How we make money and how countries tax that income is changing. And, perhaps even more personally impactful to you, the economy has been running the boom-bust trend in shorter time cycles.
When the economy, and especially real estate, was booming, there was a saying that “a rising tide raises all boats.” It was easy to make money through business and real estate. People got to the point where they even felt they were entitled to easy money and that it would always be there.
And then it wasn’t.
The economy, just like the tide, went out, and for a while, it looked like there was nothing left. But, if you look closely, there is still life. In fact, some of our clients are prospering in unprecedented ways. Some have businesses that work best in down markets, others have made use of new technology to reach new markets, reduce costs, and increase efficiency. All of us have less competition. The marginal business with poor practices is gone.
The economy didn’t destroy business. It revealed business: its challenges and its opportunities.
The economic downturn also revealed that it has never been more important to pay attention to the numbers of your business. And, that leads to one big question:
Smart Business or Stupid Business?
There are two kinds of money problems that you can have with your business: Too much money and not enough money. In a rapidly growing economy, it’s sometimes too easy to make money. Systems get lax, because if you waste a little, it doesn’t matter. Employees get lazy because the owners are too busy to really pay attention to what they are doing. The money is too easy, and it’s very tempting to get sloppy.
In an economic downturn, the reality of the business is revealed. If there are no real economic projections or financial check-ups, the business will probably crash. You’ve lost all the easy money flow that covered the multitude of sins.
An economic upturn can bring huge opportunities and a chance to build something fast. An economic downturn can bring much cheaper resources and less competition. A smart business prospers in either economic climate. It’s built on solid fundamentals and the ability to quickly adapt with good information
Smart Business often acts opposite of what you think are normal trends. When the economy is great and making money is easy, it’s the time to save. When the economy is slow, it’s time to spend and invest in the business.
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