the rules are so the guy who is a good plumber or a good painter gets in more trouble than he should without knowing how to ruin a business.
The first thing I will tell you though and this is for the guy’s that think running a small business will give them more time and more money.
1) GET READY TO WORK HARD
If you would like to receive the Dynamic Business Mentors regular email newsletter email your details to newsletter@dynamicbusinessmentors.net
Best Wishes
Greg Paul
CEO
(C) Dynamic Business Mentors 2012
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