Robert Ringer suggests that if your business goes out of business every time there's a fall in the cash flow, maybe the business model you're following is not quite the best way to look out for number one.
posted 01.09.06
Hiccup Businesses
The continuing demise of the nation's biggest airlines confirms what I have long said about the airline industry—that it's a "hiccup business." Meaning that if an airline has a cash-flow dip (read "hiccup") for one or two months, it's in trouble. If it's a big hiccup and drags on for three or four months, the airline can find itself in bankruptcy.
What makes a business qualify as a hiccup business is a flawed business model. It's a model that requires selling a product or service to the masses at artificially low prices in order to maintain unrealistically high sales and razor-thin profit margins. Businesses based on this kind of flawed model are living on borrowed time.
Doomsday scenario
In the case of an airline, a 10 percent drop in passengers spells doomsday. All it takes is a 9/11, a Hurricane Katrina, or an earthquake to bring a hiccup business to its knees.
Adopting a hiccup business model is the economic equivalent of playing Russian roulette. It's much safer and sounder to stick with businesses that don't depend on an unrealistically high number of customers for success—businesses that sell to people who can actually afford to buy and that can withstand bad economic times.
As an example, I have always believed that the 1974-75 recession was the best thing that ever happened to me when it came to marketing my first book. And when Jimmy Carter somehow stumbled into the White House in 1976, it was a virtual guarantee that the economy would get even worse.
I believe that the hopelessness people felt as a result of no one being at the controls in the Oval Office was reflected in the explosive sales of my first three books during the Carter sitcom years. People were clearly looking for answers that they knew they couldn't get from the government. And that translated into book sales.
Find a business that can sell as well, if not better, during bad economic times, and you're halfway to the bank. For example, I believe that when the government's current economic policies yield their inevitable consequences, companies such as Office Depot and Lowe's will do extremely well.
It's the hiccup policies leading to the hiccup economies, stu—
But hiccup businesses are just outwardly visible signs of the real problem—the fact that Western countries have gravitated toward hiccup economies. The idea is to spread the wealth through artificially high wages, extend irresponsibly high lines of credit to anyone with a regular paycheck, then extract as much of the money earned and borrowed to fuel a false economy.
Unfortunately, in the U.S. and other Western countries, it is politically impossible to say no to fiscal irresponsibility. Any politician who has the courage to say no to "entitlements" is merely volunteering for a new title—ex-politician.
Copyright © 2005 by Robert J. Ringer. Reprinted by permission of the author. Robert Ringer is a professional speaker and the author of three #1 bestsellers, including two books listed by The New York Times among the 15 bestselling motivational books of all time. You can sign up for a free subscription to his e-letter, A Voice of Sanity in an Insane World, by visiting robertringer.com.
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