In the last article we talked about not being too aggressive, especially in the early years. So when is it good to be overly aggressive and wield absolute power against your competitors?
Time has softened me since my younger days, and now I can safely say that it is not good to be too aggressive. My first companies that were able to bankrupt other competitors were not innately rich on a large scale, although they simply had the most money. Channel your focus towards your company and less emphasis on wanting other people to quit.
A company that I am overseeing is extremely successful. They have about 150k in net profit in just year 14, an absurdly early time to get that level of net profit. They are part of the top 25 of the week. They are extraordinarily wealthy and have great influence over the industry.
The company has 100,000 in cash, this now sets the tone for one of the happiest questions a company should ask itself. What do we spend our money on?
A company that is absurdly rich may expand its factories, be overly aggressive, start exercising its absolute power to bankrupt other companies. I’ve done this in the past, but are the long-term effects of being too aggressive any good? No one has started a war against us yet, why rock the boat?
Instead of needlessly expanding for the sheer pleasure of bankrupting others. My strategy of choice is to pay off debt. We will expand in sequence with the industry, but if there is no need to expand, let us pay down the debt in case bad times come in the event. We will have deep pockets and a high credit rating to gather resources.
Also, not being too aggressive prevents the balance of power from collapsing, so we expect to be able to maintain our profitable position for a few more years. Also, if someone else creates a price war, the perception would be that we are defending our market share, and everything we do is in self-defense.
There you have it, pay off your debts and don’t be too aggressive in expanding. If you expand too much, and the industry falls into a recession, and you have all the debt racked up from rampant spending during the good days. You’ve created yourself a situation to lose if someone smart takes advantage of it.
Ultimately, it is safest not to be overzealous in running the business, not to spend frivolously, save cash, and be conservative in making smart industry-related expansion decisions. That is the true business strategy.
