A basic business principle that analyzes a situation or condition by using substitution to evaluate the difference between the accepted standard and the actual. The principle is widely used in management replacement, business valuation, and product/resource replacement decision models.
There are a multitude of principles used in business, some are industry specific, others are functions of business. But there is one that is a general principle that is used across the board in all areas of business. It is called the ‘Substitution Principle’. It works just like the substitution principle in math that we all learned about in algebra.
One of the most misunderstood principles of business deals with the one or few individuals in a small business operation who are critical to operations. This individual is referred to as the Key Man. The best example is that of the primary wage earner in the family unit.
