As I write, the economy is strong. Yet, as we all know, every
boom is followed by a bust. Every up cycle is followed by a down
cycle. So when things are good, that's the time to prepare for
when things will be bad.
Over the years, I've seen entrepreneurs make three mistakes
during boom-and-bust cycles. The first mistake is made when times
are good: Entrepreneurs begin to spend. With increased confidence,
they expand their businesses, hire more people, buy bigger houses,
lease new cars or have more kids.
The second mistake occurs when the economy shifts and business
slows down. Suddenly, confidence is shaken, and entrepreneurs begin
to save. Cutting back only causes the business to fall faster.
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One of the best secrets my rich dad taught me was to save when
times are good, and spend when times are bad. In other words, do
the exact opposite of what everyone else is doing.
When times are good, save money by paying off bills and
improving income-to-expense and asset-to-liability ratios. Make the
business financially stronger. Be careful about taking on more
debt, especially ego debt, like bigger offices.
When times are bad, don't cut back on sales-generating
activities like advertising and promotion. Instead, increase your
sales, promotion and marketing budgets. Hire more salespeople and
increase sales training. An aggressive outbound sales campaign
reverses your fears--it gets energy flowing out and then flowing
back to you in the form of sales.
When the economy recovers, a business that has saved money often
emerges smaller and weaker. A business that has spent money emerges
bigger and stronger, able to expand rapidly.
The third mistake is failing to understand the sales and
promotion cycle. My rich dad taught me that it is a six-week cycle,
meaning if I do some promotion today, my sales will increase in six
weeks. One reason entrepreneurs fail: They're impatient. They
do some promotion, but when nothing happens immediately, they think
advertising is a waste of money.
Never stop promoting, advertising and selling, whether business
is good or bad.
Robert Kiyosaki, author of the Rich Dad
series
of books, is an investor, entrepreneur and educator whose
perspectives have changed the way people think about money and
investing.