It might sound old fashioned but when you are business building, living within your means is not such a bad idea. Knowing how much is in your bank account on any day, and knowing that the balance is in the black, ensures survival in any economy.
When you look around and see business owners driving around in flashy cars and installing reception areas more expensive than there house, be suspicious. All is not what it seems. In my experience as a consultant and coach, most are living on borrowed money.
Leveraging is a fancy business school term for borrowing money. For some it is squandered on trimmings and toys to give the illusion of success. For others, it is spent unwisely on ‘throw money at it’ strategies that simply don’t work.
I am nor saying that you can’t grow your business using borrowed money. What I am saying is that you must be aware that the economic landscape can change in a heartbeat. In an environment of slow sales and falling asset values, a significant core debt is the last thing you need.
No one ever thinks that a recession will always follow a boom, even though it has been a regular 7-8 year cycle for the past 100 years. The bottom line is that when things get tough, borrowed money still has to be repaid.
Recession is the time when ill-advised business financing strategies are found out. It is always the over-borrowed businesses that go under. It is much safer to grow your business slowly and steadily from the profits of your business.
That means that for a while at least, you will have to engage in that other old fashion concept of long hours and hard work to bring in sales revenue.
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More business building next time!