It Has Happened Before and It Will Happen Again

by Jennifer S. Hendrickson

You can't turn on the TV or read the news without hearing about the financial crisis, the housing bust, the "economic meltdown" or any number of other phrases that makes you feel a little uneasy.  Your retirement accounts may be just a fraction of their former value and many of us wonder: "at what point do I just get out?"    

True story:  I was having lunch with a friend the other day who told me that she had finally had enough losses in the market.  She called her broker, cashed in all her investment accounts and opened up a nice, reliable 3% CD at a local bank so she could sleep better at night.  When I realized she wasn't joking, I told my friend that the next time she felt compelled to make an emotional decision about a financial situation she should pick up the phone and call me....so I could lock her in a closet until she came to her senses!  

What my friend failed to realize was this:  the economic turbulence we're experiencing has  happened before and it WILL happen again. It's as certain as death and taxes and I do sympathize:  My investment portfolio has also lost a lot of its former value in the past few months, but the way to make money in the market is to buy low and sell high - not the other way around.  

There are several  questions being asked by both businesses and individuals so let's address some of the more prevalent ones here:  

Q:  How many times has the United States experienced an economic downturn?

A:  Since 1854, the US has experienced 32 recession/expansion cycles with the average contraction lasting 17 months.  None were pleasant, including this one. It's just a natural part of the economic cycle.  

Q:  What is the best way to handle my personal investments during times like this?

A:  If you're younger and have plenty of time to watch the market go back up before retirement, sit tight, close your eyes and hold on.  If you're approaching retirement, you should have been layering out of the market over time to reduce your exposure to this part of the cycle.  In either case, now is generally not the time to sell.  In fact, if you have some extra cash available, now may be a good time for some opportunistic investing.  Even if this isn't the absolute bottom, you'll still be buying low.  Above all, never make a financial decision based on emotion.  

Q:  What can I do to make sure that my business will make it through this tough time?

A:  Lately, this is the question we're asked the most.  Our answers are fivefold:   1) Be creative with your marketing dollars to differentiate yourself.  Run-of-the-mill marketing strategies may not be appropriate right now because everyone is trying to save money by using cookie cutter marketing plans; 2) evaluate any processes or procedures that could be streamlined to help your business become more efficient; 3) focus on providing the single best customer experience in your industry. When consumers have limited dollars, they want to spend them where they feel good about their purchases; 4) don't stop advertising.  Most of the time you're struggling to be heard over the masses.  When your competitors quit advertising, you can be heard and seen more clearly in your  market for the same price.  You're getting more bang for your buck; 5) above all, don't try to do it alone.  Call on your trusted advisers (accountant, attorney, consultant, financial planner) to make sure your strategies are sound.  You need these relationships now more than ever;  

If you're a bit nervous, you're not alone.  But take comfort in the fact that this has happened before and it will happen again.  It's just a natural part of our economic cycle.  We can all learn from this and be even better prepared the next time around.  

If you would like to talk with Hendrickson Business Advisors about your business strategies, please call us at 573.335.1885 or email me at jennifer@hendricksonbusinessadvisors.com     About Hendrickson Business Advisors:

Hendrickson Business Advisors, a management and marketing consulting firm, was founded in July of 2007.  Our clients rely upon our collaborative process to help them grow revenue and bring more of that revenue to their bottom lines.  Today, proper strategy and precise execution are even more important for businesses who are watching every dollar in these uncertain economic times.  Through Sustaining Business, you will have an opportunity to hear from each member of our talented team at Hendrickson Business Advisors as they provide insight on their respective areas of expertise.  We sincerely hope you find this newsletter valuable and informative and we always welcome your feedback.  

Sustaining Business - October 2008 

Published by Hendrickson Business Advisors, LLC

1729 William Street

Cape Girardeau, Missouri  63703

573.335.1885

info@hendricksonbusinessadvisors.com