Good is the enemy of great, writes Jim Collins in his book ‘Good to Great’ in 2001. A book which for many years was seen to be the last word in management prior to the digital revolution that followed. Things change.
One thing doesn’t change when you’re running a business though and that’s the need to take out Bad Luck Insurance (BLI).
In one of Jim’s other books ‘Great by Choice’ he presented the concept of Return on Luck.
Jim Collins’ work in “Great by Choice” emphasizes that while luck plays a role in business success, what truly separates great companies is their ability to get a positive return on luck, both good and bad. This involves preparing for both good and bad luck, making the most of opportunities presented by luck, and mitigating the negative impacts of bad luck through discipline, effective decision-making and a focus on their core strength.
Collins found that bad luck planning was present in all great companies that he studied. One great piece of bad luck planning is the way in which company funds are employed.
This particular lesson was one I had to learn the hard way…twice.
The first time was when my business ran out of cash in the first three months of trading and when it did so again in 2017.
The cause was poorer than expected sales in the first instance and overspending in the second instance. Both experiences scared me and after the second I vowed, never again!
This set me on my journey to carry no debt. To this day I don’t own a credit card. You pro-debt leverage people don’t write in, I don’t care. It was my journey. Today, both my personal and business finances are debt free with deposit surpluses, and I intended to keep it that way.
The point is that I now have bad luck insurance for both my business and my life. I’m not saying you have to do it my way, I’m just saying that as a business owner, organising your finances in such a way as to give you BLI is a really smart way to run a business and a really smart way to teach your clients to run theirs.
I used my own system that I devised but there are great systems out there for personal finance organisation from the likes of Ramsey Solutions and business finance in the shape of Profit First.
https://profitfirstprofessionals.com/why-become/
Neither of the above mentions are paid promotions, they are simply two systems I’ve seen working for accountants consistently well over the years.
Here’s the bullet:
- Your firm may be in good shape. Do you want it to be in great shape? If so, Collins argues, and I agree, that BLI is one factor that turns you from good to great.
Why? Because things change.
To your success
Martin Bissett
