Set Your Business Free
Two business owners are considering giving their business a year off. The business has been growing solidly each year since it started eighteen years ago. It now boasts a strong asset base, mainly significant value in intellectual property developed over the last 12 years. The business has not delivered any income to the owners during that time; it has only generated costs.
At times, especially recently, the owners feel quite tired of the business. The business seems to have been developing a mind of its own and becoming tired of the owners’ efforts to steer it the way they feel is best. All think that a break would be good.
So, they’ve decided to make a cash injection into the business, and then let the business go its own way for 12 months. The hope is that it will find its own way in the big wide business world, and emerge stronger and with more focus.
Could you imagine the condition your business would be in after twelve months if you left it to its own devices? Over twelve months, you made no active management decisions and only minimal monitoring. Your only input is to provide top-up cash injections when needed.
It’s clear that you simply could not give your business that freedom. Not in its first year, and not in its 18th year. Never. Wondering where you might end up might be an acceptable, but slightly careless, approach for an end-of-school long holiday, but business managers could simply not give their business that freedom. A business left to its own devices would very quickly descend into chaos.
Management is Control
The management of a business is basically twofold: i) keeping it from getting out of control; and, ii) growing the business. The second is virtually impossible without the first; in fact, growing it while it is out of control would only likely lead to a larger disaster.
Keeping a business under control requires a plan for all to understand and follow, and a budget to “measure”, and in turn, drive the plan.
The business plan is a statement for the goals and actions. The plan feeds the budget to forecast the revenues and costs and cashflows of the actions to determine if the financial goals can be achieved. The plan and the budget work together – feeding each other – to try to remove the mystery and “white-knuckle thrills” from the business.
While a gap year at the end of school provides the challenge of discovery and learning and the thrill of diving into the unknown without any thought, the business plan and budget are intended to deliver the polar opposite: a steady hand, every day, “eyes-on-the-prize”, on a pre-determined and measured journey, where the excitement is reserved for celebrating the reaching of goals.