June 26, 2016

Safety Net

This business concept, especially the term, is inspired by safety practices observed on construction sites.

The general idea of this concept is to identify and set a certain level of working capital, selling price, production level, etc. to better manage business variables. The goal of setting a Safety Net is to ensure business progress and resiliency during critical times such as financial set back, unfavorable market condition, or tight competition. Safety Net is usually a little over the break-even point.

Though this concept is normally used on business planning, this also serves an important role on personal financial management. In fact, the idea of saving 3 - 6 months worth of Cost of Living is based on this concept.

No comments:

Post a Comment