Contrary all the time.

I ended yesterday's post by saying:

"Also interesting to me is how utterly contrarian I am. Here I am, earning the best profits of my career in the midst of the biggest downturn in my lifetime.

Odd, that."

I've actually put a bit of thought into that because it happens so much. Often, while all the stores around me seem to be doing great, I'm dealing with difficult cash flow situations. And just as often, when everyone around me is crashing, I seem to stabilize.

I've come up with several reasons.

1.) Fear. This is the most obvious. When things are going well, I'm less worried about my sales dropping precipitously. I can run my store closer to my bank balance. When the economy goes south, I'm suddenly way more focused on saving money and building the cushion.

2.) Taking chances. Same as above, but if I'm going to take chances on bringing in new product, it makes sense to do it in an upturn, where mistakes are more easily corrected. The time to experiment is when things are going well.

Another rule of thumb I use; it doesn't matter how good the product if no one is coming in.

3.) Making changes. Probably a corollary to #2. It makes more sense to make necessary changes while I can afford to, than to wait too long and try to make them when I can't afford to. This is a mistake I think lots of businesses make; assuming because everything is going well, they don't need to change. They milk the business for short term profits, at the expense of long-term health.

4,) Leverage. If I think I can turn a hundred bucks into two hundred bucks, then it makes sense to do so. If sales stop responding to increases to inventory, then cash becomes more important. If I can see increases in sales in a product category, it makes sense to reinvest until that increase slows. Like the proverb of teaching a man to fish, creating viable product lines is much more valuable in the long run than saving cash. But when you can't leverage any longer, cash is king.

5.) Feathering the nest. Again, it makes more sense to strengthen your business with investment when things are going well than to try to prop it up when things are going poorly. While the other two piggies are out playing, I'm still bricking up the walls of my business. I get envious sometimes of what I see other people doing, while I'm being boringly staid -- but I know that I'll be happy I did it.

6.) Business cycle. Often in the past, I'm still recovering from the last downturn through most of the following upturn. So just about the time the next downturn happens, I'm usually ready to get started to begin thinking about soon making an effort to prepare the ground to set the board to take advantage and -- oh, screw it-- you know, earn a frikken profit. Usually I wait too long.

So instead of making a profit on the way up, I'm climbing out of a hole. I trying very hard to not let that happen this time, so I'll be well prepared to take advantage of the upturn -- whenever that happens.

7.) Preparing for the worse. I tend to see upturns as an opportunity to get ready for the next downturn. Which means that when others are reaping profits, I'm plowing it back into the business. At the same time, I'm careful nowadays not to add to my overhead, except in those areas where I can cut -- such as employees. I'm willing to spend my money on inventory, because that doesn't tie me into longterm obligations. But I'm trying very hard to not build any more expenses, especially debt. When things are going well, it's a good time to pay off all the debt.

8.) Play the Rocky Theme. I do like to come from behind. To be the underdog. To surprise everyone. Besides, showing that you are doing well when everyone else is doing well is unremarkable; showing strength when everyone else is hurting, that is a bit more noticeable. I don't think this is a matter of showing off; my profits aren't anything to be excited about. But I'm managing this downturn relatively easy compared to the past.

I prefer to think of it more as the Tortoise and the Hare...


All of the above put a real drag on my earnings during the good times. I'm not putting money into savings if I'm buying new fixtures, or carrying an employee, or building new inventory lines, or paying off debt. Indeed, because of the vagaries of sales and cash flow, the above often put me in a tight spot.

Tight spots which I try very hard to avoid when things slow down.

I never thought I'd appreciate the downturns of the past, how sales would drop over night by half, (sports cards and comics), and/or continue to plunge to zero (beanie babies and pogs), or go up and go down and go up and go down again (magic and pokemon), but I learned valuable lessons about debt and overhead and recognizing cycles.

Most people are going to seem one -- maybe if they have a very long career, two -- extreme downturns like this. For me, it's about my 7th or 8th such downturn. Rocky got a little punch drunk, but he survived.