Back in 2007 it became evident that the next economic bust was imminent. Some of us prepared by clearing debts, paying off mortgages, securing multiple sources of income and spreading our money in several banks.
The impact on businesses was not yet obvious but we all knew that the rules of engagement were about to change. And they did!
By 2009 I was advising a new company in Greece that was building e-shops. The full impact of the economic crisis has not affected them greatly (yet), since e-commerce was on the rise.
There were a few indicators, though, that worried me greatly. The first one was that prompt payment was not forthcoming. Getting paid became a constant struggle that took an interminable number of man-hours. Secondly, clients started looking for more cost-effective options; thus moving away from custom-made websites. Thirdly, instances of cases that ended up in a court of law became more often.
As I realised that Greece was dangerously close to economic disaster, I asked the startups to cut significantly on their costs. Specifically, I asked them to a) start working from home in order to reduce their expenses, b) move away from custom-made sites, and c) create a strategic partnership with a local law firm.
The founders of the company decided not to move premises with the excuse that they would have the chance to capture more clients, if they conduct their business in an affluent environment. They saw the advantage of changing their business model but, by then, it was too late. On the other hand, they started collaborating with a solicitor almost immediately, which helped them avoid bankruptcy.
The company survived for another year and then closed down. The owners are now employees in two large e-commerce companies in Greece. They are both eager to start new ventures and contacted me to help them. This time, I hope, they have learned their lesson and they will not repeat the same mistakes.
So what is today’s lesson? As entrepreneurs we need to take into account radical (or even subtle) shifts in the economy. Shutting our eyes in front of the impending tsunami is not going to save us. The response should be prompt and decisive, if we want to survive. Waiting and waiting and waiting a bit more for things to change is not going to save the company.
Furthermore, an economic crisis may have devastating effects for the majority of the population but a lucky minority has the potential to create large fortunes. The only requirement is to take advantage of the opportunities that will undoubtedly arise.