We’ve been hearing a lot about the recession lately. This reminded me of a conversation I had a few years ago with a property developer. Sam’s company purchased land all over the country – usually close to college campuses. They built and managed apartment houses, selling them after a few years.

The recession in the mid-2000’s nearly bankrupted his business. He ticked off the things they had done wrong.

• Too highly leveraged – he simply had too much debt. In fact, he had mortgaged some of his properties two and three times to raise money for new buildings.
• Low cash reserves – he didn’t have (and couldn’t get) enough cash to make it through more than a few tough months.
• Ignored the warning signs – his instincts told him the good times couldn’t last, but he never slowed down and never stopped borrowing money.
• He loved the game of “find-buy-build” but hated the numbers – only his bookkeeper knew which properties were making money and which ones weren’t. When she tried to bring up the subject, Sam was always too busy.

I asked him what lessons he’d learned.

Lesson 1:
Now he is open with his family. When business was good, they’d taken some great vacations, bought new cars, and expensive toys, and purchased a gorgeous lake home. When times got bad, they sat together at the kitchen table and talked. Together they decided what needed to be sold, let go, and saved.

Lesson 2:
Cash is king. Sam’s goal is to save enough money to run his company for one full year if something should happen to him. And he has a plan in place to do that.

Lesson 3:
His faith gives him the surety that no matter what happens, he will be all right. He has spent many prayerful hours in difficult situations.

Lesson 4:
Going forward he will be a better steward of his money, paying attention to the details and heeding the advice from experts.

His company is a lot smaller today, he’s not driving a new car and his toys are getting old. He no longer owns a dream house on the lake. I asked him recently how the pandemic had affected him. “Worse than the real estate bubble, but I weathered it better. We socked away a lot of cash which saved the business.” Sam watches his financials like a hawk and makes minor, but necessary improvements to his buildings. “We’ll survive to fight another day,” he said.

“Are you having fun”, I asked?  “More now than a year ago,” he replied, “But it’s starting to get better.” And isn’t that what running your own business is all about?

The road is easier together,