Interest rates down, sharemarket up, house prices rocketing, crypto currencies exploding … lockdown again! Social media rules our lives - “celebs” and “influencers” telling us what to believe.
We’re all over the place - How do we measure and control things in such a dynamic world. Is fake news a real thing? What’s real anyway - is it “real” real or “perceived” real?
Let’s take a little reality check here - here’s our “Deadly Dozen” tips for keeping it basic when investing and in business:
1. If it looks too good to be true, it usually is - Logic, common sense and lessons from the past always trump catchy marketing jingles, glossy brochures and fast words from paid influencers, brand ambassadors and advertising gurus. Beware the hype!
2. Don’t put all your eggs in one basket - Diversify, spread your risk, build wealth broadly. The single bet is rarely a good idea! The occasional punt is OK, but it must be measured and not put “the whole farm” at risk. Sow a new crop - one paddock at a time!
3. Borrow slowly, pay back quickly - It’s often easy to borrow money, but difficultto pay it back. Borrow cautiously - Hong Kong billionaire Li Ka Shing hasa rule that net debt should never be more than 15% of net worth. Set your rules and stick by them and be alert to changing business, investment and interest rate environments.
4. Take some off the table - Invest with intent. Don’t be too greedy. Set “in” and “out” targets and reduce exposures progressively as profits emerge. The number of people who say “I wish I’d sold” always vastly outweighs the number of people who say “I’m glad I held on”!
5. Buy “fit for purpose” - To quote John Ruskin -“The common rule of business balance prohibits paying a little and getting a lot - it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better in the first place”. Do your research and invest in a balanced way.
6. Leaders must lead - A leader’s role is to set the course and ensure that everyone knows the plan and the expected outcome. The leader must provide/ensure: Inspiration - Open peoples’ minds as to what can be achieved and how. Confirmation - How an individual or group can play their part in the grand plan. Motivation - The impetus to get things done and be part of it. Participation - Ensure that all play their part, measure and are rewarded accordingly.
7. Focus on core activities - There are many distractions in today’s world. A strong focus on key strengths and leveraging talent, experience and market position will best lead to bottom line results.
8. Control costs - Focus on profit, not turnover. Too many get caught up in the “profitless prosperity” of growth for growths sake, by concentrating on top line revenue only. Fixed costs must be vigorously controlled to ensure profit maximisation.
9. Pareto’s 80/20 Rule - We have all heard it - and it’s so true! 80% of revenue comes from 20% of customers, 80% of problems come from 20% of products, 80% of slow collections come from 20% of customers etc, etc. Try to apply the 80/20 rule to business and investment decisions - then carefully evaluate the worth of the 20%!
10. The Team know - Delegate, involve and reward your team - they ARE the business and they HAVE the answers. Too often, management “retreats” and expensive consultants mastermind strategies and implement plans that don’t have practical application. Consult your people at the “coalface”. They know what works and what doesn’t - the practicalities. Use their knowledge, experience and wisdom.
11. Experiment and learn - Foster an environment of “mistakes are OK”. We don’t get it right all the time and if we’re not making some mistakes, we’re not moving forward. The race car driver Mario Andretti famously said “If everything seems under control you’re not going fast enough!”
12. Keep a “Jerry Can” - Whatever you do, keep some “spare fuel”. Have a safety net, keep something in reserve. Circumstances can change adversely or, opportunities can unexpectedly arise. Having some financial capacity on hand is a good place to be. Financial distress leads to forced/poor decision making. Don’t get swept up in “get rich quick” stories.
So, there they are - our twelve tips for trying to keep a clear head in the somewhat chaotic circumstances in which we seem to find ourselves in 2021.
If you need support for decision making, analysis, de-cluttering your thinking or, just someone to talk to call your usual hmh contact. We’re here to help!