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Every ten years or so the word recession pops up in the news, creating panic amongst small business owners. Fearing the worst and employing an element of common sense, most businesses will look to cut back on overheads.
Unfortunately, many make the mistake of cutting back on marketing budgets which, in small companies, is often an easy management decision. Reducing the spend on advertising, such as in newspapers/local press or by means of a mailshot, is a much easier option than laying off staff or downsizing the company car. The current economic crisis will be a good test of my theory that, faced with a recession, marketing spend should initially be increased before levelling off at the original level.
Taking SmarterHousing as an example, I opened a small office in Spencer Street, Royal Leamington Spa early in 2007, to cater for the fact SmarterHousing needed a physical presence near the University of Warwick. Whilst there was sufficient traffic to smarterhousing.co.uk to let the growing portfolio of student accommodation, day-to-day running of a property management poses logistical problems which can only be solved by having a local presence.
Early in 2008 when the economic crisis turned up in the form of a near banking/financial collapse, I was hardly surprised. Whilst clients of SmarterHousing have made sensible investments over the years, gradually building up (in some cases) vast porfolios of student and residential accommodation, I have had the acquaintance of many an individual who acquired one or two properties on unrealistic mortgages – in terms of their ability to repay should the market turn in the way it did. What I didn’t anticipate was the way in which the market began to correct itself so quickly, with house sales screeching to a halt in the process.
A number of estate agents based in Leamington Spa ceased trading within months, crippled by huge reductions in income and an inability to cut costs. SmarterHousing have recently taken on a new member of staff from a long established local estate agent, which has given us a useful source of information on day to day management of a typical company in the area. I was shocked to learn our cost base is around 1/10th of a typical estate agent!
An opportunity to move into a larger premises arose in July 2008, which would bring with it the potential to move into residential lettings and sales, with the benefit of being at the same rental value as our existing premises in Leamington Spa. As a slight aside from the initial topic, you will find more opportunities to save money without having to ‘cut back’ in a recession, and they should not be passed lightly.
Prior to the move, which completed today, our competetive position in the market was quite good. Not only is our cost base significantly lower than other estate agents, the bulk of our income is highly predictable, thanks to the nature of the student market and the fact properties are reserved a minimum of 6 months in advance. Now that we can trade as an estate agent (the previous location, attached to a nightclub, was far too student orientated to fill potential house buyers with confidence) and have an exceptional office location, you can expect to see SmarterHousing plastered all over Leamington Spa, Warwick and Coventry!