The Facts of Business Life Read Online Free PDF Page B

make intelligent decisions.
    A good example of the importance of this might be when an owner, seeing a market opportunity, buys a competitor by using a significant amount of working capital from his or her existing business. As a result, both companies are strapped for cash and limited in their potential for growth or expansion, if not in even more dire circumstances. If this owner, however, had a better understanding of accounting and finance and had completed a working capital analysis, as well as doing cash flow calculations, he or she could have foreseen the cash squeeze problem and avoided it by finding other means of funding the purchase.
    If any proof is needed of the importance of having a good understanding of business, all you have to do is look at what often happens when the owner of a business decides to retire and turn it over to one of his or her children. More often than not, when this happens, the son or daughter who takes over has spent a few years working in the business and a few more helping the owner run it. But a lot of family businesses don’t do as well when they are passed on, and one of the primary reasons for this is that, even though the new owner has some experience in the business, he or she often doesn’t understand the various facets of business and how they are all interrelated. And the result, unfortunately, is that a perfectly viable company, one that its original owner spent years building up, now has a questionable future.
    Colleges and universities understand the importance of having an overall understanding of the many concepts of business—it’s why they insist business students choose a major but also take other core business courses. The fact is that if you don’t have a good general idea of how business works, it puts you and your company at a distinct disadvantage when compared to competitors who have developed this understanding.
The Business Life Cycle
    In business, as in life in general, nothing remains the same. There are so many variables beyond our control that, when it comes to ourselves as well as to our businesses, the only way we can be sure to not only survive but flourish is to adapt to the changes that are taking place around us. There is, however, one aspect of both business and life in general that we can expect and, to some extent, prepare for—and that’s maturing. Of course, people don’t mature in exactly the same way that companies do, but both people and organizations go through a life cycle. In life, we start as newborns, then grow into infants, toddlers, children, teenagers, young adults, adults, middle-agers, and, eventually, seniors. Companies, by comparison, go through five stages—or levels—of life:
    1 . Ownership and Opportunity
    2 . Creating Your Company’s DNA
    3 . From Survival to Success
    4 . Maintaining Success
    5 . Moving on When It’s Time to Go
    I will provide more explanation about these five levels in the next chapter. For the moment, though, it’s important to recognize that, just like people, businesses need guidance as they go through their life cycle, and it’s the owners who are ultimately responsible for providing that guidance. It’s equally important to recognize that, just as the guidance a parent provides a child must change as the child grows older, the guidance an owner provides over the lifetime of a company must change as the company moves up from one level to the next.
    The seven Facts of Business Life are essentially a means of providing guidance for a company. What that means, though, is that while the facts are always true, their application will change depending on where the business is in its life cycle. We have all seen businesses that come out of the gate hard and fast, have a big impact in the market, and then fizzle out, never reaching their potential. What that means is the owner provided appropriate guidance to enable the company to get off to a good start, but