History Repeats Itself – Past History Does Not Predict Future Performance

Chia-Li Chien | May 24, 2010


During my 2nd quarter SRI Business Retreat meeting recently, I talked with forty-six business owners about history. I used as an example the fine economists who also play the role of historians, reporting our economic situation on a monthly basis. They do a great job of telling us what is going on in the economy. For example, the Federal Reserve System provides a great deal of historical data about our overall economy. You can even download local data from your Federal Reserve branch. My branch is the Federal Reserve Bank of Richmond, which covers North Carolina.

Why do you need to know about economic reports? Because these economic reports typically talk about the unemployment rates, interest rates and consumer spending that will have an impact on your business both now and in the future. Your response to the data in the reports means you play an intricate part in the overall economy. According to a recent article 6 Things Missing From the Recovery from U.S. News & World Report, L.P., small businesses account for 65% of new jobs created in our economy. So yes, we all play a key role in the overall economy. But yet, the U.S. unemployment rate was 9.9 % in April 2010. The Wall Street Journal Economic Forecasting Survey of May 2010 predicts that unemployment will be down to 9.7% in June 2010. We, the small businesses, are the major contributing factors for creating jobs today.

But let’s take a look at history a little further back. In Reset by Kurt Anderson, he provides an historical view about the last two decades in the U.S. “from the beginning to the end of the long boom.” History clearly showed us that we were in for a “CHANGE.” We’ve spent most of our wealth in the last two decades, and now the speed of change is faster than ever before.

As a small business (which, by definition of the Small Business Administration, is an entity that employs less than 500 employees), one of our goals perhaps is to create personal wealth. (Don’t worry; there is no shame in talking about that, because you are the one who bears all the risks that come with owning a small business.) And that thought leads to our next question – how do you create value in your business that will become your personal wealth?

Well, let’s say there was a bear chasing you and your competitor. You want to make sure you outrun the competitor, but not the bear, in today’s environment. In order to win – to outlast the bear and the competition – it is crucial to reconceptualize your business model as we move from conceptual age into aggregation age. Your goal is no longer just surviving a tough economy, but also to be ahead of the historical curve. Early adopters create most wealth – and you want to be one of them. And not because of greed, but for your financial independence and that of the next generation so they have a fighting chance to compete globally.

Here are the things to consider as you reconceptualize your business model:

1. Be a proud a control freak of your intellectual capital. Own your intellectual capital (IC) or intellectual properties, and outsource those non-core functions. Leveraging your IC or “know how” is your best investment for your business.

2. Alignment of your business model. Business model is defined as the vehicle that gets you there. There are three components of the business model:

* a. Passion/Purpose. This is your personal passion combined with your business purpose. The business purpose could be what you provide for your customers.
* b. Core competency/talents. Make a list of what you believe to be your core competencies or talents in business, including capabilities such as process and resources.
* c. Economic drivers. What are your revenue sources? Or, in other words, how do you profit from your passion/purpose and core competencies?

Imagine that your business sits on this three-wheeled car, so that if any of the wheels became deflated, you would be working harder than ever, but still have a low balance or no balance in your business checking account. You must have all three wheels properly inflated to run a well-oiled, well-balanced business.

3. Be a Niche -aholic. A niche can be a product, service, geographic location, or even a type of customer. Focus on a minimum of three to four niches, but ideally you want to have about six to eight niches that will well-diversify your company revenue. But most importantly, create profitable niches, and get rid of any niche that is not making a profit or is not pivotal in your company expansion.

The majority of business owners are trade people, at best, managers of the business. Sadly, very few become strong enough in strategic thinking to become a business architect. A business architect can launch your business into value creation, allowing you your best chance to be equally compensated for the amount of risk that you are shouldering as the business owner.

The truth is that no one can predict what’s going to happen in the future – especially in the uncertain economic environment of today. But wouldn’t you prefer to be part of the statistical history that shows an upswing, or making history brighter now for a brighter future? Begin now to reconceptualize your business, and you’ll be the one writing your own history.


This article is published at Women on Business

URL: http://www.womenonbusiness.com/history-repeats-itself-past-history-does-not-predict-future-performance/


Chia-Li Chien, CFP®, CRPC, PMP; helps women entrepreneurs to convert their business into meaningful personal wealth.  She is the author of Show Me The Money and columnist for WomenEntrepreneur.com & Fox Business online.   She is available for consulting, speaking engagements and workshops.  She can be reached at http://www.chialichien.com or jolly@chialichien.com.


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