Economy Thread

[billbenson]

I'm trying to think of how whats going on with the economy effects me. My career ended in 1999. Filed bankruptcy after I ran through all my savings several years later and had 100k or so in credit card debt.

I bought a house over a year ago and got one of the last 100% loans out there. I bought it for about 190 and its probably worth 175 now. The house is in a great location though. Very nice neighborhood, 10 minutes from the beach. Good schools. A definite fixer upper though. The real reason I was able to qualify for the house is I run a lot of money through the bank so I could show high average balances.

I'm down to about $15k in credit card debt. That might go up a bit as I'm getting some net 30 orders which really mean net 45.

My primary business is selling some fairly expensive products to large construction firms, the government (FAA, water department, military...), oil companies. The war certainly helps me. I sell stuff destined for Iraq. Oil platforms are still going to be pumping oil. It's pretty recession proof. I sell via the web and primarily do all my own web development so I have very low overhead.

I have only been taking money out of my business account to pay bills. The rest I send to our supplier as we are on net 30 terms but are at about net 60. Since my major bills have been credit cards which have been mostly interest only payments and home loan which is interest only at this point, my effective income is very low.

It just strikes me that because of my current position, very little of the economic or political news directly affects me. With no assets, low income, low overhead, this seems to be a pretty good time to be building a business; or am I missing something? I just don't really see any direct effect on me?

[orion_joel]

Much of what you say Bill is very much true. However some of it does lead to a main point, which you brought up yourself. You are supplying effectively recession proof businesses with your product.

Do you think that you would be doing so well at the moment if for instance your business was selling a non essential product to low income earners. I would guess maybe not. Even with the economy as it is there is still a good deal of major construction going on, The government always has money to spend on something and Oil companies are probably making the best profits out of anyone.

I think you are in a unique position where the down economy could actually be helping you. This is not to say if the economy was going up that you would not be in a similar position, but the business it sounds like you operate can benefit from both up and down economy, potentially in different ways.

[billbenson]

That's all true, Joel, and I really just tripped over the product I sell. I'm just trying to find flaws in my logic so they don't blind side me when I don't see them. Right now I see my weaknesses as cash flow, funding, and a single source supplier. I'm tryinng to diversify, but there are only so many hours in the day.

[orion_joel]

Probably the number one flaw (which may not even be there if you have thought about it) is that if you can supply this product then others can as well. I would suggest being sure to stay ahead of any potential competitors, and make yourself the number one potential supplier.

One thing that you may be able to work on is the bank. If you have been trading long enough to have good records of how cash flow and funding match up in a X day period, then you may be able to do better then credit card financing with the bank. Over draft Facility or Line of Credit may provide better lower cost financing then credit cards. I would think the primary thing the bank would want to see if proof over a period of time that when you need $10K or so to purchase stock the payment to cover this comes in X days later. However if you are a good customer and can just provide a solid financial statement to them they may not even care about the track record.

Probably the one thing that i would attempt to do is pay down your home loan as quick as possible. This really would have to be classed as a liability, and could be one stopper that could stop other financing sources for your business (depending on how it is setup of course). The interest that you are paying out on a mortgage for your own home is dead money, there is no way to recover it (that i am aware of anyway). Plus once you have paid this off it is one less expense that you need to think about, and as it appears you tend to keep most of your money in the business, so would provide additional funds to grow the business (this may be a good few years down the track, but it doesnt hurt to plan ahead)

[cbscreative]

I would try to plan around those cash flow issues as much as you possibly can. I can't offer answers to that as it's up to you, I'm just thinking of the trend we're seeing now with banking. Because of all the goings on, they are tightening up on things like lines of credit. Where I'm at, we've had several companies close simply because the bank pulled back on credit lines. The companies were stable, so it had more to do with federal regulation on the ratios banks were allowed to have, and not on the fact that the companies were not credit worthy.

[KarenB]

Hi Bill,

I just wanted to add how cool it was that you shared your personal story with us and how you managed to pick yourself up despite all odds back at that time.

[billbenson]

Thanks Karen. It's been a long road and you never expect your professional career to end after a successful 20 plus years.

[orion_joel]

I would have to agree with you Bill, that after 20 years, in a successful career, you would not expect it just end.

However not even with the economy just in general i think this is going to be something that is going to happen more and more. I think career's are going to be shorter and generally where people may have had maybe 1 or 2 different career paths in their whole working life, it is going to more so become 3 or 4 or even more career paths.

I read somewhere (or maybe heard it on the radio) the average person finishing school and entering the work force now is likely to have 30+ employers and up to 7 different career paths, throughout their working life. This is not that hard to believe when you see how some young people this days jump from job to job. Even myself i have had i think it is 6 different jobs, and have started to cut the last one or two from my resume because the experience is often quite irrelevant to the job that i am applying for now.

[KristineS]

I think things are different than they used to be, but I don't think that's necessarily bad. One thing the Internet has done is allowed more people to work on their own and allowed more people to work for companies that aren't in their immediate area. It used to be that you had to live near the company for which you worked. That isn't always the case today.

I firmly expect that I will work for many different companies before I'm done working. I find that kind of exciting.

[billbenson]

Several things happened all at once pretty much in telecommunications which was my prior career. Starting in the 70's, all of the telco central offices were upgraded to new switching equipment. Also, cell towers were being put up everywhere. Eventually everything got upgraded or cell towers built, so the market went away. At the same time, the internet came into play. The need for field sales people to get on an airplane and present a product to a customer went away. Not completely, there is still some need for face to face sales, but with video conferencing, purchasing agents placing orders on line etc., the need for field sales people went away. I saw a statistic a few years ago, that one in 7 high tech sales people still had a job like I had.

Also, when this all happened the technology changed. VoIP which is calling over the internet emerged and the technologies I knew became obsolete. I quickly became an expert in equipment that no longer existed.

In hindsight I should have seen this coming. I didn't. I was hitting 50 and employers preferred to hire kids out of school as well. I was late 40's, living in Central America, traveling, newly married, blowing all my savings, assuming I could just return to the US and get a job. When I did come back, there was a recession and jobs were hard to find and they didn't need people with my background (other than sales skills).

I see that possibility today for a lot of the kids starting work today. They come out of school, get a job, specialize in one area and 20 years later technology changes and companies prefer to hire young people. You need a backup plan, but you don't think about that when you are young.

I worked for a short period of time in 2000 for a company that sold only by the internet and could see the opportunities there. Thats where I am today.