Post by NS'Creter on Oct 4, 2008 11:57:22 GMT -4
Hi guys! Although we are in different countries and some of the rules are different a lot of management fundamentals remain the same. I was reading an article a while back (don't remember who wrote it or where it was) and I saw myself in some of the mistakes they talked about. We all make mistakes, hopefully we learn from them and don't repeat them.
The mistake that really stood out to me because I am very guilty of it was one that they said a lot of new business owners are guilty of. It said that we plan too far ahead. We spend too far into the future. I have definately done this in every biz I've owned. Buying the very best of something and enough of a quantity to last a very long time cripples cash flow. It doesn't matter if you're a multi millionaire are barely getting by...you've either allowed a certain budget to run your biz or you've only got a certain budget to run your biz. Either way starting out cashflow is not an endless stream.
I totally "get" why people do this because I have done it repeatedly.
We try to make the best long term decisions. We are willing to "bite the bullet" until our business is supporting us and we want to be fully prepared. We want to look as professional as possible. All are admirable and legitimate reasons to reinvest too heavily. Yes, we have to reinvest...yes, we have to be willing to make sacrifices (especially at first), but there is a comfort zone. It is a common mistake to overspend with the best of intentions but it leaves us living from payday to payday because our cashflow is sporatic and our reserves at a minimum...or worse.
An example of this is when buying supplies...whatever material it is. To buy the 6 we need to do the job today is always more expensive per item than buying 24 and have a supply on hand. If our financial situation allows us to "hold" stock or buy in bulk we are very fortunate and that is the best decision. Unfortunately, most of us have maxed ourselves out just getting into business and we're operating on a "shoe string" budget at first so the best decision is to buy what we need...do the job and get paid. Also, even if we are fortunate enough to have some buying power and bulk purchases will not leave us short there is a limit to how much stock/supplies we should carry. There are all sorts of accounting "tricks" such as writing off depreciation on supplies but that is more for established businesses than newer ones.
I found this interesting and absolutely have made this particular mistake repeatedly. For whatever reason that article really spoke to me and pointed out a few things that I never saw clearly before. I guess sometimes we can't see the forest for the trees.
The mistake that really stood out to me because I am very guilty of it was one that they said a lot of new business owners are guilty of. It said that we plan too far ahead. We spend too far into the future. I have definately done this in every biz I've owned. Buying the very best of something and enough of a quantity to last a very long time cripples cash flow. It doesn't matter if you're a multi millionaire are barely getting by...you've either allowed a certain budget to run your biz or you've only got a certain budget to run your biz. Either way starting out cashflow is not an endless stream.
I totally "get" why people do this because I have done it repeatedly.
We try to make the best long term decisions. We are willing to "bite the bullet" until our business is supporting us and we want to be fully prepared. We want to look as professional as possible. All are admirable and legitimate reasons to reinvest too heavily. Yes, we have to reinvest...yes, we have to be willing to make sacrifices (especially at first), but there is a comfort zone. It is a common mistake to overspend with the best of intentions but it leaves us living from payday to payday because our cashflow is sporatic and our reserves at a minimum...or worse. An example of this is when buying supplies...whatever material it is. To buy the 6 we need to do the job today is always more expensive per item than buying 24 and have a supply on hand. If our financial situation allows us to "hold" stock or buy in bulk we are very fortunate and that is the best decision. Unfortunately, most of us have maxed ourselves out just getting into business and we're operating on a "shoe string" budget at first so the best decision is to buy what we need...do the job and get paid. Also, even if we are fortunate enough to have some buying power and bulk purchases will not leave us short there is a limit to how much stock/supplies we should carry. There are all sorts of accounting "tricks" such as writing off depreciation on supplies but that is more for established businesses than newer ones.
I found this interesting and absolutely have made this particular mistake repeatedly. For whatever reason that article really spoke to me and pointed out a few things that I never saw clearly before. I guess sometimes we can't see the forest for the trees.