The Business Cycle
by Jonathan McGaha | June 10, 2013 12:00 am
“What a beautiful day in the Kingdom,” said the King to his two friends as they walked along a dusty dirt road leading out to the rural areas surrounding the Castle. Directly behind them were various Knights in Shining Armor on horseback and on foot, sworn to protect their King with their life.
Igor, owner of Moat Designs Ltd., followed along as Slide Rule, the owner of Building Blocks Inc., the architect for the Castle, talked in an animated voice about the lack of work.
“Business has been so bad that I’ve had to borrow money against my property,” said Slide.
“Why?” asked the King.
“Some people pay and some people don’t. I get a project, and then it’s not funded. Sometimes I think I’m just not making the right decisions. When my family ran the business long ago it seemed a lot easier.”
“That’s no big deal,” said Igor. “I never know when I’ve made a good decision.”
The King looked at both of them. “I can see clearly now sounds like a song, yet there needs to be a discussion regarding the cycle of business. It’s an age-old problem, one that has been with us for centuries. I’m afraid if you don’t understand the big picture, neither of you will succeed.”
“What do you mean by the big picture?” asked Slide.
“OK, while we walk and enjoy this fine day, let me fill you in on some details. First, let me quote, from memory no less, a small paragraph of a book by the famous author James Clavell in his Asian saga “Noble House.” Have either one of you read this fine book?”
Igor and Slide looked at each other and then shook their heads no.
“You really should. It’s a book about business in Hong Kong. Take careful note of the sequence of events:
“‘It’s the age-old destiny: one-in-ten-thousand coolie (Chinese Worker) strikes gold, harbors money, invests in land, saves money, becomes rich, buys young concubines who use him up quickly. Second generation discontented, spend money, mortgage land to buy face and ladies’ favors. Third generation sell land, go bankrupt for same favors. Fourth generation coolie.'”
“You quoted that from memory? I’m truly impressed,” commented Slide.
“But what does it mean?” asked the King.
“I can tell you,” said Igor. “It means in the end, you lose.”
The King shook his head. “Let me explain it for you.”
As he spoke, they arrived at a small stream, and the King waved his hand, and a blanket was immediately provided for them to sit on, and a fresh brew was immediately served.
The King was now comfortable and happy to start another Master Class. “It means that the nature of man is to live from the efforts of previous generations by contributing less, and taking more.”
“Actually, that’s quite common,” said Igor.
“See, it’s true, one in 10,000 coolies strike it rich, and the next generation who is brought up with money really doesn’t appreciate how it was earned, and thus spends it whimsically. The third generation now is responsible for the business and doesn’t have the training or the capacity to manage their business investments, so they start to sell off the assets. And the result, the fourth generation ends up a coolie and the cycle is completed.”
“That’s a very scary story,” said Slide.
“Yes Slide, you’re right. It’s a terrifying story, but it happens all the time, and will continue to happen to future generations.”
“So, what can we do about it?”
“First, it’s important to recognize that this business cycle is real, and it can easily happen to any generation. The secret to overcome this situation is long-range planning. It’s imperative that businesses plan a minimum of five to seven years out. This forces you to step back and look at the big picture.”
“So, let me make sure I understand. If you’re planning five to seven years out, that’s not a business plan?”
“Yes. Good for you. The business plan is an annual plan that answers the questions as to what the business is going to do this year to satisfy the longrange plan. Then marketing and business development fits into the business plan to help achieve the desired results.”
“Actually that makes a lot of sense,” said Slide. “But here’s the real secret. Those companies that use the business planning and managementby- objectives methodologies will increase their chances of surviving tenfold.”
“What about those companies that don’t plan?” asked Igor.
“The cycle of wealth followed by poverty will continue, undaunted by the winds of time,” answered the King.
With the exception of an occasional guest appearance by the author, any similarity to actual events or people living or dead is purely coincidental.
Ronald A. McKenzie is president of COMPASS Consultants Corp., a strategic planning and marketing company specializing in developing business growth. He is a published author and has made nationwide presentations on the subject of strategic planning and marketing. He resides in Las Vegas and can be reached at ramckenzie.compass@gmail. com and www.compassconsultantscorp.com.
Source URL: https://www.metalarchitecture.com/articles/the-business-cycle/