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Opportunities Out of Darkness

This may read like an insensitive post given that the world is in the throes of a global pandemic.  It’s not my intent to be insensitive but at the same time, I don’t apologize for the post or the timing, it’s just the lens through which I see stuff.

Here’s my broad thought process and why it might seem insensitive and most importantly, a challenge to you.

Domestically and internationally are about to experience a very deep recession.  Honestly, I don’t even know what the means.  Extraordinary unemployment, low or even negative GDP (economic growth) and record personal and corporate bankruptcies perhaps?  Many prognosticators are predicting a depression.  I’m not sure I know what that means either.  We are already seeing long lines for food at food banks across the country.  In the ’30s these were described as bread lines.

A deep recession or even a depression is going to look different than it looked in the 1930s.  In 1929 the population of the United States was approximately 100 million people. Today, 2020, the population is roughly 330 million. GDP, gross domestic product or the value of goods and services produced in the US in 1929 was $1 trillion.  Today, in 2020, the GDP is approximately $23 trillion.  We’re a much bigger country.  Does that mean we have further to fall?

The good news, if you want to consider this good news, is that we know how to resuscitate the economy. We’re going to have political fights about who should be saved the most. Those fights have already started. We’re going to have fights about where the money is needed.  We’re already having those fights. 

In another post, I indicated that what makes the economy grow and what gets us out of a recession is “spending.” The government is putting money in the hands of businesses and individuals to keep the bottom from falling out of the economy. With no definitive or national plan to curb the COVID-19 pandemic, what going to take to put a floor on the economic hit is a complete unknown.  If we knew how the length of the pandemic or had a plan to mitigate its depth, we could have a strategic plan for where and how to infuse cash into the economy.

The coronavirus pandemic is creating economic stress but also an economic opportunity.  Businesses, large and small, are already closing. Many of the smaller businesses won’t recover. These businesses are not bad businesses with bad business models. Most businesses can’t survive for weeks or even months on end with diminished traffic or business activity.  The business owners have some tough choices to make, temporarily close, permanently close, sell the business or try to limp along until the economic recovery happens.

The down-market will create opportunities for entrepreneurs.  Forward-thinking entrepreneurs will have the opportunity to buy a struggling business or fill a market void by starting a new business.  

The phrase, ‘cash is king’ probably never meant more than it means now. I wish I had some cash but I’m thinking I might not need much. Let me explain.

There are going to be business owners out there that for a lot of reasons say fuck it, time to exit. It could have operated for 30-40 years and didn’t have a planned exit strategy but this economic downturn is giving them a reason to exist. Selling the business may be as good an option as any. It beats just closing the doors in some respects.  These types of transactions probably won’t come at a deep discount.  They are just opportunities to purchase and existing.

There will be opportunities where there is distress and you will have an opportunity to buy a business at a deep discount.  The owner may simply be out of cash and selling is a way to salvage something, not necessarily the business, but to pocket some cash and get the fuck out, while they can.  These are great opportunities and should be of the highest priority to identify.

There will be situations where you will have an opportunity to start, maybe from scratch and at a discount, a business.  For instance, there will be a lot of restaurant and bar fallout, a blood bath.  These restaurants and bars will be vacating what might be an ideal space or great building locations. At the end of this crisis and before the recovery is in full effect, ceasing this space might be a real bargain, an opportunity that might not have existed before.

There might be “market voids” cause by companies or suppliers exiting a business or business unit that you can fill.  You have to be looking to find them. They might fall into your lap but that is wishful thinking. For instance, GM & Tesla make cars, not ventilators.  Hanes sells apparel, not masks. There is a big push to repatriate the manufacture of medical supplies & devices.  When GM, Tesla, Hanes, and others return to their primary businesses, the void for the manufacture of medical equipment and devices, domestically must be filled by somebody, maybe you.

This is the last scenario I’ll mention but there are many more. There will be situations where either large or mid-sized businesses will want to sell a business unit or particular asset or group of assets so they can focus on their “core” business.  The assets they shed or are looking to sell might be ideal for you. “Ideal” is something you will have to assess based on what you want or can do.  Every business will be impacted by the recession.  The smart business will shed, ancillary businesses to preserve cash and to return to profitability as soon as practical.

My point is this, the economic stress resulting from the pandemic is going to create some business opportunities.  Those that are forward-thinking, being aggressive, and looking for something different to do might find it. There is a group of “opportunists” out there looking and I’d like to think I’m one. You or someone you know is probably an opportunist as well.

For a large swath of Americans, your cheese either has been or will be moved.  The value you place on for what you know, what you have done in the past, your skills or your education may be different than the value companies emerging from the recession will see.  All of us will have to adjust.  Entrepreneurship might be where you find your cheese.

Let me say this and I’m not going to spend a lot of time on it but don’t let the lack of cash or resources keep you on the sidelines.  Don’t use that as an excuse.  I once asked a college professor about not having cash to “do a deal.”  His reply to me, and the class in general, as if it’s a good deal and you can sell it, you should be able to get it done.  From experience, that’s true and most cases.  Your risk tolerance will determine whether you will give different opportunities a chance.

We, as a country and individually, are facing some difficult days. How long we, as a country and individually, the struggle will be in large part how we respond to opportunities presented to us.

This is an edited repost from another blog I update. I apologize if it seems choppy.

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