I don't believe it was preordained that Pegasus would be a Minimum Wage job. Without the dreadful mistakes I've made over the years, it would've turned into a real business long ago.
Some of these mistakes just had to be learned the hard way. It is an extremely lucky or smart guy who can avoid them: especially since the 'common wisdom' and economic culture seems almost designed to lead you astray.
But I got way too enamored of the bubble money. The huge infusion of money that would come along, only to simply disappear overnight. Pogs, Beanie Babies, Pokemon, Sports Cards, Comics.
I got into the habit of waiting for the Next Big Thing.
It's one of the reasons I felt compelled to talk about the housing bubble, because I understood how difficult it is to see and resist the temptation.
If I could give myself advice 24 years ago, it would be; "slow and steady wins the race." Build the business slowly, keep strengthening every year, resist the quick kill, resist over-expanding and over-investing. Live within your means.
Like I said, maybe I just had to go through that fire. I think I know what I'm doing now. I think we were able to apply those hard lessons to Linda's store and have avoided the same mistakes.
But the race isn't over yet...
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Another key element is to use the good times to plan for the next bad time. During a bubble you take advantage of it, but you don't count on it continuing. A properly run business builds infrastructure/investments during good periods that it can use to survive and even prosper during the next bad period.
The key challenge is to determine if a down turn is part of a normal business cycle, or if something fundamental has happened in that business segment such that it will not recover (think buggy whip manufacturers).
"...use the good times to plan for the next bad time."
I think I've done that, this cycle.
If I can just avoid getting carried away, I'll be well set for the upturn.
I probably should explain: about 5 years ago, I was well below the daily sales level I though would make the store healthy.
I fixed that figure in my mind, and used the last five years to keep increasing inventory until I hit that figure and kept it going as long as the upsurge continued.
I ended up a good 20% above my figure.
Now I'm just trying to finesse it, trying to keep as much of the extra margin as possible but at the same time not overspending to keep the sales high.
Ironically, the exact same procedures it would take to extract profit are the same for trying to weather a downturn.
It's looking right now as though the daily sales are going to settle somewhere about halfway between the peak (fueled by spending) and my original goal.
Which is just about as diagrammed.
Barring unforeseen circumstances....
I probably missed the downturn by about 7 months. August and Sept of 07 were down, but I think reacting before 3 months trend is being a ninnie.
Most of the media is talking about the downturn starting in January, but for me it clearly started in Aug of last year -- about the same time as the credit crisis started.
The dropoff in Jan. was unmistakable, and Feb. was even, but by March I was already planning for my fallback position, which I've pursued over the last three months to great success.
Still, it took me from August to March to really get it underway, and this is someone who was watching for it and recognized it for what it was.
Like turning an ocean liner.
Keep in mind that this down turn will have two distinct components.
The first was brought on by the credit crunch and the housing down turn.
However, keep in mind that in a more normal period that housing is negatively impacted AFTER the recession starts. It is a lagging indicator not a leading indicator.
We are now starting to see the impact of the second component, the impact of the general slow down in the economy.
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