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Blog - Business

Faith in "ones" brand often arises out of 6 very established myths. If you are responsible for your company's branding initiatives it may pay you to think about these myths and to keep them in mind.

Myth 1: If a product is good, it will succeed.

A long, long time ago in a galaxy far, far away, products and services were responsible for the fate of a company. When a company noticed that its sales were flagging, it would come to one conclusion that either its products or its services was starting to fail.

A simple mechanistic model of how advertising works might postulate that consumers see a commercial, this changes their perceptions of the brand (or creates a perception, if it is a new brand), and as a result they purchase the brand. This might seem to imply that most of the effect of the advertisement occurs at the time of exposure to it.

A paradigm is ‘the way that we view things’. Once in a while a ‘paradigm shift’ occurs. Basically this means that the world does not change, but the perspective from which we view the world changes. Major paradigm shifts in history include the discoveries that the earth is not flat, but round, and that the earth is not the centre of the universe: it is only one of many planets, orbiting around one of many suns.

Many advertising gurus avoid answering a very basic question: ‘Does advertising really work?’ Obviously nobody in the industry is going to say that advertising does not work, even if they believe that it does not work, but to avoid answering this simple question can create misunderstanding, because the implication is that all advertising works.

It is important that the distinction between credit risk assessment and credit risk measurement is clarified. A rule of thumb that can be used to distinguish these applications is to understand what the three fundamental goals are that each seeks to determine.

Credit risk arises whenever a lender is exposed to loss from a borrower or counterparty who fails to honor their contracted debt obligation, as agreed, in a timely manner. For lenders who extend credit in the form of loans or capital market products, credit risk is inherent in all their business activities and is an element in virtually every product and service that is provided.

If you think of a business as a human body, cash would be the blood. Positive cash flow allows a business to stay in business. Without sufficient cash flow, a company is unable to meet payroll, defaults on payments to suppliers and ceases operations.

You need to conduct a valuation of your business, because you want to sell it, want to obtain a loan, or just because you are curious what its true value is in the market. The funny thing is that whenever it comes time to calculate the total value of a company, the flow of cash will be much more critical than the flow of value that conventional accrual accounting systems track. Whether your firm is small or large, public or private is not at issue.

 

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