Save When Times Are Good; Spend When Times Are Bad
Many would react by
saying that we should do the exact opposite: spend when times are good and save
when they’re bad. Why might this not be
the best advice?
I’m not advocating that one shouldn't cut costs during a
downturn - quite the contrary. What I am asking people to do is consider this:
when is the time to buy? Surely it’s during sales? Leaving aside the usual jokes that you buy
something that you don't need at 50% off in a sale, there’s a reason to look at
this.
Let’s start, though, with saving during good times. This can be hard; when times are good, we
want to enjoy them. The problem is that
we start to believe that the good times will last forever, we want them to last forever and everyone else
is acting as if they will. There’s often
pressure on us to spend as well from all the different “stakeholders” in a
business…
I’m not advocating no spending, just that we should continue
to put something (preferably more, if we’re seeing increased income) aside for
the proverbial rainy day.
As for spending when times are bad, it’s
straightforward. First, if people see
you spending, it may give them heart.
Second, when times are hard, people may be more willing to negotiate. You may be able to clinch purchases or deals
at a price that you wouldn’t get during the good times.
Third, if you’re buying from other suppliers, you're helping
them to stay in business. Hopefully
they’ll remember that when things get better…
Two other expenses worth considering are training and investing in new equipment.
Every good organisation should look to “upskill” its people and if you
have “downtime” and spare funds, it’s a way of preparing people for when things
improve (as they eventually will). You
may also be able to obtain new equipment at lower prices.
Imagine if you’ve invested in more training and equipment
whilst others have “marked time”. You’ll
be in a better position to take advantage of the upturn as the business that’s
ready to go whilst others play “catch up”.
This is long-term thinking and will be opposed by
short-termists who can only see the now.
It takes a brave CEO to go against this.
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Leadership, Strategy
posted by William Martin @ 08:59
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