The Good Part of the Recession

We are seeing economic data and analysis about the economy turning the corner and beginning to move upward again toward the end of 2009. And because housing typically leads the economy both into and out of its recessions, we have reason to be a little less glum.

We all have friends and good, quality competitors who have suffered along with us. Some likely didn’t make it to this point. Not much to be happy about for sure, and yet there is a very strong “good” that comes as a result of these tough times — awareness. You are now aware of how things really are when they are bad. If this is your first recession, you have had a baptism of fire rather than simply experiencing a run-of-the-mill downturn. The last one comparable to these times was during the inflation/interest debacle of the late 1970s and early 1980s, when the prime interest rate was as high as 21.5 percent and a good permanent loan interest rate was 14 percent. There was demand for housing at a fair price, but buyers couldn’t get a loan.

What good can come from these horrible experiences? The memory of what it was really like will help you use sound judgment about your expansion rate, 401k contribution, how your company is capitalized and how soon you act and reset priorities. I would guess a majority of folks regularly say, “I wish I had acted sooner, either paring down my staff or deferring purchases. Those are steps that, while never easy, are facilitated by the experience of having weathered a recession.

Remodeling is one of the more difficult pursuits in the residential construction industry. The most successful companies know that only well-run companies with sound performance and policies will survive long term. That survival is predicated on using good practices during good times so that tough times can be weathered. Maybe “survived” is a better term.

"…there is a very strong “good” that comes as a result of these tough times — awareness."

Recently, I spoke at the Southeast Builders Conference (SEBC) in Orlando, a long-standing, excellent conference combining the Florida Home Builders Association annual meeting with a trade show. Yes the attendance was down, and there weren’t as many smiles as there were last year and the year before, but neither was there just doom-and-gloom because recessions get over and this one’s headed that way.

In one of the classes I taught, there was a remodeler named George. George was part owner of a company doing millions in residential remodeling and new construction up and down the East Coast. We talked about the opportunities that exist during times like these and how beneficial it is to have strength. Another chap, Al, whose business is in New York, said the same thing. They are as busy as they have ever been because their market share has grown during the recession. There were only seven people in one class that I taught, and they represented five different states. But the entire class told the same story: They were still in business because of early and decisive action. The normal class size would have been 30 to 35, so I have the top 20 percent of the action, or to put it differently, only one in five prosper.

The classes I taught were diversification and financial management, higher level courses that are part of the Graduate Master Builder and Remodeler designations available through the National Association of Home Builders’ University of Housing. Consider the importance of business education and training. These very successful people already knew most of what was presented, but we had discussions and it was an excellent review. Winners are seldom remembered by how much they won but just that they won. You still take home the medal if you only won by an inch, and the players like those reading this are winners still because of inches.

When you start signing business and seeing the bottom line ink color turn to black again, it is from that very first dollar that winners apply the strategy of preparing to weather the next storm. Yeah. You read correctly. It is not a happy thought — another recession. But, straight up, there will be another one, just as sure as we know that this one will be over. They’re never fun, but make some good use out of this one that will help ready yourself for the next one, while you’re here...