From a purely financial perspective there is of course the statutory requirement for any business to submit annual accounts, part of which is the balance sheets showing how the assets and liabilities of the business are in balance. There is also the need to ensure that income is balanced in a meaningful way with expenditure; whether that income is from sales, investment, or loans, added to any existing cash held, the income needs to balance any outgoings.
There is also a balanced scorecard which is a strategy performance tool that can be used to identify and improve strategies in a business and ensure that they are aligned with the company’s vision and objectives. A variation on a balanced scorecard can also be used as a valuation method for early stage businesses where traditional methods used for longer established companies do not work so well.
But then, of course, there are also all the balances required in running a successful business. These balances will change as the business grows but nevertheless that sense of equilibrium must be maintained over time. At its most fundamental that means that the products or services are able to be delivered in such a way, and at such a cost, that ensure that the business model is sustainable and scalable, and that all can be done in a way that generates profit that can be reinvested into the business to ensure its future.
It is also important for both the founders and the business that good things are balanced with challenging things. Too many challenging things can build up to the extent where the proverbial straw can break the camel’s back, but as long as there is a flow of good news as well as bad or challenging news, then the good can mitigate the bad and maintain the balance.
That fundamental truth can be easy to state but it can, nevertheless, hide the fact that in order to achieve that crucial balance many different elements also need to be in balance. This includes ensuring that any marketing activities and expenditure is achieving the required ROI and generating enough fresh enquiries, and then having the staff and systems in place to convert those enquiries into actual sales. But here it is important to balance the number of staff and other associated costs with the level of actual and expected new sales, as otherwise profit margins will be eroded and profit levels will not be balanced with sales.
At the route of all this is the management team and the wider advisers that they rely on. The best and most successful entrepreneurs and founders surround themselves with the best and most complementary co-founders, management team, and advisors, as they fully understand the importance of achieving a balance of knowledge and skills as well as different access to contacts and market information. Where this balance is not achieved the business runs higher risks in many ways and even potential failure, whereas when the fulcrum is perfectly placed, the business is much better able to seize opportunities when they arise and maximise profitability.
So just as it does in the natural world, businesses depend on many things being in balance and working together, rather than being out of balance and the subsequent friction causing inefficiencies that hinder business growth and reduce profitability. And again, just like in nature, businesses evolve and in that evolution it will always lead to the survival of the fittest.
25th May 2021
in British English