The Long and the Short of It: Balancing Today’s Business With Tomorrow’s Prospects
Description:
One of the biggest challenges in running a business is continuously finding the balance between short-term profits and monthly cash flow needs, and the business’ long term future. This can be a delicate tightrope walk indeed. However, you can use this balancing act to your advantage.
Content:
One of the biggest challenges in running a business is continuously finding the balance between short-term profits and monthly cash flow needs, and the business’ long term future. This can be a delicate tightrope walk indeed. However, you can use this balancing act to your advantage.
Managing for the short-term gain means making dollars-only-decisions, driving people hard and prioritizing cost over ultimate value. Cutting out or failing to add anything that does not yield an immediate benefit is the mark of a business being managed only to a short horizon. Much damage can occur under the cloak of seemingly sensible frugality. If you don’t buy any seeds to plant, how can you expect anything to grow?
An example of this is not investing in your people. You give your team incentives to deliver results based on the clear goals set forth. Results are measured daily, weekly and monthly, and you hold them to consistently delivering those results. While your passion for winning and your rewards to your employees for doing so are important, short-term results orientated thinking should be balanced with longer term investments in the training and development of your staff. Think of this as sharpening their axe. Would you rather pay your people to swing a dull axe all week long? Or would you rather pay for them to attend a week long training seminar to learn how to sharpen their axe, so they can come out swinging sharper next week and chop down twice as much? You would lose one week worth of work, but the benefits you would reap in the long run far outweigh this initial investment. Many small business owners have a hard time with this even though they may inherently believe in the benefits of training. It is hard to invest in the unknown and take that leap of faith, and that is essentially what operating from a long-term perspective requires.
In an increasingly short-term focused culture, it can be hard to fight the instant gratification instinct. Let’s look at some other dollars we spend today gambling that the future value of the net cash flow that investment generates will be greater than the present value of the cash today or the opportunity cost of doing something else with that money. Investing in research and development and marketing are other expenses that see cash out the door without a predictable or guaranteed repayment date. If you think that your organization can subsist forever off of the same product/service line you have today, you are deluding yourself. Smart organizations earmark cash for projects with long horizon’s; these are both high potential yield and high risk investments. Similarly, a CEO needs to realize that today’s successful marketing campaign is tomorrow’s sales revenue.
Learning to balance the daylight of today with the horizon of tomorrow is a skill that you will cultivate over time as a business leader. This is an ongoing process of learning so don’t expect yourself to be perfect today, but as you become more adept at running your business, you will become more attune to how the waves of time wash over your marketplace and you will learn how to ride the ebb and flow that your business surfs by. To learn more about how you can make your business and your employees flourish, visit www.flourishingbusiness.com.
Author: Elizabeth Gordon
About Author:
Elizabeth W. Gordon, founder and President of The Flourishing Business, LLC, is a visionary leader who has a passion for helping others achieve their entrepreneurial dreams and enjoy more of the best in life. With a vast and diverse background in many business arenas, Elizabeth regularly has the opportunity to share her business acumen with clients, large and small. She currently serves on the Board of Directors of the National Association of Women Business Owners (NAWBO), Atlanta and the Board of Directors of the American Association of University Women (AAUW) Atlanta. She is an Accredited Executive Associate of the Institute for Independent Business (IIB) and a certified Life Coach.
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