As I write, the economy is strong. Yet, as we all know, everyboom is followed by a bust. Every up cycle is followed by a downcycle. So when things are good, that's the time to prepare forwhen things will be bad.
Over the years, I've seen entrepreneurs make three mistakesduring boom-and-bust cycles. The first mistake is made when timesare 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 businessslows down. Suddenly, confidence is shaken, and entrepreneurs beginto save. Cutting back only causes the business to fall faster.
One of the best secrets my rich dad taught me was to save whentimes are good, and spend when times are bad. In other words, dothe exact opposite of what everyone else is doing.
When times are good, save money by paying off bills andimproving income-to-expense and asset-to-liability ratios. Make thebusiness financially stronger. Be careful about taking on moredebt, especially ego debt, like bigger offices.
When times are bad, don't cut back on sales-generatingactivities like advertising and promotion. Instead, increase yoursales, promotion and marketing budgets. Hire more salespeople andincrease sales training. An aggressive outbound sales campaignreverses your fears--it gets energy flowing out and then flowingback to you in the form of sales.
When the economy recovers, a business that has saved money oftenemerges smaller and weaker. A business that has spent money emergesbigger and stronger, able to expand rapidly.
The third mistake is failing to understand the sales andpromotion 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 sixweeks. One reason entrepreneurs fail: They're impatient. Theydo some promotion, but when nothing happens immediately, they thinkadvertising is a waste of money.
Never stop promoting, advertising and selling, whether businessis good or bad.
