Devoted to Managers and those that seek to improve their management skills

One of the defining factors between great and average businesses is how management handles the business during the more financially successful times.

I remember when Peter Lynch wrote about what he looked for in a company when he would travel all over the world to find good investments for his mutual fund. The thing he always looked for was concerning the extravagance of a company.

He loved to walk in and see used furniture and what we would think of as "boring" offices. Many of the companies he invested in were also located in old buildings or parts of town that were very inexpensive to operate in.

The thing to keep in mind here, is that when he searched these companies out and went to look at their facilities, it meant that they were a company that had some pretty good financials to begin with. So when he went to look at a company that was growing pretty strongly, he wanted to know how they operated when they had a lot of cash on hand.

The reason why is it is far more difficult to be disciplined with a lot of cash and sales, than it is when times are tough. When times are tough, everybody is disciplined by default. It's not that way when times are going good.

This doesn't mean that money shouldn't be spent, but rather that it shouldn't be wasted. Making things look cosmetically great, can blow so much money, that it's hard to believe for some. I've seen businesses that are thriving, go through huge amounts of money in comparison to their budget, and basically run themselves out of business because they didn't have any safety net when the inevitable slow times came.

It is the good times that test our mettle, far more than the bad times, in this area of managing company spending. Keep it in mind when business is doing that good.