Mike Clark's Business Bites: Firms that manage their cash can maintain altitude even when unexpected occurs

Criticising business owners for "only caring about money" is like criticising the pilot for "only caring about fuel". Photo / Unsplash

OPINION:

We tend to use the term jet-propelled when we want to illustrate how fast something's going to happen or how powerfully we hope it will move forward. Do you feel your team is jet-propelled, moving forward and achieving results with great effectiveness and speed?

If you were to pick a vehicle analogy to capture the essence of your team, what image would you pick? Would it be self-propelled like a tricycle, skateboard or bicycle or be battery powered, or have a grunty engine? Would your vehicle be a solo affair or a multi-carrier? Who would it serve and to what purpose?

Anytime you use analogies, whether it is getting people to choose a colour or an animal that best describes them, there are so many factors to take into account. The vehicle one is no different. It is interesting and useful, albeit with limitations.

I have always loved analogies for explaining business to people. From waka to jet planes, analogies help people step back, disconnect emotively, and be more able to see and learn objective lessons. This helps people to take actions that are in the best interest of the whole team.

Irrespective of how big your plane is, there are some essentials that apply. You need a pilot. On larger planes, you need multiple pilots. This person/people are often the founder, chief executive or managing director. They set the course and constantly navigate the myriad of indicators to ensure the plane is on track. If they lose control the plane will crash.

Good pilots communicate with the crew and passengers. They are reassuring and informative. How effectively do you communicate? If you were a passenger on a plane, would you feel safe and confident if the pilot communicated as much and as well as you do?

As well as a pilot you need fuel! (The body and the engine we will explore more next week.) Fuel is cash flow. Without sufficient cash, you will crash. If ever you are criticised for "only caring about money" the plane analogy can be useful to educate people who do not have your experience and knowledge because that is like criticising the pilot for "only caring about fuel".

Planes have crashed and people died because they ran out of fuel. Do not let that happen to your business. As James Clear says in Atomic Habits, "You do not rise to the level of your goals, you fall to the level of your systems."

Do you have a robust system that allows you to manage cash flow? Can you easily check your fuel gauge and consumption rate (revenue, expenses, profit)? A key dial to watch is turnover or profit per employee (divide profit by number of employees).

Do you have an ideal green zone you want to be operating in? Do you have reserve tanks - a buffer for operating expenses to pay wages and bills? Even in plane analogies, one cannot avoid tax and one must remember we fly to create a profit. Create separate tax and profit accounts.

Businesses that manage their cash can weather the inevitable storms and maintain altitude even when the unexpected occurs (Covid, global shipping problems, shortages etc). Have you set yourself up with appropriate gauges to ensure you keep flying?

• Mike Clark is director and lead trainer and facilitator at Think Right business training company.