You are delighted to see that your business has made substantial profit at the end of the financial year. At this moment you face a problem. How to allocate business profit into competing wants? I am listing below the theory of three parts allocation:
In history and human thought kings, philosophers, prophets and enlightened tradesmen were using the number 3 as the number for trade and wealth. Even Hindu cosmologists considered the planet Jupiter as wealth giver and assigned it with number 3. Following their steps I am sketching for your benefit a three part business profit allocation method:
Allocate one-third of Profit within a Business
Business must grow from year to year. As each year passes you see the level of operations is rising. This entails additional capital requirements from you. There are two types of capital requirements. One is for purchase of new fixed assets or re-furbishing of the existing ones. This is called as capital expenditure. The other is additional investments in inventory and receivables which is popularly known as working capital. Both capital expenditure and working capital are combined together to enhance the capacity of the business to produce goods and/or services in an effective way.
Allocate one-third of Profit outside the Business
An age old adage obliges you not to keep all your eggs in one basket. It is true that your business is growing and needs more cash to grow faster. But it does not mean that you should put all your money in a single enterprise. Any novice knows that, it is better to bet on more than one horse in a race. In modern day risk analysis the fundamental theory is to spread the risk. So be wise. Park your one – third of profit in a different area. Maybe you can place it in bank, share market, gold or other investments. In some cases you may open a subsidiary to your main business and invest it there.
Allocate one-third of Business Profit to You
In the rush you have forgotten about you, your family and the society out there. As an owner of the business you need compensation. This we call as drawings in the case of sole proprietor and partnership and dividends in the case of limited liability companies. You have to live and run a household and attend to the upkeep of your family. More than that, you have to contribute some part of your income as charity to the society at large. Therefore, it is duty cast upon you to allocate one-third of business profit to you as owner.
Cosmic Balance
If you follow this scheme of allocation, you are in cosmic balance. There is a triangle formed: one is your business, other is your savings/investment and next is your own self. By following this three part allocation of business profit you will be able to get your cosmics working for you in perfect harmony. As you know cosmics are aspects residing in you and influence you and your business throughout.
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