Weak Link Financial
– Does this action strengthen the weakest link in the chain of production?This link is fundamental to building your business or family prosperity. It is one of the cornerstones of holistic financial planning.
Here is the logic behind this powerful concept. Every manageable whole has its own “production chain to new wealth”. The chain is comprised of three links, known as: The Resource Conversion Link (aka Resource Link); Product Conversion Link; and, Marketing Link.
To play Audio Click, just click once on the play icon. (If you have slow internet connection such as Satellite or dial up then you may need to press pause for a minute to allow streaming of clip for continuous listening)Resource Conversion Link
This link combines human creativity with money, and with raw resources.
The raw resources that are used differ slightly depending on the type of business. The businesses may be classified broadly as either –
Sunlight Harvesting businesses
People and businesses whose primary activity is the capturing and storage of sunlight (solar) energy, using the photosynthetic process occurring within green plants. The amount of solar energy that is captured depends on the effectiveness of their four ecosystem processes. The effectiveness of these processes is entirely local, and dependent on the individual management decisions within each whole. Highly effective water and mineral cycles, and dynamic communities of living organisms always result in massive capturing of sunlight compared to less effective situations.
Because living process are a pre-requisite to being a sunlight harvester, solar panel installations fall into the next category, resource enhancing businesses.
Resource Enhancing businesses
People and businesses who are one (or more) steps removed from the sunlight harvesters are classified as “Resource enhancers”.
Resource enhancers: change the form and function, and therefore the potential value of products created by sunlight harvesters, however they do not add more energy into the food and fibre system than was originally captured by the sunlight harvesters.
Resource enhancers combine their human creativity with money, and products sourced from:
They turn these products into new products and/or services, for sale at a higher price to reflect the ‘value’ added in the process.
- The sunlight harvesters, and/or
- Other resource enhancers further upstream of themselves,
Product Conversion Link
Sunlight harvesters capture solar energy in plants of various types. As a general rule the point of harvest is the transition point from “Resource Link” to “Product Conversion Link”. Yield is determined in the Resource Link (ie by the effectiveness of the ecosystem processes). Whilst in the Product Conversion link, quality and quantity may be lost.
Looking at crops first, a cabbage, a strawberry, wheat or any other crop (including all grain, fibre and vegetable crops) cannot be dealt with until the point of harvest. Immediately following harvest the strawberry can be packed, cooled, shipped and otherwise handled. The trick for the producer, whilst his product is moving through this link in the production chain, is to maintain the product in a potentially marketable condition.
I well remember trucking insufficiently chilled green beans to market. In the period between harvest and delivery the disease sclerotinia took hold, and a rampant white fungus was what we delivered to market. It was not very appealing to anyone, and caused a complete revamp of our handling procedures. We had a “Product Conversion” weak link, and until fixed, nothing was more important than resolving the cause of our problem.
Massive amounts of sunlight might be captured and stored as standing feed. In other words, the Resource Link might be very effective.
Grazing animals “harvest” grass, but if the manager delays grazing a paddock, so that the standing grass becomes too old and loses quality, this will influence animal weight gain, birth percentages, and wool or hair quantity and quality. This would possibly indicate a weakness in the Product Conversion link. The animals may be eating the grass but failing to convert it into a potentially marketable product.
Resource enhancers take the food and fibre etc produced by the sunlight harvesters, and through various levels of processing convert them into a myriad of salable products. The end proucts are often hardly recognisable as derived from the raw material the sunlight harvesters produced.
Marketing (Money Conversion) Link
All products and services remain nothing more than ‘potential’ revenue to its producer, until such time as the product or service is sold, when it is (usually) exchanged for money. Marketing holds the key to receiving value for the products and services produced. This principle holds true for individuals providing labour for farms, factories and offices, and it holds true for every business from sun harvesters, on.
Holistic financial planning and the Financial Weak Link
Just as no piece of chain is stronger than its weakest link, no business is financially stronger than its financial weak link. To strengthen a business almost always requires the spending of money. At the time it is spent, the money must be targeted at the weakest link in the chain of production.
The weak link will move from link to link from year to year, and even within a year, so one must remain alert when identifying the current ‘weak link - financial’. For instance, no amount of money invested in some form of advertising (marketing link) will enhance a business in the long term that is producing a poor product (product conversion link).
Only careful investment into ‘the’ weak link at the time of spending will result in long term growth of the business.
Return to Main menu Feedback and Comments