This article is on how contractors can take advantage of downturn opportunities.
Some of you will be new to the IT Contracting game.
Others of you have been doing it for a few years and have piled up a bit of cash. That’s if you haven’t poured it all in to the Stock Market and property when they were rising. Many of you will have done this.
However, if you have some cash sitting around your time will come when the next downturn comes. There are always major downturn opportunities to make money – if you have some cash set aside.
It may even be a chance to turn a period of unemployment for a contractor to good use.
Importance of Cash to UK Contractors
People just can’t get a hold of it.
Banks are not lending it out.
Revenues in businesses are plunging.
Some of them will go bust.
Cash Flow a Contractor Opportunity
Although the downturn is over the upturn is not of sufficient strength for some businesses that were hit by the downturn.
This is the stage when many businesses go bust.
It is Cash Flow problems that are the big killer.
Many of them will be good enough businesses but it is the lack of Cash Flow that usually does for them. And the banks are not going to step in here.
Property Prices Plunge
Property will be comparatively low in value. Many people will have negative equity in their homes in a downturn.
There is going to be a lot of distressed selling of houses by people who could never really afford them in the beginning.
Also, the Stock Market will be at relatively low levels compared to the previous boom. It will be now very cheap on a long term basis.
Taking Advantage of a Downturn
So what can an IT Contractor do to take advantage of downturn opportunities?
We will run a series of articles on this.
Here is the first suggestion.
Contractors Can Buy a Local Business
A lot of local businesses in your area will be foreclosed by the banks in a dowturn just to get their money back that they loaned them.
Some of these will be pretty good businesses but have been beaten by Cash Flow, the downturn and the weak upturn.
They may not be able to pay back the large loan they took out to buy the business or develop it.
You can get some really bargain prices here. That’s because the banks are desperate to get them off their hands and get what they can from them.
Contractors Can Buy a Pub
If you fancy a pub or a shop or even a local IT business then a downturn could be your time.
There’s a popular pub / restaurant around here that has just shut down because those leasing it from the owners went bankrupt.
The owners had it for sale at its peak at 1.3m Euros in 2005 when it was doing well.
It went for 175,000 Euros in 2014.
No one wants to buy pubs / restaurants at the moment around here which is still depressed from the last downturn.
Monty of Alamein
The big house around here was the Montgomery family home – that’s right Monty of Alamein.
In the downturn of the early nineties the current owners (through a bank loan) had been running it as a hotel / pub / restaurant, but very unsuccessfully.
There was also structural damage to the building in the form of a crack.
My uncle said I should try and get it as the bank had foreclosed on the owners.
He went down to see the bank manager and the bank manager told him I could have it for £28,000.
Estate Agent and UK Contractors
I was foolish.
I went down to see the estate agent about it instead.
He was quite a slithery character I later learned.
I approached it cautiously saying I wanted to buy a house.
He showed me a few but went I asked about the Montgomery house he kept changing the subject and looked very slithery indeed.
I was only on holiday in between contracts at the time and went back to London.
Next time I was over here a year later I heard that the estate agent’s cousin had bought it. He built six houses on the prime land overlooking the lough.
It would be worth a good few millions now.
However, the point of the story is (and I’ve had enough self flagellation) that your local bank manager is the one who knows who is in trouble and who he wants to close down.
Don’t worry about being too late.
Often good businesses fall over even when things are picking up as they have got past the end of their Cash Flow and are forced under.
This means that you can have a good business at a knockdown price just when the economy is picking up.
The thing to do is to have a chat with your local bank managers starting with the one at your own bank.
Tell him, or her, what you are about, i.e. that you have cash and are willing to buy businesses at knockdown prices.
Cash Investment for Contractor
Don’t let him talk you into providing a cash investment for the business that will keep it alive for the current owner.
You only want the whole lot.
Specify the type of business / businesses you want.
Did you know that 80% of restaurants go out of business in the first two years?
Contractors Can Buy Nice Restaurant
How would you fancy taking a nice pub or restaurant off a bank manager’s hands for a giveaway price?
Don’t worry about the bank manager thinking you are a bit of a vulture (which I’m sure a few readers here are thinking).
He will be very, very glad to have someone like you on the sidelines.
It might even be good form to turn the first one or two down as being too expensive.
He’ll be trying to get you to pay as much as he can as the bank now owns the business.
Contractors Buying Properties or Businesses
However, he doesn’t want to spend too much of his time flogging one of them as he’ll have lots to get rid of and banking is what he wants to do – not sell properties or businesses.
If you don’t have much cash but are still working start piling it up now, firstly because you might need it and secondly if it turns out you don’t, you will be one of those precious creatures that everyone will be looking for in a downturn – someone with cash and not just falling assets.
This is the first in the series of how British Contractors can make money out of a downturn.
We will publish others like How to Use Recruitment Agencies to Make Money.
Get ready now for downturn opportunities to make money.
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