You’ve heard the phrases that have become cliches in business parlance, such as cash is king. They are repeated as if they are always correct. But are all of these phrases to be accepted as rules to follow? Let’s see…
“Cash is king”
The original source of the phrase is debated, but it’s accepted that it was popularized after the 1987 stock market crash by Volvo CEO Pehr Gyllenhammar. It has come to mean that having good cash flow is essential. Sales may be great and showing a profit on the income statement may indicate a sound business, but that doesn’t necessarily translate into good cash flow.
According to SCORE, the lack of cash is the number one reason why businesses fail. More specifically, 82% cite cash flow problems as their cause of failure.
Bottom line: Cash is king is an important colloquial that business owners shouldn’t overlook. Managing cash flow should be a prime activity for owners. This can be done using various tools and apps to see where the business stands at any given moment and what the near future portends. But cash flow management goes deeper, starting with a company’s budget, collection processes, inventory management (for inventory-based businesses), and other business fundamentals.
“The customer is always right”
The original source of the phase is a 1908 policy set by Harry Gordon Selfridge who founded Selfridge department store in London. The policy was followed by other retailers, such as John Wanamaker and Marshall Field. The policy follows one initiated earlier by hotelier Cesar Ritz: “the customer is never wrong.”
The policy means that if a customer is dissatisfied, the situation must be immediately remedied. However, while the policy may be easy for employees to follow (just replace, repair, or refund, depending company policy or the situation), it ignores realities. Customers may be dishonest or simply take advantage of the policy.
Bottom line: Whether the customer is always right depends on the circumstances. Adopting the policy for some businesses may be essential to avoid bad reviews on social media; the cost of the refund is minor compared with the loss of reputation. But a broader policy, one that takes into account employee actions and feelings as well as the realities of a particular situation, may be better advised. Allow a customer to complain, and where valid, address the complaint appropriately.
“You break it, you buy it”
The original source of the phrase is unclear. Some attribute to a Miami Beach gift shop that displayed a sign in 1952. Others say it was displayed in a shop in Greenwich Village in 1948. There’s a myth that The Pottery Barn had signs displaying this phrase and, thus, has become known as the “pottery barn rule.” The chain, however, didn’t use such signs; it merely writes off damaged merchandise and doesn’t follow the rule.
Legally, the rule is unenforceable. There is no law that I know of that is based on this rule. What’s more, as a practical matter, it would be difficult to enforce this rule; stores may not know who is responsible for damage. Today, in many locations, stores can’t even seek redress for intentional destruction (e.g., during rioting), let alone accidental breakage.
Bottom line: Whether the phrase is factual is highly unlikely. Breakage is a cost of doing business. Nonetheless, displaying a sign with the pottery barn rule may incentivize customers to be careful around merchandise.
Final thought
Whether you follow these rules is up to you.
Barbara Corcoran, real estate mogul and Shark Tank personality, said: “It’s your game; make up your own rules.”
