The Kismetic Strategist

“Happiness is a positive cash flow” – Fred Adler

In a business, cash flow is the “the excess of cash revenues over cash outlays in a give period of time (not including non-cash expenses)”.  If the definition sounds technical, that’s because it is: outside of accounting and finance readings, this isn’t a very common phrase.

In layman’s terms, cash flow is the amount of money in your bank account: if you have a large paycheck coming to you soon, but you are overdrawn, then you are cash flow negative.  On the other hand, if you have a lot of extra money in your account, but you owe it to others, you are (at the moment) cash flow positive.  So Adler is basically saying happiness is having more money in your bank account than you spend.  Simple, right?  And it applies:

1) How many fights in relationships are over money? This usually isn’t how to split extra cash, rather it is about not having enough at the end of the month; essentially, negative cash flow causes these issues

2) The happiest people I know live within their means. For example, a good friend, in 2005, lost his government job and spent about eight months looking for his next position. Yet he was (and is) one of the most positive people I know. One of his secrets? He lived on about half of his income, and the rest was put into investments and rare splurges.  In other words, he maintained positive cash flow for so long that he had the cushion to fall back on when he needed it most.

3) Cash flow is essential for most small businesses.  About 25 percent of new businesses fail in the first twelve months: the “cash is king” mantra suggests cash flow is one of the biggest causes of failure (as does Mark Cuban).  If you think your happiness is tied to being your own boss, then, Adler’s quote is true for you.

Looking back at the three examples, they are more about reducing misery than increasing happiness.  But maybe these are the same; if so, learning some accounting basics can increase our happiness.

Source: shesnuckingfuts

Every Tuesday I offer up a classic proverb and decide whether it is relevant to modern business.

Today’s proverb:

“The acorn doesn’t fall far from the tree.”

For centuries, this proverb was an accurate reflection of culture: you were generally born to a family with distinct values, and you learned the family trade; your last name might even reflect this trade (Shoemaker, Smith.)  A family, then, was like a very large tree on flat land.

At some point, this changed: with more mixed races, last names that mean nothing, and the rise of the school system, we identify less with a family heritage and more with our consumer goods: I’m not the descendant of a Welsh immigrant, I’m an iPhone user.  I’m not the product of my hometown, but the product of my university.

The updated version of the proverb, today, would be: “The acorn doesn’t fall far from the tree, but squirrels will gather them up all the same.”

What this means for your business: In the b2c world, customer profiles currently take into consideration age, ethnicity, and geographical location.  While age is still relevant as it relates to adoption of technologies, location and ethnicity are becoming less important: as Penelope writes, we have more in common with people of similar finances than those with similar locations.  With the mainstream adoption of Facebook, customer profiling should focus on the consumer goods the customers identify with – how would you market differently, for example, to an iPhone user versus a BlackBerry user?

Every Tuesday I offer up a classic proverb and decide whether it is relevant to modern business.

Today’s proverb:  

“There are three things that matter in property: location, location, location.”

-Lord Harold Samuel

Today, this proverb is widely accepted as gospel in commercial real estate.  But is it still true?  For the answer, let’s consider the synopsis of Trade-off, a new book coming out in September:

“(A)lmost every decision we make as consumers involves a trade-off between fidelity and convenience.”

In this statement, convenience and location are basically the same; fidelity is something like quality.  So today we base our decisions on quality and location.  This is nothing new.  But here is the twist: location has always been certain, while fidelity is more ambiguous.  Today, however, Yelp offers more certainty in quality, while Google Maps and GPS systems lessen the strain of convenience (i.e. getting lost in a new place).  As a result, the desire for quality has and will increase, while the need for location will decrease.

What does this mean for your business?  If you own a retail business and you think location is most important, think again: while it still has value, the greater value is in creating a fidelity that renders location irrelevant.  In other words, if your cafe makes the best coffee, has the best atmosphere, and is open the best hours, it can be located in a strip mall and still have a strong customer base.

Conclusion: A better mantra (for retail businesses) is “Quality, Consistency, Location.”

(ht: Seth Godin)