Times Are Rough, So Think Smart and Profit

Chances are, you don’t need a reminder from me to know that the economy is suffering, financial institutions are collapsing, the real estate bubble is popping, people have lost their jobs, getting access to loans and other credit is stiffening, and federal bailouts are occurring. There are those that choose to live in a world of ignorance devised of pretending that our situation is not as bad as it is now, nor will it get worse. “The worst has come!” they say, and “Now is the best time to buy!” These super-optimists slow down the inevitable crash of our economy so that those of us that are paying attention can take the action necessary to protect our assets and thrive during hard times. Take a minute and try to decide which person you are; seriously, think about it.

If you believe that the worst has come to the US and world economies, then perhaps you believe the next 5 years is filled with a joyful rise in the stock market, endless consumer purchasing, extreme real estate speculation — you should stop reading this article right now. I’m not going to try to convince you otherwise!

Otherwise, if you believe that we’re in bad times, and headed for something nastier, I invite you to take this time to identify what things you need to change in your life to thrive during this time. Here are a few things you can do to help your business survive (or even start) during a period of duress:

  • Spend less.
    This may sound obvious, but you need to stop spending so much. You may think you’re frugal now, but there are always things you don’t need that you keep buying. Was it necessary that you brought on all those extra consultants? Do you really believe that those fringe benefits are directly contributing to your profitability? Make some needed cuts, and start developing a “Do I really need this?” mentality.
  • Start saving money.
    Cash is king in a world that is suffering. If you can manage to save up extra money now, you’ll be able to buy up assets and resources when things hit rock bottom. There won’t be much (if any) financing when everything is down! You’re going to need cash. Imagine when you have an opportunity to buy that $950,000 3-bedroom house that will eventually drop to $350,000. Or, when BMW and Mercedes starts to offer extremely steep discounts to clear their inventory because no one else is buying. If you don’t have cash when the deals come knocking, you’re missing out.
  • Use lower cost alternatives to services.
    In many cases, we’ve standardized on using nothing but the best when it comes to services and products for our businesses. But there are a tremendous amount of alternatives to everything we use, many of which offer similar (if not superior) quality, but for a drastically lower cost. Seek them out, because you might just be surprised to find out that you can barter a little more with someone else.
  • Bank with a reputable bank.
    Banks like Wells Fargo and Bank of America will not go under. Why? Because they take on a much lower quantity of high risk debt. Seek out banks that have a track record of taking on less risk, but provide higher interest rates. If you look carefully, you’ll find banks offering 3.5% and above for savings accounts (ING Direct), and considerably more for money market accounts. Why do you have tens of thousands of dollars sitting in a traditional savings account earning less than the historical average of inflation?
  • Avoid rising above FDIC limits in your accounts.
    I don’t care who you are, but putting more than $100,000 in a checking, savings, or money market account is just asking for trouble. The FDIC insures accounts up to $100,000 per account type per bank. Anything over that, you risk losing (and at a minimum, at pennies on the dollar) when the bank fails and needs to be bailed out. There are billions of dollars in accounts that go uninsured because they’re over the limits. Take the time to setup additional accounts and split your capital up across them. Like the cliche says, “Don’t put all your eggs in one basket.”
  • Always put 20% or more down when buying property.
    I know it seems appealing to buy that car for 0 down, or that piece of property for only 5% out of pocket. Unless your payments are considerably less than 20% of your monthly cash flow, you’re making a huge mistake. Should your cash flow come down, you’re going to be living in hell. Putting 20% or more down makes you truly think about what it is you are buying, and it increases your chances of financing. Some lenders are actually requiring 20% down now.
  • Help others save money.
    If you build in the ability for people to save money into your products, they’ll buy your product, even during a recession or time of economic stress! Would you pay $5 for an iPhone application that helps you find the cheapest gas nearby? What if your services were all by phone and the Internet, instead of continually requiring your clients to come into your office? Perhaps you can even offer your product for 50% cheaper than your best competitor, and spin it as saving 50% to your clients.
  • Telecommute more often, even with your clients.
    Work with your clients, vendors, employees, and consultants to telecommute more often. Everyone benefits. There are a few hurdles with it, but the benefits outweigh the problems. Your top performing staff will think twice about going to your competitors if you offer them perks that benefit them, but without costing you.
  • Strengthen your network.
    Now is the best time to start revitalizing your network. Do it before the situation gets worse, because when times are rough, you’re going to want to lean on your network. I’d be willing to bet that most of the people in your network are not yet prepared for what is coming. This means, when that time comes, they’ll be asking you for favor, and returning them in exchange. Take the current moment to reach out to the people in your current network, and offer them a hand. Additionally, spend some time meeting new people at local business groups, on Twitter, and LinkedIn. Offer your new friends something to show your level of commitment.
  • Increase your cash flow.
    Last but not least, find ways to increase your cash flow. You should be striving to grow your revenue every month. New streams of income are hiding all over the place. Put advertisements on that newsletter that you send out every month. Start a blog. Create simple side products that reuse some of what you’ve already built — a simplified version of it. Share a piece of what you’re good at in a PDF and sell it.

Many of these may seem incredibly obvious, but I’m willing to bet you don’t even try to do most of them. Give it a shot, focus on them, and see where you stand in 6 months. Come back and let us know how you did.