How to Prosper in a Recession Local slumps did not faze these intrepid entrepreneurs. Each overcame adversity to turn a profit and learned lessons that could help you.

by:kingtool aluminium machinery     2020-03-26
(MONEY Magazine)
-There is no doubt that you have heard various experts talking about the next U. S.
The recession will come. Ignore them.
In fact, the recession is more local than national.
According to Albert Sindlinger, a pollster, at any time since the summer of 1986, from four to 31 states have been in recession.
Still, if you look for opportunities in adversity, you will succeed when the economy is down.
Brooks mckabee, Charleston, W. Va.
For example, after real estate prices in his area stalled, his house was cleaned up.
When other retailers gave up, Dolores Barnes opened a successful clothing store in Dallas.
And Bob Scud of Rockingham. C.
His new tools. and-
His former boss is cutting jobs, including dead shops.
These threats of recession give you a lesson if the recession is going in your direction.
Real estate man: Apply a distress-for-
Some say that when the economy gets cold in the United States, West Virginia gets pneumonia.
The country relies on the mineral and chemical industries, and local wages, spending and real estate values are affected when demand for industrial goods slows.
In fact, West Virginia was there on the 10 th.
The unemployment rate of 8% is almost twice the national average, still from 1981-82 recession.
However, as the 39-year-old Brooks McCabe saw, the weak economy in his home town of Charleston brought some unusual real estate purchases.
McCabe said, \"in the recession, people are too general about the real estate market to stay away from all properties.
But investors who analyze the local economy can find good value. \'\' And how!
Mckabee and his equal partner Rudy Henry have accumulated 1980 since the 500 incident
Imperial apartments are worth more than $7 million.
Mark Levin, a professor of real estate at the University of Denver, commented: \"People who make money in the real estate sector are usually a reverse, a small-scale Donald Trump.
At least physically, mccais looks more like Broadway\'s imgrey than the arrogant Trump on Fifth Avenue.
But from a professional point of view, this comparison seems appropriate.
In 1980, when McKay and Henry set up a commercial real estate company, McKay-
Henry real estate, McKay recently left $25,000. a-
Working as a year-old state director of housing in West Virginia, he is an agent for Home Finders, a local real estate brokerage, and his wife, 35-year-old Barbie and Henry, are also agents of the company.
Four years after the men left the company, Barbie joined them as a bookkeeper and advertising manager.
Brooks now earns $35,000 a year, and Barbie earns $12,500 a year.
She only works 25 hours a week so she can be with their 7-year-old daughter, Katie.
McCabe started his business with little money.
He and Henry each invested $1,000 in savings.
The rest of their start
Up capital comes from commissions for several office buildings, fees for the Union apartment building and a bank credit line of $50,000.
After losing the early bidding war against the richof-
National Investors-
Down more than $50,000 by 1984. -McCabe-
Henry has maintained steady profits and growth since 1985.
\"Brooks and Rudy went through tough times and they don\'t know if they can keep the door open,\" Barbie recalls . \".
Now, they are focused on apartments that are barely competitive because syndicate wants bigger properties.
McCabe\'s apartments in and around Charleston have a cash return of 9% to 11% per year, several percentage points higher than the national average.
In addition, these investments allow him to enjoy about $20,000 a year in taxes, almost half of his family\'s income. His six-
The investment strategy is like this :--
Looking for a building between 10 and 30 years old in a good location ((that)). . .
Its owner is not maintained. \'\' --
Make sure the property has about 50 to 150 apartments;
Smaller buildings are too labor intensive.
Dense and larger often get high prices from syndicate. --
Spend 3% to 5% of the purchase price to make the building brighter.
\"Add a little gingerbread so people will consider renting when they drive by,\" McCabe said . \". --
Provide incentives to tenants to keep your vacancy rate below 3%.
For example, McCabe sometimes pays $100 for the introduction of another hire r.
\"If your best friend lives where you live, you are unlikely to move,\" he said . \".
In a complex rented mainly by people in their 20 s, McCabe plans to install a $4,000 drive --
When washing the car, give the tenant enough tokens to use it.
He expects to withdraw his investment within a year as the tenants attracted by the car wash reduced his vacancy rate. --
Increase rent as much as possible per year, with the goal of at least equal to the growth of local inflation.
The improvements you have made will justify higher rents. --
Plans to keep the building for five to ten years-
Long enough for it to have a healthy price increase.
A major example of McCabe\'s ability to turn lemons into lemonade is the regent of W. RavenswoodVa.
40 miles north of Charleston.
He bought one. story, 48-
In 1981, the local investor\'s cash was sold for $500,000, a variable
Interest rate mortgages and fixed loans of 10%rate note.
Six months later, 2,133 employees of Kaiser Aluminum, the city\'s largest employer, were fired or retired early, leaving about half of the town\'s Labor Force idle.
While many of the frightened landlords just looked at it, mckeb looked into his tenants and asked them what improvements they wanted and then spent $150,000 on the new roof, carpet and fenceThe payoff?
By the end of the year, McCabe reduced his vacancy rate by half to 2%, while increasing the rent by 20%, for a typical vacancy rate of $190 per monthbedroom flat.
In last March, he sold the Regent\'s building for $895,000, after which he sold an average of £ 17% a year. tax return.
However, McCabe focuses on real estate investment, which makes him somewhat short-sighted in other aspects of his personal finances.
For example, he does not have a pension or disability plan: \"My retirement income is an interest that I get from real estate and disability insurance is expensive. \'\' (
In fact, the disability policy that pays him $26,400 a year will only cost him about $100 a month. )
The family\'s only savings are $30,000 in cash value in brooks\'s $200,000 universal life insurance policy and $75,000 in Southern California Edison stock (yield: 6. 7%)
There are also some local bank stocks.
The couple postponed Katie\'s plans for university education until she was 10.
However, the mccab family is conservative in terms of consumption and borrowing.
\"We are definitely in the process of austerity.
No luxury holidays
\"We drive instead of flying,\" said Barbie . \"
In addition, Brooks hopes to repay a fixed salary of 1/2.
Their $110,000 rate mortgage
The bedroom brick colony was 15 years ahead of schedule until 1993.
McKay said, \"in my transaction, I live and die because of debt . \"
\"But now I want to keep my personal debt low.
That way, if I need cash to invest in the property, I can mortgage on my house and get some money quickly.
The decline of Mackay
Beat tip: \"Don\'t invest in real estate in recession areas unless you can get a rate of return that compensates for additional risks.
In a prosperous economy, my annual return on cash is 8%, but my goal is 9% to 11%.
Ask your tenants what they want and try to give them when you raise your rent.
Read books on property management.
Two of my favorites are practical apartment management by Edward Kelly ((
Institute of Real Estate Management, $28. 95))
Paul lapidders manages residential real estate ((
Warren Goram and Lamont, $68)).
Owner: get rich by rag trade J. R.
Ewing is not the only Texan who lost his company recently.
In Dallas alone, more than 3,500 companies are attracted by the state\'s sluggish oil.
The economy has been dependent over the past three years.
Only people as determined or rich as J. R.
Will start a new business in such a climate. -
Especially among consumers like this.
Sensitive industries such as retail.
Sakowitz, for example, a wellknown 86-year-
In 1985, the old Texas Professional chain filed for bankruptcy protection, and many smaller Texas retailers closed.
Dolores Barnes, 41, has no J. R.
Not at all.
But she\'s strong.
After leaving her job and being rejected by various potential creditors, she opened her own clothing store
In August 1986, it was thought that the name of a woman was dolores.
In 1987, the company posted a gross profit of $65,000.
Barnes, who gave himself only $250 a week, said: \"No time is the right time.
I knew I would succeed.
Barnes\'s confidence comes from the fact that she\'s not a garbage. trade rookie.
She worked in Neiman.
Marcus has been in Dallas since the end of 1960 with a full title
She has been in the digital department there for the past three years.
As a single divorced parent raising 21 and 17-year-old Pamelayear-
The old brothers and sisters Tara and Radara have been counting on wage guarantees for many years (
About $30,000 when she left the store in 1985)
And the prospect of her health benefits and generous pensions for the golden years.
But she is also tired of frequent trips to branches that her job needs, and she wants to change.
So in August 1985 Barnes went to be the manager of a three-year-old fair woman.
Dallas apparel chain
However, within 8 months, the doctor ordered her to take 8-
Sick leave for surgery for one week
Barnes says her new employer is upset that the new worker\'s work has been open for so long ---
An attitude that bothered her made her determined to set out on her own.
\"I made a lot of money for the other two stores,\" she recalls . \"
\"I know I can do it for myself.
Encouraged by friends in the retail industry, she broke up with a fair woman in May 1986, just a few weeks after surgery, and started calling the realtor to find the right place for her own store.
She found one in a month. -a 1,100-square-
85-walking space
South Dallas Mall, $1,000 a month.
Barnes applied to eight banks for financing but was rejected because she had never owned the business and did not have enough collateral, she said.
Opening the store, the owner offered personalized service, the price of clothing and suits ranged from $100 to $800, and she took out $5,000 of the $20,000 she saved at the time, and got a loan of $10,000 from friends.
Originally a confident and cheerful native of La Bastrop. worked 12-
Seven days a week, in Dorothy.
She now spends 50 to 60 hours a week in the store using her spare time for Baptist church work, and her role as a member of the board of directors of the merchant association of the Wayne Wood Village Mall where Dolores is located.
Barnes also coordinated several annual charity fashion shows, held vocational seminars in local high schools, and was active at the National Council for black women and the National Association for People of color.
Her dedication to her store and community helped achieve total sales of $11,000 per month, up from $6,000 when the store opened.
There is no harm to the frugal management style.
\"I turn off the lights and keep the air --
Low level adjustment unit, do not take a long time-
\"Call,\" she said.
Now, she even considers opening a second store in Tyler, 90 miles east of Dallas.
Taylor, who has a population of 80,500, is attractive because it has three universities with a total enrollment of 15,000, and Barnes says there are no top universities.
Great quality shop in large size.
Barnes also hopes to open more stores inside and outside Texas in the next five years.
Her ambition is understandable.
Full sales potential
According to retail analysts, digital apparel is over $6 billion a year, and Barnes believes customers will respond to her personal style wherever they are.
For example, she often places special orders for valuable customers and calls them when new items arrive.
Barnes in a three
Bedroom brick house in Oak Cliff, a suburb of Dallas.
Her 1/2
Her interest rate mortgage in 1970 only costs $220 a month.
Utilities, meals and incidentals also cost $300 a month, making barn\'s personal budget tight.
\"I don\'t have money to spend, I don\'t splurge,\" she said . \"
Barnes hasn\'t had a vacation since the opening doll was released, and can\'t remember when she went to the movie last time.
Barnes is still passionate about the future, but he admits: \"I like him very much.
Sweep me off my feet.
But she added, \"I know, though, that God will look at me on it and take care of everything . \".
Barnes recession
Tip: \"If you know what to predict, you can make a profit even in a downturn.
Cater to specific market segments.
For example, I do not sell clothes less than the 12 th.
Run your business like home and don\'t be ashamed to ask friends to help for free.
My help dress up the window and act as my model for the fashion show.
Tool maker: knowing when to resign is the key, and there\'s nothing going to be a recession in a small town like the biggest employer in the area.
Just ask Bob Scud.
In 1983, he was a local member.
Guarantee manager for machinery maker Clark equipment, whose 1,000 workers make it the largest private employer in RockinghamC. (pop. 8,300).
At that time, Japan\'s competition and the appreciation of the dollar were unstoppable. S. heavy-
Machinery Company and textile company in North Carolina.
Clark finally closed the gates of Rockingham in 1986, reallocating some, but leaving a lot of people out of work.
But now it\'s 43.
Two years ago, he left Clark and started the first tool in the area --and-die shop.
His company Sandhills tools and engineering hired 27 people last year, earning $1.
2 million, the profit margin before tax is 15%.
Scudder, a cheerful, strong man who paid himself a meager salary of $50,000, was more willing to reinvest his profits in Sandhills.
Scudder, a trained engineer and tool manufacturer, moved here from Warsaw, Ind.
Travel to Rockingham on 1978 (
\"I\'m a Yankee Rebel,\" he says\"
The 43-year-old wife Gloria and 22-year-old daughter Jenny and 21-year-old Pam.
At that time, Clark\'s business was booming.
\"I think I might retire with them,\" Scudder said . \".
His salary and Gloria\'s part.
Part-time jobs in a hospital earn about $30,000 a year.
Clark also gave us extra benefits. -
The company\'s pension planmatched 401(k)
Health and life insurance benefits.
It is easy to improve the cost of living.
Scudders only paid $55,000 for their four peoplebedroom house.
Monthly mortgage: $400.
However, by 1982, Clark\'s business began to get worse.
Scudder said that in early 1983, management told him that factory layoffs would start soon and that operations could close in a few years.
Still, Scudder is luckier than most people.
\"They told me that I could find another job elsewhere in the company,\" he said . \".
Instead, Scudder owns a car with his friend Tom Wheeler.
Rockingham\'s parts business is considered the perfect signal to open the tooland-
Mold workshop for precision metal processing for the cost of the area-
Conscious manufacturer
According to their ideas, Clark\'s skilled mechanics need to work, and Clark\'s equipment will soon be sold cheaply.
They also know that another such company is needed in North Carolina.
\"To the north, there is a tool --and-
\"There are death shops on every corner,\" Scudder said . \".
\"I think I will be successful if I build one here.
Gloria skudel does not care about rural Rockingham, about 75 miles east of Charlotte, who is not interested in her husband\'s business adventure.
\"I want him to move to another factory in Clark, or big companies elsewhere,\" she said . \"
\"This small town is very small. it is difficult to make friends here.
Her husband, an optimist and a natural salesman, recalls: \"Gloria thinks I\'m jumping too far.
But I know I can live a good life as long as I can talk and move.
Neither Bob nor Gloria was worried that Bob\'s uncertain income would jeopardize his daughter\'s college education.
When he left Clark, Scudder received a total of $50,000 in severance pay and $401 (k)savings.
He intends to pay the university bill with the money.
However, the feelings of the daughters are complex.
\"My biggest child was scared to death, but my other child was totally in favor,\" Bob recalls . \".
After compromise with his wife, Scudder decided on November 1983 to start Sandhills tools and works as part
His Clark job, salary and benefits.
But he has no backup plan if his business fails.
Every day after work and Saturday, Scudder and Wheeler meet at the back of/Wheeler\'s carparts shop.
On the evening of the weekend, they started working on the machine from 6 in the evening. m. until 11 p. m.
Neither of the two invested their money in business.
\"Our bankers don\'t understand why we didn\'t put any of our cash into the company,\" Scudder said . \".
The reason is simple: we don\'t.
Wheeler already has a milling machine and a lathe that Scudder uses to make the tools and meters that other manufacturers need to produce their products.
Stable order, short
Bank loans and $20,000 in small loans
Commercial subsidies from state government agencies provide financial support for their tooling machines.
Because Sandhills started at a time when the economy was sluggish, the state\'s money paid half the salary of some workers for six months, plus training costs.
As business grows-
Sales exceeded $100,000 in 1984-
Scudder and Wheeler realize that they need to devote themselves to the company.
\"Work fell from the sky,\" Wheeler said . \".
The local unemployment rate was 13 in 1984. 9% (Contrast 7. 7% nationally)
Skard left Clark and Wheeler sold his car. parts business.
Wheeler said: \"It takes a lot of courage for Bob to give up his company job and the welfare of two children in college.
But as the saying goes: there is no glory without courage.
Today, Scudder said that although he refused to give the exact number, his personal net worth was three times that of 1983.
As the dollar fell to spray starch on the textile industry, Rockingham also strengthened.
In 1987, the fruit of the loom purchased and modified Clark\'s factory, where underwear was produced and 650 people were hired.
Current Unemployment rate: only 5.
3%, slightly lower than the national figure.
Scudders have put a lot of their wealth into real estate.
They bought a Myrtle Beach considering the weekend. C.
Waterfront apartment for $89,000 (
Monthly mortgage: $900).
Bob hankers buy more Myrtle Beach apartments for rent-
Property investment.
Last fall, the couple sold their house for $95,000.
\"I never liked the house,\" Gloria said . \".
\"There is no formal restaurant and garage here, and the pool we built has not been used.
\"They\'re renting an apartment right now, waiting for their new $130,000, three-
The bedroom house is built on 1/2 acres of wooden cliffs.
The Scudders hope to move in this month.
Their monthly mortgage will double to $800, but Scudder is not worried about the extra cost as he is full of ideas for expanding and diversifying Sandhills tools % & Engineering.
\"We may lease machines or buy and sell used equipment,\" he said . \"
Wheeler toys one day pushed the business to the public.
At the same time, they all know that they have to make their customers happy, including a Clark factory that has become their largest: Located in Statesville, NY. C.
100 miles away.
Recession of Scudder
Beat tip: \"tidy up your financial house.
When I started running Sandhills, I didn\'t have any debt other than my mortgage.
The cost of starting a business is much lower than you think.
If you are in a depressed area, ask state agencies to help you reduce costs and get the company started.
Don\'t take a quick break in the company you work.
Grow your new business step by step.
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