As I write this the stock market is down 500 points for the day and oil stocks are down about 25% on the week… again
I know, no one wants to imagine that it could happen again but the plain truth is that whether it is in the next year or 10 years from now that economies go through cycles of booms and corrections. My position is that you should prepare for both!
Just today I saw a Bloomberg article outlining economic predictions of recession chances between now and 2018 as high.
So, what can do you do to protect your income, family, lifestyle and progress towards your goals?
We know that corporate America is not shy about downsizing employees, any employee, no matter how good they had been performing. One way big companies make their stock look more desirable to investors when it is selling low is to downsize a random group of employees. So if you depend on your paycheck then you need to consider ways that you can maintain income if the paycheck disappears.
How many months could you be unemployed and keep living comfortably?
Right now, in a good employment market, we still see top executives coming to us for assistance who have been unemployed for a year or more. Of course if you look on their LinkedIn Page or at their resume they are “consultants” or have taken a sabbatical but the reality is that on LinkedIn the word consultant usually means “unemployed” or “partially employed”.
Severance packages are a thing of the past for most employees. While it used to be commonplace for us to work with former executives that had 6 to 18 months of severance to cushion the blow of being downsized, now we rarely see that scenario.
“When did Noah build the ark? Before the rain…” – Nathan Muir, Spy Game
Whether our candidate has a severance package or not they all too often come to us “after the rain”. The flaw in that plan is that they did not put in place a second, third or more income streams that could add to savings in the good years and cover ongoing expenses in the down years if one of the income streams (salary from their job) goes away.
This is not a new idea, you have probably diversified a stock portfolio or been part of a retirement investment fund that buys a market basket of stocks so that the performance of the portfolio was not dependent on one investment.
It is time to look at your job as simply part of your portfolio
For years now the unwritten agreement between the employee and the employer has not really existed. Few employees are so loyal to an employer that when it comes time for a raise or promotions they don’t float a resume to other companies. Also for years now companies are not at all bashful about laying off even the best performing employees.
If we look at your job alongside your stock or real estate investments the two different forms of capital you put up to get the income from a job are your time and capability. Those are your “investments” into that income stream. Could you better invest your time and capability in building a business you own (and can sell)? For nearly all of our candidates that answer is YES! But when it comes to leaving behind a paycheck some candidates prefer to ramp up a new income stream before voluntarily cutting the cord on the paycheck.
Here is our Proven Franchise Hedge Plan
We have watched the franchise industry through countless ups and downs in the economy. We work with our candidates to identify those franchises that best fit them AND have some level of recession resistance. No company is completely free of economic impact, but some provide products and services that tend to be necessities and not those that are purchased out of disposable income.
The second part of the targeting process is that we want to aim for those franchise opportunities in that pool that are absentee or semi-absentee by nature, meaning that they may only need 5-15 hours of your family’s time per week to oversee them. These will be manager run operations where the manager will hire, fire, manage the staff and run the operation. The franchise owner is not in charge of daily operations. In these franchises the owner would oversee financials, keep tabs on the Manager and plan their next location.
The brands we target for this hedging game plan tend to be brick and mortar businesses, not office or home based. For a full-time employee home based additional income streams of any kind tend to be neglected after longer and longer work days so we don’t suggest the home based role for a full time employee.
This game plan is one you can begin any time but doing so when you are comfortable is always best. When you are employed these deals are far easier to fund. Small Business Administration (SBA) backed loans are easiest to get when you have an income stream in place, for you that may be a paycheck. Some lenders tell us they are close to impossible to get if the borrower is unemployed.
So right now, while you have a paycheck coming in and can borrow with these secure loans, is your best time to plan for any potential future hard economic times.
You can find a semi-absentee or absentee proven national franchise brand and begin ramping it up while you don’t need the revenue from it. Chosen carefully that business may be well positioned for economic downturns and could be the life raft you need if your company downsizes you in a bad employment market.
If you have questions on how to execute this plan or build multiple income streams just call us, the door is always open and when you are ready to voluntarily quit your job and swing for the fences we have a game plan for that too.
George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution. Contact the Franchising USA Expert George’s Hotline 703-424-2980.