Herman School of Business
Business survives even when businesses fail...
What would happen if the market implodes further and we grind into a deeper Depression? Individual businesses will fail, commerce will seemingly grind to a halt, new players will emerge and start enterprises that will fill in for those who disappear. Business will still be alive, while many of today’s players will shutter their doors, because the marketplace doesn’t want what they have at this point in time.
People will not stop eating. Someone will have to grow and sell food. People will not stop needing clothes. They just won’t buy what is on the market today until they wear out what they already own. People will not stop moving around in cars and trucks. But they will keep their old car and not buy a new one just yet. And those items that are not a necessity will sit on shelves and collect dust, until the seller marks them down so low that someone will grab a bargain.
The Government is so big it employs a huge percentage of the population and therefore many will still get paychecks. I wouldn’t want to be in the jewelry business right now as people can’t eat their Bling and in fact haven’t finished paying off the credit card they bought it with so they don’t even wear it since it reminds them how stupid they were to buy it in the first place.
Know this: the greatest fortunes made in this country came from businesses started…in the decade of the 1930’s! Businesses that grew out of the depths of the Depression went on to yield incredible fortunes. How was that possible? Because, the cost of setting up a business when everything was on the bottom was the lowest in history. You could grab huge market share by taking over the customer base of failing enterprises. You could launch new ideas that would leverage customers into a marketplace that was barely alive…and had only one way to go…UP.
I have screamed GET OUT OF THE STOCK MARKET for over a year now and if you are still there…GET OUT. It is a fools game to think you can pick who will survive. Depressions crush old companies and new ones take their place. If you think someone will pour a fortune into your failing stock holdings to revive those companies you don’t understand dilution. Why would someone invest money in the current GM, FORD, AIG, or any other company doomed and end up saving shareholders who end up their partners?
People will be starting new car companies, new insurance companies, new clothing companies and they will be buying the “brand rights” away from existing companies. There may be a new GM, but you won’t own any of it…your stock will become wallpaper.
I repeat my oft mentioned philosophy…invest in a start-up with a portion of your net worth so you can be an “insider” with a stake in a business that can grow and become the new brands of business. I bet they will still be selling Under Armor products five years from now…and I bet the current shareholders of Under Armor won’t be part of the ownership. In the world of new investors the first thing to go is the old shareholders. If your new money keeps a company alive, the new money folks want the future profits and will not allow old shareholders to ride their coat tails and get a piece of those profits, which were only allowed to happen because of the new money.
I have two clients right now with great business start-up ideas. Both will create a change in the way business is done in their industries. I do not have any ownership interest in either one. And those who participate could see a sweet return on their investment. Why don’t I just dump my own money in and clean up? Because I only invest in companies I own outright. My net worth has been built on those types of companies. Most investors don’t want to operate the business and therefore need to invest where the company they own is well run with a great business plan. These two new franchise operations will be launched soon…and these are the types of companies you should be looking at to secure your future.
- Posted: 2 March 2009
- Comments: 0
- Category: Business failure
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