Herman School of Business
The 3 "R's"
If you are not old enough to remember what they were supposed to teach in school, let me remind you. “Readin, Riting and Rithmatic” was all you needed to get by in the world. If you mastered these skills you could go anywhere in your life, accomplish all of your dreams and climb the ladder to success.
Today, fewer and fewer people look at a newspaper, spellcheck corrects what you write and without calculators built into cash registers your change would always be wrong because the person waiting on you doesn’t necessarily know how many quarters are in a dollar.
There are college graduates today who suffer when it comes to even a minimal level of skill at the old 3 R’s. But they somehow make it in the world because of the technological help available. If you have the old reading, writing and arithmetic knowledge down pat, you are now ready to graduate to the 3 “R’s” that you need in the new environment.
Reality, Restructure and Resources. The new 3 “R’s.”
Reality is hard and it is the first step towards success today. Business owners talk about things returning to normal. “When this recession ends and things return to normal” is a common belief held by those who will be failures in the near future. What we had for thirty years wasn’t normal…it was abnormal. This is normal.
Reality recognizes that for thirty years we didn’t have an economy based on the “supply and demand” of our population. We had hyper demand pushing way too much supply because people could spend more than they make and more than they had. The economy was a heated up, growing mass of wealth for everyone with a pulse. House prices went through the roof, mail boxes were full of credit card applications, buy now and pay later deals all over, and stock portfolios getting fatter.
It was as if we had discovered what some experts called “new math.” Where price to earnings ratios were old school and looking forward to incredible growth possibilities set the price, even the average Joe could get rich. He just popped some stock with his new home equity loan and never imagined the debt would be bad for him because his stock profits were amazing. And if one month you feel short of cash, just slide that plastic in the ATM for a quick advance of money. They seldom noticed the interest rate attached to that quick advance.
With the ability to access credit freely, demand boomed and supply had to catch up. The growth was a beast. Like King Kong. But it wasn’t beauty that killed this beast… “Twas credit that killed the beast.”
As long as everyone had houses they could refinance when the bills came due, or the fact that their stock portfolio could be slimmed down to raise some cash…then business owners could keep borrowing money to build more plants, rent more office space, construct super shopping malls, and give employees great salaries and benefits.
We falsely created wealth, built an infrastructure based on that lie, and now wonder where our customers went?
Like any Ponzi scheme, the last ones in lose everything. So, every business loan made in the last two years and every expansion by entrepreneurs built on credit or bloated customer buying power…is now in trouble.
You are now ready for the next “R.”
Restructure. If you are able to restructure debt you may be able to survive. But restructure doesn’t just apply to those in debt. Restructure means adjust your business to the levels of cost based on reality. There will be less demand, so we need less supply. Every business “in your space” is cutting prices to fight for the lower demand.
Look at an intersection. Three restaurants and a gas station. Three office buildings and a bank. Three hotels and a shopping mall. In the next two years demand will correct the excess supply. But, which two will survive and which one will disappear. It won’t be based on who is the best, or who is the most popular. It will be the business that restructures costs, stops wasting valuable cash on marketing, and doesn’t produce at continued losses that may stay alive. While the business owner that keeps giving away product, borrows more to stay afloat, or thinks that tomorrow we will go back to the pace of yesterday…will disappear.
If you are not controlling costs based on today’s sales levels you will go bust. If you borrow money now and think growth will pay it back you will disappear. If you go to bed at night without dreaming of change you will be extinct. Consolidation could be the answer. If you have a plumbing business, share your office space with an electrician. You both save rent and when his or her customer walks through the door, they might also need your services. Merge two companies into one…put your ego aside and stay alive.
If your house payment is killing you don’t blame the business. The business didn’t lease the Lexus, you did. Dump the Lexus and sell the house and maybe you can keep the business that can keep you alive. My bet is you can’t lose the business and get a job that can pay enough to cover the house and car anyway…so they will still have to go.
Now, on to the third “R.”
Resources. Use the resources to find the answers. Use resources like books, people, and the internet to find solutions. You can’t afford a consultant who might save you tens of thousands of dollars, but you can afford to lose it all by not having that resource? C’mon people, you should be dialing my number by now to hire me, not ignoring the reality of your situation which you don’t know how to restructure by yourself.
Get on the Internet and seek help. Start at www.HermanUniversity.com and start connecting with what you need. Find articles on the hundreds of sites offering help. Watch any of the thousands of videos, listen to the podcasts and interviews and find your help.
But don’t forget the first “R,” Reality. Stop following the hype about making easy money, becoming a millionaire in just months, or finding a pot of gold at the end of the rainbow. Success is hard to achieve. It takes work and time. And you have to really know both the old “3 R’s” and the new ones.
- Posted: 6 March 2010
- Comments: 0
- Category: Business success
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