How entrepreneurs can profit from the cuts

It is a well noted fact that in times of financial difficulty, a cry goes up from the socialists that claims that the rich get richer and the poor become poorer.

In difficult times, this is often very true – but for the right not the wrong reasons.

For entrepreneurs and people with legacy wealth, financial depressions, recessions or spending cutbacks are often seen as an opportunity and not a drag on their ambitions.

I was in a taxi not too long ago, whizzing through the back streets of Whitehall on the way to a meeting. The taxi driver was a typical lippy London guy who chirped up with: “Ok guv’ner, what do you do for a living then?”. When I told him I was a professional wealth manager, he laughed and said: “Crickey you must be havin’ a field day at the moment. After all, the only people who are havin’ this recession are those who don’t have a job.”

I must say, I was somewhat thrown aback by his comment – but even more so about how intuitive his observation really was. He’s absolutely right. If you have a full-time job or you’re an entrepreneur, the recession could be the best thing that’s ever happened!

Let’s look at the reasons why this is true.

For businesses to thrive, we need a number of factors to be in place: we need low interest rates, which we have; we want low retail price increases and low inflation, which we have; we want our competitors to be struggling, which we have; and we also want opportunities to capitalise on the misfortunes of others, which we have.

As entrepreneurs, we must look at how the opportunities present themselves, it could be that one of our competitors is running low on money and cash flow. If that’s the case, they may be looking to sell the business. If one of your suppliers is in the same boat, you can buy them out and secure better pricing on your supply chain. If you’re looking to diversify your business into associated trades, which would allow cross-selling opportunities, this again can be a great way of making extra market share and, more importantly, making profits from every aspect of your empire.

If you are cash rich, the banks or building societies are unlikely to improve their interest rates for some considerable time so why not use your wealth to become a business angel? Use your skills and management expertise to buy into a business that needs a cash and skills injection. Work your investment well and you could have a little gold mine in the making.

Marketing in a recession is also something that we all know we should do but, due to financial constraints and dwindling cash flow, we often chose to neglect. This is the time to be brave. If your competitors are pulling the plug on their marketing, then the number of people likely to see your marketing campaign is likely to improve dramatically.

So chin up, entrepreneurs. It’s not all bad.

Frank Cochran is the owner of FSC Investment Services

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