“You’ve got to trust your instincts
And let go of regret
You’ve got to bet on yourself now star
‘Cause that’s your best bet.”
These lyrics on 311’s “All Mixed Up” (1995) still ring true today. Over the last few months, as the equity markets have turned shaky, the song brings back a lot of memories. It’s been 11 years since the Great Recession of 2008, and I should trust my instincts. If there’s a recession coming again, I know how to diversify my assets and guard my back. I am better equipped at handling any financial emergency and letting go of my regrets. So, here’s my inspiring story about how I overcame the challenges of global recession and emerged stronger.
I was only 25 years old. In 2006, together with five of my colleagues, we founded the Brodos Recruitment Agency – our dream company. We were ambitious, hardworking and optimistic about the future. Within two years, I was managing a team of 72 employees and our business was growing rapidly.
Three months later, the world’s stock markets fell and the effects were devastating. Magna Traders dropped by 26% in eight hours, while the Imperial Home Appliances fell a catastrophic 60%. Several other companies listed on the Toronto Stock Exchange vanished overnight.
My biggest fear was coming true. I had mortgaged my house to start the business, and I had encouraged five of my co-workers to leave their jobs and join me in starting the company. And now, I could see the economy failing and our business falling apart, ruining all our dreams. Fortunately, it did not. We changed our business strategies and made some drastic moves to survive the major economic downturn. What were those changes? Let me share them with you.
We reduced cash outflow
Expenses are an inevitable part of a business. But, during tough economic times, it’s hard to keep the cash flowing in. When expenses are greater than profits, your business incurs loss. Keeping this in mind, we started working on cash outflow.
Daily financial tracking
We used a key indicator app to track our business and daily deliverables. This indicator was also used to calculate profit per client and per job. If a deal didn’t make a certain profit, we cancelled it immediately. Time was vital and we had to make the most of it.
Saving on Utilities
This was a tricky and interesting move. Our objective was to save on utilities like water, internet, phone and power supply. We called all the vendors’ competitors and asked for a deal that they can offer for a start-up business. We also let them know that we’re ready to switch vendors if they give a reasonable discount. Once they made their offer, we called our current vendors and got them to match the same, so we didn’t have to switch the vendors. It was probably unfair on some level, but necessary to achieve other ends.
We kept working on promotions
During financial crisis, many business owners make the mistake of cutting down on their marketing expenses or perhaps even eliminating it completely. We knew that this is the time when our business would need maximum marketing. During a financial turmoil, customers are restless and constantly change their buying decisions. We took charge of this situation and made every effort to get our name etched in their mind. Modern advertising strategies like use of social media and PPC (Pay Per Click) attempt to do exactly that.
We made the most of our existing customers
A loyal customer is worth more than a new customer. We look at our clients in terms of their long-term sales potential, especially when they keep coming back for a new product/service. Their word of mouth is an excellent way to make more sales without inviting the costs of finding a new client. So, we didn’t mind giving free training sessions and free job consultations (once in a while) in order to keep our clients happy.
We used gold as a hedge against recession
My father was an investment portfolio manager and I have always heard him say that gold is a safe investment, especially during financial emergencies and stock market crashes. And his words became the best advice in our difficult times. Cash inflow was limited and our expenses were getting out of hand, in spite of our best efforts. We needed some cash to cover the immediate expenses, but we didn’t have money in our bank account. It was then that I came across an “instant cash for gold” scheme that offered immediate cash for your old and unwanted gold items. After much speculation, we gathered our gold assets and took them to the pawn shop for value assessment. We were happy with the price offer and walked out of the store with a significant amount of cash.
The economy has, and will always have its ups and downs. Good times don’t last long, but tough times do. So, how do you protect yourself from the effects of recession? With advance planning, cost cutting and investment portfolio diversification, you can emerge out of difficult times, just as I did. Good luck!