The Great Gods of Commerce.

The Great Gods of Commerce come to you and tell you that you can have one of two destinies.

1.) They will guarantee that your sales will double in just one year. OR

2.) They will grant you a steady 15% growth for the next five years.

There is absolutely no contest. Take the 15% growth.

Think about it. To simplify things, I'll posit that cost of goods is 50% and overhead is 50%.

If you start out with 10k in sales, it means that you invested 5k and profited (gross) 5k, which paid the overhead.

If your sales jump to 20k, at 50% margins you have to reinvest the entire 10k in earnings. What do you pay your overhead with? You have twice as much work, in the meantime, and you have to have the ability to sell twice as much effectively with the old systems and employees and space, which is pretty much impossible, or reinvest in systems and employees and space which adds even more to the overhead (you have to borrow to pay for.)

There is no way to double your sales in one year without borrowing money. And remember, the Great Gods of Commerce have not guaranteed that your sales will stay at that level. In fact, anytime sales double for anything it is almost a sure sign that it is a bubble, which means that you will have reinvested every dollar, and borrowed half again as much, and have a near certaintly that you won't get it back. It's actually worse than this, because for most small businesses, cost of goods is more like 60%.

On the other hand, a steady 15% increase in sales can be easily paid for within normal cash flow. It's like building a solid foundation under each level of a building. And 15% growth over a 5 year span, have doubled your sales! While you are paying your bills and turning a profit. While you are steadily expanding your services and selection.

The last three fads that have come along and threatened our growth rates, I've declined to pursue to the heights. With pogs, I very ruthlessly ordered on a weekly basis, and stopped buying at what I thought was the peak. With beanie babies, I purposely bought a less than perfect selection and price from a middle-man, rather than be forced to buy the quantites and selection that Mr. Ty would have forced me to buy. With Pokemon, I again bought through a middle man and scrambled for supply and had very little buying power, rather than get a direct account and have to buy in advance, in quantity. I left money on the table.

But I was able to grow my business, with relatively little risk, and when the fads were over, I'd reinvested in more solid and enduring product. I'm just not in business for the quick kill. I'm in business to stay in business.