5 ways to protect your business

Recessions and market swings create business vulnerability. How many of us would have thought Blockbuster Video would be vulnerable 10 years ago? Even then, the signs of the changing market were already there. How to protect your business from shocks?

These 5 tips can save your business in the future:

1. eliminate debt,
2. Create strong reserves,
3. Diversify your property with strong investors,
4. Regularly analyze your market and business for strategic opportunities and risks, and
5. Manage reduced costs and upgrade feature

Did you know that Sam Walton paid off his first business loan on his first variety store within 3 years of cash flow? Sam understood the importance of generating excess cash flow in his business to eliminate the risk of foreclosure should times get tougher. The Bible says that the borrower is a slave to the lender, and recent events have made the pain of this relationship even clearer. Some of America’s largest companies operate debt-free, including Cisco Systems and Apple Computer. This approach has given these companies great flexibility and freedom, which has translated into huge ongoing benefits.

The corollary of having no debt is strong reserves. If debt makes you a slave. Solid reserves is the vaccine that protects companies from the need to borrow.

While we all want total control and no supervision. A diversified group of investors gives a company a place to turn for capital without going into debt. Did you know that John D. Rockefeller never owned more than 37% of Standard Oil? And Standard Oil used capital voraciously early in its development. A diversified group of investors enabled Rockefeller’s vision. At one point, Rockefeller buys more than 1/4 of the industry from a wide range of owners in less than 90 days.

Market analysis, opportunity identification and risk prevention are perhaps as important as the first three. Sam Walton paid off his loan in three years only to discover that the landlord who rented the variety store space from him had decided that he would like to put his son in business in the same location. Sam was out of business. This lesson became a key strategic tenant for his WalMart strategy. Blockbuster is about to close because the company failed to recognize the threat of digital downloads.

Driving costs down is an obvious key step. However, many companies fail to institutionalize the process. Companies must create continuous cost reduction processes by reducing supplier costs, increasing employee productivity, and gaining other operational efficiencies. Continuous focus produces continuous results.