Sin number 12 - Believing the good times will last forever
By Greg Carroll
We all go into business for a number of reasons, but wealth generation is usually somewhere towards the top of the list. Therefore it's completely understandable when you've spent years slogging it out building your business and living on a tight budget, that when you finally start to make some real money you want to enjoy it. And that's great as long as you remember the good times don't always last forever.
The real estate industry is a classic example; during the boom from 2001 to 2003 the real estate industry was having a ball. It was almost a case of "get the listing on Wednesday; sell the property before the week-end". No disrespect to agents but many of them didn't have to work too hard to make a sale because there were plenty of eager buyers lining up. So quite a few agents went from average incomes to substantial incomes overnight. They went and bought more expensive cars, bought a bigger house, moved into bigger premises, and put on more staff. Then all it took was two rate rises in late 2003 to bring everything to a grinding halt. So some were stuck with expensive vehicle leases, higher mortgage repayments, higher rents on their premises and more staff to pay, but less income coming through.
So, a word of caution, when things do take off, enjoy it; but don't paint yourself into a corner.
Make sure that you keep your business running on the principles that got it this far in the first place. When business is tough you tend to count every penny and worry about every cent that is spent, but when times are good there can be a tendency to loosen the financial controls. If you know how to make it run on the smell of an oily rag don't lose that. It means your business won't have as much trouble adjusting if business slows.
Also make sure you build in plenty of flexibility so you have some outs. If you need to move to a bigger premises don't lock yourself into a long term lease, there's still plenty of space around that's been sitting vacant for ages so you've got some negotiating power.
If you have to put on staff look at doing it on a casual or contract basis, or explore freelancing or outsourcing for aspects of your business. That way you only pay for what you use.
Don't loose focus on where the money comes from. When business is going well it can be tempting to get diverted into other areas, to pursue other opportunities. While it's important to keep an open mind don't forget what pays the bills. Business these days can change very rapidly, and if you take your eye off the ball for second you can be in all sorts of trouble. So make sure you continue to focus on your core profit centres.
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