In the book, “Midas Touch” by Robert Kiyosaki and Donald Trump, a story is put forth about a company that borrowed $27,000 during a time of low sales and the CFO/CPA of the company spent it on paying off old bills when he should have spent it on purchasing more product to sell. This resulted in stagnation… with no new income, the company was in no better position and would soon owe just as much as they did before, but this time with a $27,000 debt in addition to the bills.
When possible and especially in times of crisis, always spend money in a way that will make you money!
As Robert said in the book regarding the CFO, “Obviously, Stanley, the CPA, did not know my rich dad’s lessons. But it was not only Stanley who was in the dark. Most people do just what Stanley did. They work for money, then pay bills, and save what is left over. This is why most people live paycheck to paycheck. Entrepreneurs must know how to spend money to create more money – spending time and money on marketing, advertising, and sales promotions and offering sales incentives to sales representatives.”
He continued with, “In times of crisis, for example, times when sales are low and income is low, most people tend to do what Stanley did – save money, or pay bills. This generally spells disaster. In a crisis, a time with low income or low sales, smart entrepreneurs know that they need to spend money on sales and marketing promotion, even if they have to borrow the money. When the sales start coming in, then they can pay bills and pay back the money they borrowed.”
Amazing how a different perspective can change everything, isn’t it!? This from a man who knows how to make money.
Circling the wagons and “playing it safe” when your company is hanging in the balance, can actually kill your company. When sales or income is low, the #1 thing you need to do is generate fresh sales or income! Make sure every dime and every minute of your time is spent with that goal in mind if you want to pull out of that crisis.
For example, I see many businesses spending money on things that really don’t matter when their cash reserves are low or even paying off bills early when they really could be investing that money in marketing or other efforts that could drive income. Now, there is a level of unnacceptable risk and spending that hard-earned cash on an ad in a local publication when you know you are going to need to pay some bills in a two or three weeks is not very wise since we know the return is slow on print ads. I’m not saying print ads are worthless, however when working on a tight budget when cashflow is an issue, they aren’t the best choice.
However, if we are creative with our marketing, advertising and other promotional spending, we can take that cash that was once only enough to pay some bills with and turn it into enough to not only pay those bills, but execute more advertising and marketing efforts.
When money is tight, I tell my clients to focus on those elements that are most likely to earn them a return the quickest. Tying promotions and sales into an event or perhaps a pay per click campaign could work very well. Maybe even a mailing to past customers with a promotion since those customers already know and trust you and are more likely to buy from you. Another idea? Purchase referral cards that your customers and clients can write their names on and pass along… put a timed promotion on them that gives both your customer and the person they referred a gift/discount/credit and watch your investment quickly produce an ROI.
Now be warned… this type of thinking and promotion requires diligence and hard work. I do not recommend taking risks if one is not willing to see it through and put in that extra effort, but calculated risks can be a powerful thing if you follow through and make sure your plan is implemented all the way through. I’ve seen referral cards sit in a clients office for weeks before being given out to clients or an event table be poorly staffed or poorly prepared. I’ve also seen clients of mine who garnered leads from a promotion, only to not follow up with those leads.
I do a lot of speaking and one of the things I always stress, no matter my topic is that everything should be done “on purpose”. This applies to life, to business decisions, to marketing and to your spending!
Manage your money on purpose… with the perspective of making more money, not just maintaining the status quo… especially in times of crisis when it is harder to do so.
Saving and paying bills when times are hard isn’t helping your business. Get out there and make something happen! Change comes to those who make it come.