I got some gift cards over the holidays. Maybe you did too. It reminded me of a news article that I read recently. The advice was to use the cards promptly while the company is still in business. Good idea.
The economic slow-down definitely affects how I choose the businesses that I work with long term. I get really cautious. So, here is how I minimize the possibility of getting burned.
I need to add that I'm talking about small businesses with whom I have a direct and extended relationship. For me, this might be a custom computer builder or a web management group. I've paid money for their services, and I'm hooked into their services, so if they go out of business, I'm out my deposits and the future services that I was counting on.
Here's the trick to avoiding disaster. I only work with services that have a business history of at least seven years. Why seven? Many small businesses fail within the first year. Most of them disappear within three years. Few of them last five years. By seven, they are at a point in their business cycle where they have the committment, the experience, and the financial solvency to ride out economic downslides.
If a business has been around for seven years, they are definitely committed to their particular mission. They are not going to say 'hey, this isn't as much fun or easy or profitable as I thought it was,' and walk away.
If a business has been around for seven years, they have been through an economic cycle before. They have survived before by developing strategies for dealing with economic downturns.
If a business has been around for seven years, they have developed a financial base for weathering out the storms. They have the cash reserve and the liquidity to perservere.
So, how do I know how long they've been in business? I casually ask. Or, I check with the Better Business Bureau. It's pretty easy and definitely worth my time.
So, when the economy gets shaky, as it is now, I protect myself and my money. I avoid the untested. I don't want to find out that the new guy with whom I made a long-term investment is no longer around. I stick with what is proven.
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