These are the 3 very important principles that makes every timeless business become classic companies that stand the test of time and serve generation after generation successfully.
Minimize Risk of Irrecoverable Loss
There is nothing certain when it comes to managing risks. One can have as many backup plans as they want. Risk can only be minimized rather than eliminate it completely. A timeless business is built upon this very principle to stand the test of time.
An irrecoverable loss happens when the capital investment itself is lost or a loss incurred that wipes out the ability to recover. When deploying capital investments, every company small or big should check and recheck the investment.
Lot of reason are there for irrecoverable loss to happen. You may have even experienced one. Didn’t you?
Debt with high interest on the loans will erode the value of your earnings and affect the profit margin. This can simply lead to bad cash flow and less working capital making it irrecoverable until the debt is managed efficiently by selling of assets or other means. External factors like market conditions can also bring you irrecoverable loss. A new merger, acquisition or capital invested in a new product may fail due to various external elements out of your control.
Businesses have to make plans to minimize the risk of loss at all costs. Take steps to limit the loss if your plans don’t work accordingly. As a rule of thumb, make sure the risk of loss is always between your potential profits and breakeven.
Maximize The Chance of Profit Potential
The second most important principle to build a timeless business is to maximize the chance of your profit potential. After you minimize the risk of loss, focus on maximizing the profit potential. It can only be achieved by taking calculated risks that could potentially reward you multiple times.
The chance of profit potential can be achieved with the help of operational efficiency of the business. Long term business prefers small profits for a long time to making one off instant profits. Timeless businesses value customer relationships more. They want their customers to return to them to avail their product or service again and again.
Long term businesses focus on building brand and reputation for them. Compared to short term profits, they work towards low risk, long term gains. Companies that have stood the test of time always made sure the risks are minimized and the chance of profit potential is maximized.
Make Decisions to Grow Sustainably
Timeless businesses always focus on growing sustainably. They are constantly looking out for new opportunities to grow. The growth should be sustainable to be profitable in the long run. Aggressive marketing and company takeovers may grow the company, but the sustainability is questioned.
These everlasting companies are curious to learn and adapt to the current trends in the industry. They are not afraid of change and new ideas. They release products and services that help them gain market share and profit sustainably. These businesses are often the disruptors in the industry by investing in research and development.
Growth is like a second nature to these timeless companies. They innovate and make decisions quickly to stay in top of the game. They very well understand that staying on top is more challenging than getting the top.
Now that you have learned how a timeless business is built upon, it’s your time to build one.
Do you know any other important principles every timeless business is built upon? Share them on Trdinoo for others to learn and please share us with your friends and network.