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| Shock Absorbers For Your Business |
| Written by Rob Minton | |||
| Saturday, 11 July 2009 00:33 | |||
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A little while ago, I read an intriguing article in Forbes Magazine. I haven't been able to find a link to it online anywhere, or I would include the URL for you. The article was an interview with Jim Collins, author of the best-selling "Good to Great."
A little while ago, I read an intriguing article in Forbes Magazine. I haven't been able to find a link to it online anywhere, or I would include the URL for you. The article was an interview with Jim Collins, author of the best-selling "Good to Great." Collins said that he learned a great deal from studying Microsoft's Bill Gates. One of the most important lessons he learned is that it's important to have "shock absorbers" in your business. "Shock absorber" can be defined as: 1. Resilient bearing which, in a watch, is intended to take up the shocks received by the balance staff and thus protects its delicate pivots from damage. 2. Device or part that absorbs and cushions the impact of a wheel going over an obstacle, which makes for a smoother ride. The first definition implies a degree of protection, while the second describes a "smoother ride." In business, the definitions could be interpreted as: Business Shock Absorber: The thing that protects a business from loss of revenue or from unexpected expenses. Take a look at the balance sheet of Microsoft and you'll be able to quickly spot the shock absorber in their business. To save you the time, I'll point it out for you - $25 billion in cash. The Fortune Magazine article explained that Bill Gates wanted to have several years worth of expenses for his business saved in cash. This would allow Microsoft to weather almost any negative business threat including: competition, loss of revenue, recession and changes in market demand. More importantly, the stockpile of cash would allow Microsoft to stay focused on their long-term business plan. Without this shock absorber, they would be forced to defer their long-term business plan to generate short-term revenue. Side note: For the first time in its history, Microsoft recently issued long-term debt in the form of bonds, raising capital for business expenses that could include stock buybacks and possible acquisitions. Even though it has enough cash for these things, the corporation appears unwilling to let go of the "shock absorber" it has in place. This safety net stays. Financial planners generally recommend we create an emergency savings account, holding three to six months of living expenses. This "emergency" savings account would then only to be used to cover large, unexpected expenses or a loss of income. It is not to be used for frivolous purchases. This emergency savings account is a "shock absorber" for your personal finances. Most would agree that an emergency savings account is critically important to protect our personal finances. The problem is that as real estate agents, we don't have an emergency savings account for our businesses. We need two shock absorbers or two emergency savings accounts. One for our personal living expenses and another for our real estate sales businesses. I'm sure this makes a lot of sense to you after the last two years. It's important that we learn this lesson now and work to add this shock absorber into our business going forward. Bill Gates is one of the richest men in the world. He has topped this list for many years. This isn't a fluke. He is in this position because he thinks long-term and has engineered back up plans within his business. He plans for problems in advance. What are your business's average monthly expenses? Set a goal to save 6 to 9 months of your business's average expenses. As the market finally rebounds, make a commitment to save a portion of every commission check you receive as your businesses shock absorber. This shock absorber will protect your business and help you stay focused on your long-term goals. One more thing: Once you have the shock absorber, follow Gates' lead and don't spend it until absolutely necessary. About the Author: Rob Minton, who reinvented this real estate sales business to sell 269 homes to a limited number of clients, has written a very practical book on how real estate agents can sell more homes For a limited time, you can download this entire book for free by visiting Renegade Millionaire Strategies for Real Estate Agents
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