Independent Firms Have Best Chance
I recently took a sub-lease listing from yet another one of my clients who is faced with difficult times and can no longer afford his rent. All of the projections he was counting on were put on hold and he does not have any real business at this time. Although he will be continuing his business, he needs to shed expenses now.
I decided to share some of my wisdom with him and learned something very important about most of my client base, as well as what I have to offer to my clients. I explained my experiences in past down cycles to my client. For me the worst was the late 70's and the early 90's. The market cycles were different in how the down cycle began but the results were the same, higher unemployment, lack of affordable credit, businesses frozen and fear.
Yet, both of those markets actually created some of the best years I have ever had. In the late 70's, I was managing an institutional food service company. During that time, my competition (larger corporate identities heavily unionized) began drastically cutting back including dropping all low margin accounts. We contacted these firms and were successful in convincing them that rather than walk away from business, leaving their customers without service, they should sell the business to us. We purchased their equipment (at nearly fully depreciated prices) and they financed the purchases of these routes. We created a five year non-competition agreement and we grew quickly in a down market. These routes turned out to be profitable for us with our lower overhead. In addition, when the market turned around again we enjoyed tremendous growth in our business since our clients remained with us rather than going back to our larger corporate competitors.
In the 90's when real estate was absolutely dead, I was successful in finding potential buyers that had access to private funds and we went out to the market as a cash buyer ready to close quickly with little due diligence. I was successful in not only closing more sales but also by buying these buildings at a significant discount. I was also successful in introducing new leasing opportunities while undercutting my competition in rental rates to attract tenants. We were quick to lease up these buildings while the rest of the market suffered through twenty percent or more of vacancies.
When I explained these stories to my client, he turned to me and said something I had not thought about. "You know I was just born in the 70's and I have never experienced a really bad market." When I mentioned this story to some of my agents, they said the same thing. If you are under 45 years of age, you probably have not had a truly bad economic cycle to reference.
So, take advice from a man old enough to have wisdom. If you work for an independent firm you have the best chance to not only survive this downturn but also actually grow during and after the cycle changes again. Look to your larger competitors, see what they are no longer focusing on and go after that business. Swim against the water, not with the flow. It will be scary at first but once you breakthrough the awards could be great.
- Hans Hansson, Starboard Commercial/TCN Worldwide