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However hard high oil prices hit the economy, you can be prepared.
3 min read

This story appears in the August 2006 issue of Entrepreneur. Subscribe »

There's an old joke that goes, "A friend of mine told me to cheer up, because things will get worse. So I cheered up, and things got worse."

When things get worse--when the economy takes a downturn--will your business suffer, or will it do better? I say when rather than if because 1) the economy continuously experiences up and down cycles, and 2) the price of oil will stay high.

In 1973, 1974 and 1978, the high price of oil sent shock waves through the economy. Stagflation destroyed many businesses, big and small. So when the economy goes down, will you be prepared?

One of the great things about being an entrepreneur is that you have control of your company. You're the captain--you can tell the helmsman which way to turn your ship and what kind of weather to prepare for. Some questions to ask yourself:

1. With high oil prices, will my business do better or worse?
2. With high oil prices, will my customers do better or worse?
3. How many employees will stay with me, even with a 20 percent pay cut?
4. Can I afford to take a 50 percent pay cut?
5. What can I do so my business will benefit from high oil prices?

If your answers frighten you, it's time to take action. For example, if your customers will do worse with high oil prices, strengthen your relationships with your best customers-and start looking for new customers who will do well with high oil prices.

These five questions are important because wealth and energy have a simple inverse relationship. Generally, when energy prices are low, wealth increases. As energy prices increase, wealth for many decreases. If your customers live in suburbia and commute to work, their wealth will go down as oil prices rise. I'm concerned that high oil prices will severely contract the U.S. economy, which is why my two previous columns were about preparing for tough times ahead.

My company is underwriting two initiatives to prepare for a high oil price economy. We're building a franchise system to reach our customers where they live. And we built Rich Dad TV, a broadcast-quality station that currently operates through our website, so we can stay in touch with our customers on a more personal basis.

In other words, instead of our customers coming to us (or us physically going to them), we're making it easier and less expensive to stay in touch.

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.

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