Anyone who owns a homebased business knows that money tends to come in the door in cycles. When you're experiencing an up cycle, life is great. You're able to pay all your bills on time, run a new ad, even put some money away. But when the cycle turns, keeping your financial ship afloat can be difficult. This is especially true in the first few years of a new business venture, when you don't know what your business cycle even looks like.
The danger in not knowing your business cycle is that at any given time, your homebased business could take a turn for the worse and, if you're not prepared, your business could go under. Then what? You'd be in a worse position than where you started since you'll not only need to find a job and pay your normal bills, but you'll need to pay off your newfound business debts as well.
Fortunately, avoiding this potential scenario isn't difficult. I want to give you some options--probably some you haven't even considered--that will enable you to keep the money coming in, even when your main business is on a slow cycle.
"Main business, you say?" That's right. Consider the possibility that you may need to run more than one business or, at the minimum, have more than one "division" to your business. This is called having "multiple profit centers," a term coined by Barbara J. Winter in her excellent book, Making a Living Without a Job (Bantam Doubleday Dell, $13.95).
Let me give you an example to show why this idea is so important: When I began my homebased law practice, I decided I wanted to specialize in bankruptcy law. So I placed a bankruptcy ad in the paper and before I knew it, the phone started ringing. Business, almost from the start, was brisk. Having opened my business in March, I was in hog heaven by October. Business was booming.
But then November came. I didn't know it at the time, but bankruptcies dramatically fall off in November and December. I was completely unaware and unprepared for this shift in my business cycle. What was I going to do? Fortunately, I had learned the multiple business center concept, and before my November crisis had begun, I had started an alternate profit center: namely, putting on divorce seminars. So when my bankruptcy business dropped off, I began to put on more free seminars. I got a slew of new divorce clients and made it through that crisis. Now I know that November and December are slow in that one part of my business, so I plan accordingly.
A smart stock investor does the same thing. He knows not to buy just one stock. That stock may go up, but it may go down. Having more than one stock ensures that when one stock does go down, the likelihood of taking a big financial hit is remote. Having multiple profit centers offers similar protection for businesses.