In 1859, Charles Dickens wrote in A Tale of Two Cities
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness . . .”
and those words ring just as true today as they did 150 years ago.
The post I wrote a few days back entitled Follow Your Own Path continues to take on a life of its own in the comments and emails. I wasn’t trying to make light of the current economic conditions, but rather to point out that these things run in cycles and that there is always opportunity if we have the courage to pursue it. Sometimes that courage means moving against the tide rather than with it.
I’ve always been a firm believer that with great opportunity comes great risk and to take on that risk requires a leap of faith and great courage. Over the past two years I’ve seen one small business after another almost completely stop investing in their future. No capital expenditures, no advertising and no marketing. At a time when the “cost of capital” is at an all time low (your accountant understands my meaning and you should too), I see folks pulling back on all investments, playing it safe and hoarding their cash. Most that I’ve spoken with say they feel more uncertain about the future now, than in another other time they can recall.
However, I do see a few brave souls willing to take a risk and being very smart about it. They are willing to invest if they can do it without increasing their debt. More simply put, if you have the cash to invest without increasing your debt, there has never been a better time to do it. The tax codes are likely to change for the worse next year (Section 179) so investing in capital equipment (like the Canon TS-E 24mm f/3.5L II lens shown above) before the end of 2010 can be a great investment in your craft, your company and your future. As with any business investment everybody’s situation is different, so check with your accountant first!
I’ve owned two entirely different small businesses in the past decade and there are three vital lessons I’ve learned; 1) debt is not your friend, 2) credit cards are the root of all evil and 3) you really do need a good accountant.
- No small business can survive long when in debt, especially a photography business (which you are running if you’ve sold your work). The margins in this business are way too low to pay off debt and sustain a positive cash flow and a positive cash flow is your first priority. If you don’t believe me, ask your accountant.
- The invention of the revolving line of credit is single largest crime that mankind has ever perpetrated against itself. I can think of no greater sin than the advertising slogan “buy now, pay later”. There is a special place in Hell reserved for credit card companies, trust me.
- More than a “good lawyer” (are those words mutually exclusive?) you need a great accountant. More small businesses fail for the lack of basic accounting skills than for any other reason. A good accountant will provide your small business with the checks & balances (I couldn’t resist the pun) it needs to survive financially. Your accountant will keep you honest, keep your customers honest and keep the IRS off your back. You can incorporate your small business “on line” for less than $200 and skip the lawyer, but there is no substitute for a good accountant.
One Final Thought
If you want to be able to tell the difference between a professional and a serious amateur photographer in less than ten seconds, ask him when be bought his last lens. Most amateurs buy photo gear “on impulse”, when it first comes out or when “gear envy” really hits them. Most professionals buy equipment right before the end of their fiscal year, when they’re safely “in the black” and their accountant tells them it’s a choice between a capital expenditure or paying more in taxes. Not really a tough decision, is it?
A Quick Plug
Most of you know that my site is advertisement free and I plan to keep it that way. I rarely endorse a product or company and never without a long and positive history. Today I’m going to bend my rule a bit and let you know about my friends at Adorama. In the past thirty years I’ve dealt with many companies both big and small. Few impress me the way that Adorama does. These folks offer great prices on an incredible selection of gear, they provide impeccable customer service before and after the sale and they treat every customer like they’re Joe McNally. They’ve continued this fine tradition in the best of economic times and during the worst, and I suspect they’ll weather this recession just fine!