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Capital and Revenue Perspectives About 75% of traders that seek TradersCALM coaching services can be said to come with a bias towards a capital (rather than revenue) mind-set or perspective. This perspective carries with it a set of assumptions that make many concepts difficult to un-learn and sometimes engenders obstacles for new concepts to take root. Of the other 25%, most seem to have a flexibility of mind that makes a range of concepts easier to share. An analogy may help - it started with a story told to me by a clean-room fitter/shop-fitter last year. We will call him Mike. Mike had a messy divorce, and for a while was staying with his aunt. We met over a nice dinner party one evening at his aunts house - I think she was trying to match-make Mike with a lady friend. Mike expressed, with some conviction, that he could never understand why his clients would spend so much money on shop-fitting. He never complained of course, for it gave him a good living. But Mike said that he knew from his work and experience, that once the shop was fitted out, the investment was almost not-recoverable. Mike explained that, from his perspective, that as each client had varying colour, style and material and finish preferences, the materials were of little resale value to another client. Also as each shop has a differing shape and different dimensions, the shop-fitted material had little more than scrap value. I listened with some interest - for I knew nothing of retail commerce. From his perspective Mike was probably right. I could see that there must be a revenue value and it was many months before I had the opportunity to ask a shop-owner for her views. Sue, (not her real name) has three shops selling similar household items. One was fitted out before she bought it and did not do as well in sales as she hoped. The passing traffic was up to expectation, even the number of people entering the store was acceptable, it was just the average customer sale value was 50% less than in her other two shops - each shop selling very similar items. It turned out, by coincidence, that Sue had arranged Mike to refit her shop - at huge expense. Soon after the refit, sales nearly trebled. The profits at this shop rose almost six-fold and now this shop outperforms Sues other shops. Sue was considering a refit in one of her other shops which has nearly 8 years left on her lease. Mike apparently advised that the refitting would be much cheaper at this store, as some existing materials could be re-used, and Sue apparently intends to proceed after her traditional summer clearance sale. The return on the 'dead' investment represented by the shop-fitting was very good. Sue has a revenue oriented perspective to investment in shop-refitting. Lessons Learnt Many traders have a bias, it seems to a capital perspective. There is nothing wrong with this. Just like there is nothing wrong with a revenue perspective. But a greater flexibility of mind does allow for more opportunities to be perceived. The majority of traders have a trend-following style. Many of these perceive close stops as a capital protection technique. Also profits are seen as capital profits. So far so good. But if some opportunities require some limited understanding of a revenue perspective, then these are not likely to be perceived if the trader is stuck in a capital mind-set. Like many things in life, a balance provides for more opportunity both to be seen and to be exploited. |