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Ben Kingsley Blog post by Ben Kingsley

If You Can Measure It, You Can Manage It

You have heard me talk about treating your household as a business.  Those of you who are new to our newsletter, let me revisit this point.

Your household, which could be you, you and your partner etc, generates income for the work you and potentially other members of your household do, just like a business generates income.  In fact if a household does generated $100,000 in income a year over 25 years your household/business will generate $2,500,000 (And that doesn’t include wages or inflation increases either!) – Not a bad little business, right.

So your household is a great little business ‘potentially’, as long as you are prepared to dedicate about a 1/3 of your adult time in life working, to make it happen.  And just like in business about 4 out of 5 businesses don’t realise their true potential – why?  Because they don’t plan and measure their performance and manage to their target or business plan.  Without a plan they haven’t got anything to measure against, then what are they really managing?

Households are no different, only around 10% will become wealthy, because they plan long term and measure everything and with great management they achieve their real potential.

I realise there will be some households that do measure some things like their spending and do make some savings, just like there are plenty of average businesses that do the basics well, like profit and loss and balance sheet measurements.  But the real science for great businesses, just like wealthier households, is that they measure in detail key performance indicators and they are forever trying to measure and improve these indicators to better manage outcomes.  Let’s face it, in business, Profit or Loss is the result of actions and improved performance, which are a direct result of measuring and managing an outcome you have planned for.

There’s another saying I like to use also – “your outputs are only as good as your inputs”.  Basic inputs = basic results.  This rings true for households too.

Households managing money just to cover the outgoings are in business terms ‘solvent’ (keeping their heads above water) and unfortunately nothing great is going to eventuate from that – you’ll be in the 90% of households that don’t build any wealth and have to work to the grave or live off government handouts.

Wealth that will actually result in being in a position to stop working when you planned to is a result of the household measuring, identifying opportunities, setting a plan and managing it to achieve ‘real’ wealth, and you can’t ask for more than that.

The final thing I want you to think about in this month’s comment is – does every truly successful business take advice from consultants, professional advisors, I.e. people who help them work out what and how to measure things and how to better manage things?  – Of course they do, because every good to great business knows they need help.  And it’s those households that also realise they too could do with some help to get them to where they want to be – they just have to be brave or in my view, smart enough to ask for advice.

Remember, knowledge is empowering – if you act on it!

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