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We have an interesting relationship with luck.
When something goes well we use it in a self effacing way like 'lucky break'.
When things go badly we use it to distance ourselves from the event 'just bad luck'.
When we're breaking outside norms… we're pushing our luck.
According to https://www.merriam-webster.com/dictionary/luck 'luck' is a force that brings good fortune or adversity So how do we deal with the 'force' of luck in business?
Let's get luc... oh... yeah sorry this is a family show!
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- Planning & Preparedness
- Owning It
The concept of luck is so ingrained in our lives that we have common phrases that cover a broad spectrum of situations and concepts.
- What a lucky break!
- Beginner's luck.
- You're in luck.
- Luck of the draw.
- As luck would have it.
- Pushing your luck.
- Better luck next time.
- Just my luck.
- Tough luck.
- No such luck.
I’m certain you could add to this list yourself.
From popular culture we get quotes like “Luck is not a factor.” from 1989’s The Abyss or “We make our own luck.” from 2013’s The Hobbit: The Desolation of Smaug.
Words matter. They affect how we think, feel and process information. Luck, in the context of business is a word we need to leave at the door.
Getting Past Luck
Luck, as the force defined above, becomes an amorphous power over which we have no control and to which we are subordinate.
When I look at the definition of luck and the phrases we use to describe its impact in our lives I see it as a tool we use to distance ourselves from cause and consequence.
That use is where I think the term and concept of luck really becomes a problem for business owners.
Rather than considering luck a force in the business environment, I like to think of a collision of external factors that impact our businesses.
This gives me flexibility and control as a business owner in how I approach an unpredictable economic environment.
How can you or I plan for an unpredictable collision of external factors?
It would be difficult (some would say impossible) to accurately predict specific events. Luckily… (seriously I just wrote that… it’s SO ingrained!). As it turns out, we don’t have to. Rather than consider specific future events… we can identify and plan for, specific business impacts.
If Luck Exists, Let’s Take Its Power
Let’s agree to stop using the word luck and get comfortable with the constant stream of external factors and events that impact our business.
Qualitative P&L (Income Statement) Analysis
Here’s where we roll up our sleeves and get to work to take the power back from luck. Stay with me… it’s worth it.
This is actually a pretty easy hack to help you plan for adversity in your business. Print a copy of your Income Statement and just go through each line and ask yourself some questions.
- What is the impact on my business if this number goes up? Down?
- How would I respond if this number went up? Down?
- What might cause this number to change? NOTE: we don’t look for specific events like “Oh… there could be a pandemic.” If you’re looking at reasons revenue might go down, think more along the lines of “Foot traffic could go down significantly.” The general statement will get you to the same place in your analysis.
Once you’ve gone through each line you can look at the items where #3 is a factor in more than one line item. Hey congratulations! You just created a scenario!
This analysis can give you a great starting point for business planning. You can use this to plan your cash management, inventory, capital expenditures, recruiting and possibly the most important consideration of all (at least right now)… how you deliver value to your customers.
The economic landscape has always been dynamic. Human population growth coupled with international travel has increased an economic risk that many of us haven't had to plan for if we weren’t doing business internationally. Add to that the uncertain impact of climate change through resource availability, changes in policy and/or customer behavior you find yourself in what could be argued to be the most complex and dynamic business environment in history.
It’s an exciting time to be a business owner.
I’ve heard it said it’s better to be lucky than smart. Maybe that’s true but it’s better to be ready than lucky. Is your business ready? Gotta run… time to figure out how to print an Income Statement!
What is your favorite 'luck' story? What happens to the story if you look at it in the absence of luck? Send an email to firstname.lastname@example.org and I'll read some on the show!
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