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Followup – RE: Top Ten Reasons Small Businesses Fail, part eight: Cash Flow

September 23rd, 2011 | Leadership,Online & Small Business Resources,Small Business,Small Business Tips | No Comments »

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers.[1] Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners (emphasis mine). Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

The definition in the preceding paragraph, from Wikipedia, is a clear and precise explanation of what is meant when one discusses the term business in the context of American economics.  My previous post, “Top Ten Reasons Small Businesses Fail, part eight: Cash Flow“, provoked more response than any other post I have presented for the KikScore blog site.  Several comments implied a lack of understanding of what “business is about” on my part.

I presents the Wikipedia definition not so much to defend myself as to clarify what I mean when I use the term “business”.  It’s seems to me that my several critics, with the best of intentions, are confusing “business” with “vocation“, at least in the context of this discussion. This is easily done, and the confusion is most likely at the root of why many consider it distasteful (of me) to imply that they must pursue their vocation solely for the purpose of making money.

According to Dictionary.com, “vocation” is defined as “a particular occupation, business, or profession; a calling; or a strong impulse or inclination to follow a particular activity or career.”  These are all valid definitions; I consider what I do for a living, providing computer support for solo entrepreneurs and small businesses indeed to be my “calling”, something I do for reasons well beyond simply making money.

But make no mistake: having said that, if I don’t make money, I will very quickly have to find something else to do, or I will be broke, bereft and bankrupt.  No amount of altruism, good intentions, or heartfelt desire to save the world makes any difference to my landlord, my cell phone provider, Uncle Sam or any of my other debtorsMy best wishes for the world are not providing for my impending retirement – only the money I make does that.  This is a distinction that appears to have been lost to my detractors, who clearly misunderstood my opening statement in my previous post as meaning that nothing is more important than making money.

If that is the case, let me state publicly that this is not what I meant.  I was merely stating a simple fact – businesses exist to make money.  This is not why we WHAT we do for business; in fact, if we are wise, we choose to do something we’re both good at and that we enjoyed doing.  But the third, and most often overlooked, criteria in this consideration is that we must choose something that we will be paid to do.  And, hopefully, paid well.  The annals of American business are rife with the husks and carcasses of enterprises founded by those who fail to understand that businesses are about making money.

Wall Street forgot this; thus came the crash of 2008.  Sound business principles were abandoned in a blind pursuit to keep up with the Joneses and chase the hottest fads and trends rather than do what they knew they should have been doing, which was to invest wisely with an eye on long range profitability and stabilityLehman Brothers, the company were I began my IT career, no longer exists because, despite their place as not only a major Wall Street firm but a source of guidance and leadership via the Lehman Brothers index, they took their eyes off the prize and bankrupted a star in the Wall Street firmament that was over 100 years old.

Let the serve as a cautionary tale to those new businesses, or even existing ones, who imagine that they are in business for purposes other than reaping a profitWHY you are in business is not the same as WHAT you are in business for.  I hope that you enjoy what you do; I highly stressed that you do what you do with the utmost integrity and respect for your customers and clientsNothing less will yield profitable results.

At the end of the day, however, profit is what you are in business for.  And that is why I posted an article about managing your cash flow, and the importance of getting beyond the emotional inhibitors which may cause you to ignore or avoid the importance of managing your money.  The warm fuzzy feeling you get at the end of the day, having done a job well done, provides many things.  But if it doesn’t add up to an increase in your bank balance, when that feeling fades, you’ll have nothing left to show for it.  And sooner or later, you either will have to focus on profit, or you will go out of business.

And that’s not my opinion – that is a simple equation, and a statement of fact.

Cornell Green is Your Open Source CIO, guest blogger for KikScore. Visit him at https://opensourcecio.blogspot.com

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