I have found that family and friends who survived the Great Depression usually have a different economic philosophy than those who did not(especially as a small business owner). Basically it goes like this: Pay cash for everything, pay off your house, and have the cash to buy large items like a car.
This may sound very foreign to you if you handle your credit card like a derringer, or amassed a boat load of student loans, but, you must understand the philosophy of those who think this way. During the depression there were no safety nets at first. You were on your own when you lost your job, savings, and house.
When it comes to small business, a depression mentality can work against you. For example, look at these troubling assumptions:
- If it ain’t broke, don’t fix it. This small business conservative mentality flies in the face of innovation. I like another one I read, “If it ain’t broke, break it.!” A small business must always be evolving, and not stagnating in order to survive. So, replace and upgrade at a managed state.
- I pay cash for everything. If an asset has a life that will extend beyond one year, then you may want to finance it through a small business loan (or line), or raise capital. Try to conserve your cash for operating expenses. This is when a conservative use of cash will help you.
- My small business runs itself. Always a danger sign. As many have said, “You should run your small business.” This conservative point of view is a fuse to self destruction. Every good idea has its day.
Small businesses are the major job creators of our nation. It is up to us, as small business owners, to manage our businesses efficiently. At times, a conservative mindset is called for, but other times, it is not.