Your business is like a three-legged stool

You probably didn’t realize that the stool was invented by accident by a Swiss woman by the name of Maria Schitonstool in 1749. She was poor and had to burn furniture to stay warm in the winter. The last pieces of furniture she had to burn were her chairs, so she sawed off the arms and back for fire wood and ended up with a stool, maybe not as comfortable but served its purpose well. The idea caught on very quickly and she became famous. The stool was later modified by dairy farmers into one with three legs, because it was very strong on irregular surfaces.

Joe and Bob were two dairy farmers who each needed a milking stool. Joe wanted a fast solution to his problem so he scrounged around his barn to find the parts to build his stool, he found a flat seat and 2 pieces of strong wood for legs; but ended up with a scrawny third leg about ½ the size of the others. The stool worked; but Joe had to sit on his stool with tenderness in case he put too much weight on the stool breaking the smaller leg, sending Joe to the ground. Joe’s neighbor Bob wanted to make sure he had a good, strong stool that would last a long time. He spent much more time building this stool and made sure that each component was strong – the seat and the legs. Bob’s stool was so strong he started using it as a step to store products up high on shelves. His stool never broke.

Now allow me to explain how the 3-legged stool is like a business. Let’s name the 3 primary legs or functions of a business:

1) Sales/marketing – without sales a business is dead and marketing is the precursor of revenue generation.

2) The product made or service provided by the company – if you don’t have a good service or product to provide to customers, the business is doomed.

3) Finance – money is the lubricant that keeps the business machine running – a machine that is well lubricated – will run forever with few problems.

And finally the seat – that is management, the component that keeps the 3 primary legs of the business together: sales/marketing, product or service and finance. The better these three legs work together, the better the organization functions.

The key to this story is not to be like Joe, the cheap farmer who did not spend the time to find a third strong leg for his stool. Joe will spend more time worrying about his stool breaking and disrupting his day than Bob. Bob will be more efficient and productive – no worries about the foundation he sits on.

Most business owners come from the sales or product side of the business, and have little knowledge of finance – this is nearly always the weak leg in a small business. With one weak leg – the whole business is weaker because the business is only as strong as its weakest leg. The goal of management is to make sure that all three legs are strong and durable.

In finance that means:

1) accurate and timely financial statements

2) a revenue and profit plan for the year defined monthly

3) a forward looking cash flow plan insuring adequate cash flow to run the business

4) a sound financing plan supported by a local lender(s)

5) monthly performance accountability with the managers of: sales, production/service, and finance

I have employed this system for the last fifteen years, and the results – 19 business owners have increased their person net worth by at least $1,000,000. Think about how you can evaluate and strengthen each of the legs of your business, it will pay you back a hundred fold.

Here is something I am going to give you today for FREE. If you follow it, it can improve your bottom line and show you 127 ways to cut your costs in business. Go to www.dynastybuilder.com and click on the picture to receive your copy today!

This entry was posted on Friday, March 5th, 2010 at 5:23 am and is filed under Business Financing, Cash flow, Resource Library. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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