An acquaintance said to her partner-husband, "If we could only run our business during good times as we do during bad, we'd have it made."
Recall the last time you had an encounter with a business person who drove a hard bargain. Were you tempted to label that person, "cheap?" Or, did you express the observation, "I guess that's how they got rich?" Most likely, these are people who remembered the lessons learned during hard times.
Survivors of bad times can recall how careful they became with each dollar of revenue, or more so, with each dollar of debt proceeds. They remember trying to gain maximum return from each dollar expended. They remember doing without when there would be a low probability of profit. The wise ones not only remember, but act accordingly during good times.
Managers tend to reach illogical conclusions during periods of growth and prosperity. Often, they're guilty of covering mistakes with seemingly endless revenue increases. Some act out of sheer greed with no thought of the future. Some simply make stupid greedy decisions. A few become spendthrifts with unrealized profits.
Many financial analysts are great at explaining these causes of failures - in hindsight. It is extremely difficult to convince yourself, shareholders and other stakeholders of the need to be frugal, conservative and cautious - in foresight.
If you can recognize when you are in good times, consider debt reduction and deposits to savings, reserves and contingency funds.
Long-term success results from thinking of all times as hard times.
We lack the courage to admit we have made stupid expenditures during good times. Instead, we have always derived pride from our ability to manage our businesses frugally. However, during a recent closure we had a greater opportunity to note a few "needless" expenditures having occurred during the good times.
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