Times continue to be very difficult for a lot of businesses – there are fewer customers most of whom have less money to spend and everyone seems to think the only solution is to cut prices. This leads to a race to the bottom which in the long run helps no one.
So what is it all about? In my view there are at least 3 economies to consider. The first one is the one we hear all about in every element of the media – this economy doesn’t exist. It’s only a small part of the story, invariably the bad part. It includes a few facts which are then extrapolated and exaggerated on the downside. It is not a reliable basis for good business planning. The second one is the real economy, which is more complex than the first one, less well defined, not as bad as the one that is portrayed, but still not an easy environment to work in. We tend to have little influence over what happens in it, things happen too slowly for our liking and we often feel frustrated and confused, but if we are honest with ourselves business is like that most of the time anyway.
The third economy is the personal economy which each of us and our businesses have. We all have the ability to influence what happens here. We can control our costs and through our consistent efforts, we can drive our revenues. This is the only economy where we should spend any significant time – it is the management of this economy which will determine whether we end up rich people or poor people. I don’t subscribe to the traditional definitions of rich and poor because their application in today’s climate are not appropriate for most of us.
To me a poor person is someone who has bills left unpaid at the end of each month after all the income has been allocated and a rich person is someone who has money left over each month. It’s not about how much we earn, but about how much we spend. You could be rich on £25k a year or poor on £100k a year. The quality and speed of your decisions will decide which you are. The length of the downturn is a result of slow decision making processes more than the state of the world economy. You only have to look at what is happening in the Eurozone at the moment to understand that.
Don’t be guilty of making the same mistake in your personal economy and you will have a happier Christmas!