Saturday, October 26, 2013

Sky-is-falling attitude.

So I was checking to see what blog posts have been read lately, and up pops an old one.

April 16, 2008.

Basically, it was the moment I decided for myself, once and for all, that we were falling into a deep recession and it was going to get a lot worse.  It was the moment I made the harsh decisions to prepare for the worse.

Interestingly, almost no one thought it would be as bad as I did.  Even the infamous Bilbobuster was talking of a two year time frame.

I thought it would be a minimum of 5 years, and possibly 7 years before we would recover and that it would never be quite as booming as it was before the crash.

I had one interesting comment from someone back then, that is reflective of the thinking at the time.

"I think your sky-is-falling attitude is both overly pessimistic and inaccurate. From what I can see Bend is doing very well. Within a block of my house two homes are being built and another is being remodeled. The stores I shop at are busier this Spring than I've ever seen them. Traffic today, a mid-week weekday, was more congested than on a summer weekend. Where I work we're overwhelmed with business. Bend is booming and prospects are good."

Funny thing is -- I was actually soft-pedaling what I really thought.  I thought sales could drop as much as 50%, based on previous experience with bubbles. Fortunately, it never dropped more than about 15% in one year, which was a manageable decline -- I could adjust my orders and costs according.  I worked the store alone that year, so basically I wasn't any worse off than the year before.

Overall, my sales dropped 28% from 2007 to 2010.

The store has recovered in the last couple of years, though I'm still about 10% down from the peak.  On the other hand, my profit margins are better, so the store is in good shape.

But back then, like I said, I wondered if a 50% drop was possible.  I could survive a 50% drop, because that's the way I designed my business.  But I can guess that very, very few businesses can survive that much.

So it dropped about half as much as I feared, and it took 3 or 4 years to do so and it turned out to be manageable.  In fact, I'd have to say that I barely felt it, beyond the fear it engendered that it could get worse.

The lesson I think is to prepare for the worst.  Then when it doesn't happen, you're ahead.  

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