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Monday Mornings with Madison

MADISON COMMERCIAL REAL ESTATE SERVICES MADISON COMMERCIAL REAL ESTATE SERVICES
#75

LISTEN TO THE EXPERTS AND DO THE OPPOSITE

Are you turning to the experts for advice in these challenging times? We all seek answers and solutions to the problems that beset us and especially when things get tough, we look to experts for help. But rarely do we ever stop to think, “Why, exactly, should I listen to this person?” Just because someone is a member of a Washington think tank or teaches economics at Harvard, does that really qualify him or her to know what we should do, here and now? Has this eminent expert ever owned his own business? Does she know what it means to cover overhead and payroll every week? And if these experts really understand the economy so well, why do we always get their best advice after the fact, and not before? After all, would you listen to the weather channel if it only told you yesterday’s weather, instead of tomorrow’s?

Earlier in this decade, the economy was in over-drive and the experts kept encouraging us to invest, invest! Why? Well, because the market was going to keep going up forever. Then as soon as the market started to slide, expert opinion was that things were going to get much worse: we should quickly reduce spending and cut our goals by at least half.

According to Warren Buffet, perhaps the smartest investor of all times, the same happens with individual stocks. As long as a stock is going up, experts tell you to buy it; as soon as it’s starts to go down, they tell you to sell it.  The result is that you end up buying high and selling low, not the best investment strategy in any market. According to Buffet, you should do the opposite. His advice is to focus on stocks you understand and then buy when they’re going down. With so many people selling, prices are likely to end up lower than the stocks are really worth. Conversely, sell a stock when it’s rising, because the higher it goes, the more likely it is to be heading for a downturn.  Head in the opposite direction from the crowd and although you may not time the market perfectly, you are far less likely to get burned.

In general, it’s good advice to at least consider the contrarian’s advice. What is the conventional wisdom about how to manage your business during a recession? Most of the “experts” are saying to reduce your spending and cut your staff. Of course, this only makes your company less productive and helps to deepen the general recession.  So here’s some contrarian advice, the type you may not be considering these days.

Spend more Now is the time to buy anything that your company needs and may need for years to come. Because many companies are desperate for business, you can find bargains that won’t be available again for a long time.  From office supplies to new office spaces, this is the time to invest in the future of your company.

Market more Now is also the time to spend money on marketing. Now more than ever, people want the best buy for their dollar. Make it easy for them to find your company by ramping up your marketing. Since many of your competitors are reducing their marketing budget, you can gain a lot of new customers this way. There may be fewer buyers than there were a year ago, but with smart marketing, you can easily make up for lost customers by getting a bigger share of your market. The long-term benefit of this approach is that when the economy comes back (and it will!), you will have a broad base of established customers who are familiar with the quality of your products and services. This should keep them loyal to you, even when your competitors start marketing again.

Hire new people As the unemployment rate grows, there is more talent available for hire than ever before. And even people with jobs may be open to recruitment if you offer them the prospect of an exciting future with your company, and you show appreciation for their abilities. It may seem absurd to be hiring when many companies are handing out pink slips, but you could derive immediate benefits from the increased value brought to your company by new employees.

Some of these suggestions may be challenging when cash flow is tight, and some of them may not be appropriate to your specific situation. But a contrarian view certainly offers a fresh perspective. Remember, don’t follow advice just because it comes from a proclaimed expert!

QUOTE OF THE WEEK
“I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite”. G.K. Chesterton

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