Brian Tracy's Success Handbook Box Set by Brian Tracy

Author:Brian Tracy
Language: eng
Format: epub
Publisher: G&D Media

Dan

For entrepreneurs and small business owners, what are some of the biggest spending mistakes that most business owners make?

Brian

The number one rule in starting a business is preserve cash, preserve cash, preserve cash. Which means, never buy when you can lease. Never lease when you can rent. Never rent when you can borrow. Never borrow long-term if you can borrow short-term. Therefore, you never lease offices, you rent them, even if you have to move. You buy used furniture. I learned this. There’s used furniture out there for ten cents on the dollar, and it’s fine for now.

I remember many years ago I was asked to set up the distribution of a line of Japanese vehicles for western Canada. I found some warehouses in an old warehouse district. I bought used furniture, and I set up the offices and parts department and everything else. Then my Japanese counterparts came out from Tokyo to take a look at the facilities. The manager walked in and said, “Aha! Cheap offices. Cheap furniture. I like this. Cheap offices, big profits. We like our distributors to make big profits.”

He said that he saw distributors all the time who go out and borrow a bunch of money, get brand-new offices, pay top dollar for first-class, new everything. He said that they almost all went broke before they made enough profit. “Cheap offices, big profit,” he said. I never forgot that.

It’s a very important lesson, and it was learned by many companies that went broke during the dot-com collapse. These people moved into first-class office premises. They bought first-class everything, and then they ran out of cash.

What you want to do is preserve cash. Never spend it if you possibly can. Save the money. Borrow or rent on short term. Even get it from your friends if necessary, but preserve cash, because cash is like oxygen to the brain. If you have cash, you can survive. If you run out of cash, the business can turn over like a ship in the ocean and sink immediately. A business that’s been in business for 100 years can die if it runs out of cash.

So preserve cash. That’s what I’ve learned, because I’ve made all the same mistakes.

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