The Economy Doesn’t Destroy Businesses


This post is in: Business
2 Comments

1-10-11

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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2 Comments

  1. Diane Kennedy says:

    Thank you for your comments and especially the reminder to ‘stick it out.’ That’s what I’m seeing more than ever from my successful clients. The ones that make it big didn’t start off with a great idea and then just fall into money. The truth is they worked hard and had to believe in their idea and business when others might not have.

  2. Carrie says:

    January is a perfect time for me to reflect, restock, recover and re-organize my home office since sales historically slow. I find your articles incredibly useful during this time, especially when we move into tax season. All small business owners should read what you’ve written here!

    My holiday sales were record setting, despite a bad economy. My average dollar per transaction also increased. The economy doesn’t have that much bearing on my business, except to remind me to always think before I act.

    I think small business owners should always act like time are tough. Business plans should be reviewed regularly against its application and tweaking and trimming should be done. Doesn’t matter the economy. Every quarter, you need to check-in with yourself, your business, your market and the world around you to see how its going. This will keep full of that “good information” of which you spoke.

    Another challenge is riding it out: Too many times since the economic down turn, I see fellow small business owners start a strategy to help cope, to help bring in more revenue, only to panic and change directions when they don’t see immediate results or it backfires. Customers become alienated when you make sudden changes over and over again, and in a rough time, look for a more stable business with which to spend their hard-earned money. Adapting is great and necessary, but acting rashly to ramp up sales never works.

    And you shouldn’t start a new strategy without really researching fully its real world application and then ensuring you have the means to follow through with it (aka get your money out of it!). Sure that $50.00 a month service to connect with customers seems like a great plan in theory, but if you don’t have the time develop newsletters and promotions to keep customers engaged and/or the results are marginal, is really a waste of time. Never dive in head-first.

    In art school, a professor told me that creating art was 90% looking and 10% doing. I think it applies in the business world, too.

    I’m off my soapbox now. Thanks again for the informative, thought provoking read.

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