Tuesday, December 09, 2008

Tender Treasures and the Economy

Tender Treasures has been in business for 25 years, so a lot of people are asking me what this economy is like compared to other times of economic hardship. I figure this is a great forum for this discussion, and I hope my experience may help others who are wondering what to make of all of this.

First...this is the worst its ever been. Bar None...I've never seen a more difficult climate for doing business. A few days ago, the Los Angeles Times (who just filed for bankruptcy themselves yesterday) headlined above the fold that the recession was "official" and that not only were we in a recession, but we have been in one since December of last year.

I wish someone had asked me. I could have saved everyone a year of buring their heads in the sand. For me the credit crunch began, as stated, about a year ago. Credit had been easy for me for years. I had forgotten what it was like to be told no. I went to my local banker, a friendly sort who has been very helpful to me through the years....and when I asked for some more credit on my line to finance some inventory, she told me that Bank of America had just bought CountryWide and they weren't extending lines of credit to anyone. So, the credit crunch hit me a year ago.

Here is the interesting part. Because I couldn't get more credit, instead I went back to the office, looked at my Profit Loss, looked at my Balance Sheet, and started cutting. We stopped buying endless choices of gift wrap and have managed to live for the past 12 months solely on what we had already. I stopped advertising a million keywords on Google, and instead put some money into optimizing my website so I came up higher on the free organic search. I cant tell you what a bundle that has saved. On and on...I found more and more things to do to cut costs. All of that economizing has helped in this climate. I would be out of business now, if it weren't for those changes that I made in the past year.

This year, American Express decided to close down their lines of credit. Without telling me, writing to me, or in any way warning me (and everyone else I know who has this particular line of business credit) they just reduced the line of credit to the same amount that was outstanding. When I called to complain, I was told that in the contract, it explicitly states that they have sole discretion to reduce the line of credit, or to deny any advance with or without cause, with or without telling me.

I still have some credit options, but given those two incidents, I'm not using them. Its a LOT MORE WORK to run a business without access to easy credit, but in the end I think that I am stronger for the struggle, and I am probably running a more efficient business because of it. We even made it onto the Barack Obama Small Business Blog which was a thrill!

I'm certainly no economic expert, but as my accountant says...we're on the front lines. Its happening to those of us in small business first. More to come on this subject!