Are You Expanding or Contracting?

In business, you are either growing or dying.  There are many stories out there of businesses which did great for several years until business just slowed down and the business had to close its doors.  The reason is typically that when the business got to the point where there was too much work to be done, rather than growing and leveraging resources, the owner decided that business was just fine as is.  However, when you become complacent with your business, you will find that the pipeline dries up and there is no business down the road.

The key to keeping business alive and thriving is to move through expansion and contraction phases.  During times when you need more income and you have time, you will be expanding to grow in value, taking on new ventures and debts.  During times when you need more time and you have income, you will be contracting to focus on your priorities, therefore reducing debts.

So, how does this apply to your personal situation?  You will find that like any successful business, you will be altering between expansion and contraction phases.

As a student, this might mean doing your own taxes, taking care of all the jobs needing taken care of. This is a period of expansion. However, as your skills become more honed, you will decide to contract and focus, leveraging your time and money, leaving others to do various jobs. This is a period of contraction.

If you have various real estate deals for example, you might find that highly leveraging your money is common in an expansion phase, whereas actively reducing debt and stress is common during a contraction phase. In order to increase income, you will try to leverage more, but over time you will try to decrease stress so that return on investments and optimization of your portfolio is not as important.

This post was reposted from http://finlit.biz/business/are-you-expanding-or-contracting/, originally written on March 4th, 2013.