A Reno Business Owner's Advice for an Economic Crash
How he survived the 2008 recession
With the stock market dropping a colossal 12%, business owners may need to think about their preparation options for a possible economic storm. With the housing crisis and stock market crash in 2008 being the worst in recent history, looking back to the survivors of that recession may be a good idea. He is the owner of Reliant Electric, of which he founded in 2006. Reliant Electric provides electrical engineering services, primarily for larger companies, and their subsequently large buildings.
So what should you do to keep your small business alive?
Where did you work before Reliant Electric?
Well, I was president of another company that I owned, called Merit Electric, for three years. Started that with a bunch of partners, and then before that I worked for a contracting company.
How long does it take to make a change in your business plans, and when do you do that?
I mean we can change pretty quickly, I’m a union so almost all my electricians are union employees so I can add new employees the next day just by making a phone call as long as they’re available at the hall. Expanding with manpower is fairly easy if they’re available. There’s been times, like when Tesla first started, when the hall has been empty, so they didn’t have any people to give you even if they wanted, so that’s the only difficult time. You can always shrink a little bit by laying people off too, when you don’t have work you send people home. But other than business planning, [pauses] ,I mean it takes a little while to implement major changes if you want to change the type of work you’re going for it can take a while to get skilled people in to do different types of work.
With the current stock market crash, or with the previous one in 2008 have you ever noticed changes in the behaviors of your workers?
No. I mean I don’t know that the stock market directly affects our business, certainly not on a daily basis, or even monthly or weekly. In 2008, you know, the construction market crashed as well so that was the biggest hit. I don’t know that it had much to do with the stock market. It was all because of housing at first I guess.
Do you have clients that cancel orders on you regularly when the stock market lowers down? They maybe decide they can no longer afford their order and shut it down.
No.
Are there any adjustments the clients make to their orders in those sorts of situations?
No, because if someone wants to build something, they plan for it for quite a while, then it goes out to bid. By the time it gets to me, you know, I’ve estimated a lot of projects where they’ll see if it’s feasible, and those never really come to fruition. Maybe you get a phone call two years later, ‘hey uhh, we’re gonna build that thing now’, and then you have to reevaluate your price for them, but once a project is under contract it’s going to go. The moneys already there, they’ve committed to it, they’ve already invested quite a bit for design and land purposes, so at that point it’s pretty much going to go forward.
Have you ever had a contract where you finish building whatever the construction work for them is, but they just can’t deal with losses, so the building ends up empty immediately afterwards?
We did have one building out where Tesla is, the Tahoe Regional Industrial Complex. We built a 600,000 square foot warehouse building, and it’s called a spec building. The investors build it without having a tenant, and they figure by the time it’s complete people will see this big empty building and sign tenants to occupy it. We finished this one right about the crash and it sat empty for quite some time, and they had plans to build a second and third that they cancelled.
Do ever think about how the stock market can affect your business or is that something that’s just too far off to you? Its too global and there’s just no global effect.
Pretty much a global scale, it’s uh, it’s kind of an indicator of the overall economy, but no I don’t worry about it other than seeing my 401k balance drop. [laughs]
As someone who’s business survived 2008 is there anything that you think you specifically to combat that crisis, did you get lucky, is there anything you would tell smaller startups to do?
Well, since I just started at the end of 2006, I was still relatively small so I didn’t have a lot of overhead, I had a tiny little office, with only me and a part time office manager doing the books. Everyone else was an electrician and I could hire and lay off as I needed, which really helped me. I had some good ongoing projects that kept me going, so if the work isn’t there you just have to stay as lean as possible, with as low of overhead as possible and ride it out. When you’re first starting out you can’t spend every cent you make, you have to have enough money in the bank to ride out those hard times. I was pretty conservative with money and that git me through that.
