And let's also analyze whether there is a way in an economic downturn and a general depression not only maintain but also to expand the company? In other words, let's talk about how to achieve solvency and, consequently, the viability of the business. Or it can offer management First, let's clarify what for the consulting business 'solvency'. Solvency – the ability, in which the company earns more money than it spends. The first step on the path to solvency is to calculate the minimum income which should make the company one week only in order to somehow gain a foothold in business. This income represents the amount of mandatory waste, that business simply can not pay. This minimum income is called 'break-even point.
" It is surprising that more owners and managers have no idea about the real value of 'break-even point,' and inclined to be overly optimistic with respect to this value. As soon as our company implements a system of financial planning, most owners and tops 'eyes open', as it turns out that most of the time their business was not profitable and the financial crisis nothing to do with. But to return to the issue of savings. Strange as it sounds, but in order to really save, you need to increase spending but note: no actual increase costs, and increase the need for the company. Thus, it is necessary to form a 'reserve fund' by providing that a separate account, and then every week to deduct this expense required percentage of weekly income company. When Dan contributions to a reserve fund to 'hide' under the overriding mandatory payment, thus creating a top-of the business idea that break-even point is much higher than it is in fact case.
Thus, the top composition is applied to ensure that the company requires a minimum income, which ensures its survival, which is actually much higher than this break-even point. This exaggerated income establish the minimum necessary, ie thus, without which survival is impossible. And then in line with the above law, the company starts to earn money as much as needed to cover these 'Mandatory spending. " But now part of the revenue deposited in the reserve fund of which only knows the owner's a trick! The presence of deferred funds ensures the viability of the company, making it almost invulnerable to all sorts of crises since unwanted vehicles – this is the 'fatty tissue', which allows the company to survive without any kind of external financial transactions.