A little while ago, I read an intriguing article in Forbes Magazine. I haven’t been able to find a link to it online anywhere, or I would include the URL for you. The article was an interview with Jim Collins, author of the best-selling “Good to Great.”

Collins said that he learned a great deal from studying Microsoft’s Bill Gates. One of the most important lessons he learned is that it’s important to have “shock absorbers” in your business. “Shock absorber” can be defined as:

1. Resilient bearing which, in a watch, is intended to take up the shocks received by the balance staff, and thus protects its delicate pivots from damage.

2. A device or a part that absorbs and cushions the impact of a wheel going over an obstacle, which makes for a smoother ride. No different from a shock absorber used on a car or motorcycle.

The first definition implies a degree of protection, while the second describes a “smoother ride.” In business, the definitions could be interpreted as:

Business Shock Absorber: The ability to protect a business from loss of revenue or from unexpected expenses.

Examine Microsoft’s balance sheet, and will be able to see the shock absorber in that business. To save you the effort, I’ll point it out for you: It’s $25 billion in cash. The Fortune article relates that Gates keeps several years worth of expenses for his business saved in cash. This would allow Microsoft to weather almost any threat to the business, including competition, loss of revenue, recession and changes in market demand. Even more importantly, the stockpile of cash lets Microsoft stay focused on the corporation’s long-term business plan. Without this shock absorber, it would be forced to defer long-term business plans to generate short-term revenue.

Side note: For the first time in its history, Microsoft recently issued long-term debt in the form of bonds, raising capital for business expenses that could include stock buybacks and possible acquisitions. Even though it has enough cash for these things, the corporation appears unwilling to let go of the “shock absorber” it has in place. This safety net stays.

Financial planners generally recommend we create an emergency savings account, holding three to six months of living expenses. This “emergency” savings account would then only to be used to cover large, unexpected expenses or a loss of income. It is not to be used for frivolous purchases. This emergency savings account is a “shock absorber” for your personal finances.

Most would agree that such an account is critical protection for personal finances. The issue is that we real estate agents don’t have the same kind of regard for our businesses. We need to have the same kind of shock absorbers in place. We really need to have two emergency savings accounts — one for our personal living expenses and another for our businesses.

This probably makes a lot of sense to you after the past two years. It’s important that we learn this lesson now and work to add this kind of business shock absorber going forward. Gates is one of the world’s richest men, as you know, and it’s no fluke. He’s in that position because of his long-term thinking and the backup plans he has for his business. Gates plans for problems in advance.

What are your business’s average monthly expenses? Set a goal to save 6 to 9 months of your business’s average expenses. As the market finally rebounds, make a commitment to save a portion of every commission check you receive as your businesses shock absorber. This shock absorber will protect your business and help you stay focused on your long-term goals.

Oh and one more thing, follow Microsoft’s lead and do not use your shock absorber for anything, until absolutely necessary.