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Hedging against downturns: Remember the GOAL!

Business cycles are a fact of life, and those of us who have lived through many cycles have gained experience in finding the proper time to step on the gas and when to use the brakes.

These next several posts, we will explore a number of ways to build security into your plan, including insights relating to cash management, banker relations, and identifying recurring revenue streams that do not rise and fall with the business cycle…

Often we joke together as CEOs that our goal is “world domination” or “to crush the competition.”  But no matter how stated, the primary goal of an enterprise is to make money.

How do you measure progress toward such an undefined goal? We measure it by profit or revenue in dollars.  But that is a number in a vacuum without at least two other measures: return on investment (ROI) and percentage of net profit to revenue.

Microsoft generates billions of revenues and profits and even has a high ROI and high net profit percentage. But some of our small businesses have even higher percentages of return on investment and percentage of net to gross.  So the amount of money made is a number in a vacuum without the rest of the tools to tell the story.

The next time someone tells you that their goal is world domination, you might politely smile and remind them that a more modest goal might better serve the stakeholders over time and that it might be a bit easier to accomplish.

  • Deep Patel

    I agree with the moral of your story. Many times CEOs tend to get their priorities misaligned, at the end of the day as its all about taking care of the stakeholders and making a profit. Modest goals are typically the most important ones

    Thanks again for the reminder to keep the train on the right tracks.

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