Remember when buying a home was a guaranteed return on investment?
Until some time early last year, the rule was that you bought a home as soon as you could, and as long as you kept it at least three years, you would sell it for more than you paid. In London, you only had to hold it for three months - and in some parts of town three days would do it. The possibility that a house or an apartment might one day be less than the loan we took out to pay for it was literally inconceivable. It just never occurred to us
When the real estate market headed south, we reacted too late because it couldn’t be happening. We had no tools to deal with it. So we waited for the ‘bounce’ and hoped. I think we all know now it’s going to be a long wait.
In this economy, owning a business has a lot of similarities. Most business owners have stock answers to dealing with downturns. And if you owned your own business in the post 9-11 trauma, you learned something about getting through tough times.
But these days the question is not how did you deal with the post 9-11 economy? The better question is what did you do in the aftermath of ’29. As in 1929. The only historical reference we have. These are once in a lifetime conditions and a lot of people are unprepared for that. Like the value of their home, they’re still trying to use an emotional model to deal with it.
Hope. Supported by luck.
But hope is not enough. Nor is it a strategy. To survive in an economy where breaking-even is the new win, you have to get past the emotional barrier that this can’t be happening. For many businesses, that means going back to the days when our first focus was on how to cover payroll. And if you’re not at that point, then here’s what you’re hoping.
That you get work. That it’s profitable. That you get paid on time. That you get paid at all. That you get paid often enough to cover your overhead. That your bank will lend you money if things get tight. That the job you’ve been waiting 6 weeks to come through will come through. That the check is in the mail. That things aren’t as bad as they seem. That things will be fine.
You might be okay with one of those. But beyond that, you need a plan that deals with bad and worst-case scenarios. And does so before you get to that point. Because a plan made calmly is always a better plan.
As Andy Dufresne said, “Hope is a good thing. Perhaps even the best of things.”
But even he didn’t think it was a strategy.