3 prudent rules of managing a business
By scheng1
@scheng1 (24649)
Singapore
June 20, 2016 5:39am CST
I have read an article that analyze the management of a listed but family-managed business. That means the company is listed in the stock market, but the management is still family-managed. The major shareholders are the family members.
The team is a father and daughter team. They have been in the business for more than 50 years.
They are very prudent and conservative in the business and financial decision.
They have 3 prudent rules of managing a business:
1) Don’t buy what they can’t sell
2) Don’t borrow what they can’t return
3) Don’t sell to people whom they don’t think can pay them back
I think that is a very good advice for all management level executives and enterprenuers, and yet the rules are not taught in business schools.
We attended Asia Enterprise’s inaugural Shareholder’s Day to understand more about its business and outlook. Managing Director Yvonne Lee started the session by sharing more about the company…
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4 responses
@owlwings (43897)
• Cambridge, England
20 Jun 16
Three of the most basic rules of any business, surely! Perhaps they are so obvious that they aren't considered worth mentioning in business schools?
Every retail business, however careful, will occasionally buy something which it can't sell (at a profit, at least) but, hopefully, learns from its mistakes. The difficulty with this, however, is often that the business will become more conservative because it takes fewer risks. The real skill is to be able to spot and invest in a new line which will not, at least, lose money.
Borrowing money in order to expand is something every business needs to do from time to time. It's important to know the cost of borrowing and to extrapolate the feasibility of paying it back based on the existing trading history rather than gambling on the extra profits which the investment might generate. Again, learning to handle a certain amount of risk is essential.
Bad credit is always a risk, of course. Knowing how to check one's customers' credit rating is something which every business person should be well acquainted with and that is certainly something which can be taught.
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@scheng1 (24649)
• Singapore
20 Jun 16
These 3 are really so simple, yet so hard to do.
It means that they have to know their customers really well, and to predict a change in the consumers' tastes.
That is hard to do unless the business owners know everything there is to know about the business.
In retail business, at least they do not have to worry about the customers' credit rating, since customers have to pay before they walk out the door.
But in most businesses, giving 30 days credit is the norm.
In the business that I mention above, the norm is 90 days credit, because they are selling to those in construction and ship building.
Having enough cash is very important.
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