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 Nothing brings out the creative inner business guru quite like a recession.
“Whenever you have situations like this, there’s always some benefit from it,” says Allan Buffenstein, a commercial bankruptcy lawyer with McCandlish Holton. The trick, he says, is knowing what the market needs and being able to shift gears to meet it. (Much as the people who sold picks and shovels during days of the gold rush.) It stands to reason, of course, that the likes of bankruptcy lawyers, debt collectors, and refinancing and debt counselors will benefit from the current market. Revenue at the collections firm Transworld Systems is up 12% during the first quarter of 2008 compared to the same quarter in 2007, according to the company’s local franchise owner Glenn Kurtz. “There is more awareness now [about debt collection] than in better times,” Kurtz said. “It’s harder for businesses to increase sales, and so one way to increase the profits at a business is to address accounts receivable.” That line of thinking has even led some businesses that weren’t interested in collection companies five years ago to sign up as new clients, Kurtz said. “They feel like it’s something they need to do now.” Given the increase in business, Transworld is looking to expand this year, with five or six potential new positions on the horizon.
But Transworld’s recent success might still be in the minority, in part because many mortgages have yet to reset their rates and the decision to file for bankruptcy is often a last resort. Likewise, subprime-related foreclosures have yet to fully trickle through the local economy. But lemons-to-lemonade business success stories aren’t only to be found in the housing market. Higher vacancy rates along with new construction means it could be a good time to find a cheaper lease or even trade up and buy.And perhaps no niche has benefited as much – or benefited as many bargain hunters – as the auction industry. Mark Motley, the president of Motley’s Auction & Realty Group, estimates that his firm has doubled its auction business in the past year, and he continues to see a steady increase in calls from the sellers of homes, land and equipment. Attendance at the company’s auction is way up this year as well, Motley said, which means bargain hunters are coming out of the woodwork. Likewise, equipment rental companies, used equipment dealers and used furniture sellers are likely to see an increase in business. On a larger scale, some corporations might start divesting unprofitable divisions, assets and employees, which might mean more opportunity to pick up bargain-basement prices on equipment. For its part, the auction industry owes much of its success to its efficiency. During the frenzied days of the housing bubble, realtors often were able to sell homes within days of listing them. But now that the market is in turmoil, properties are sitting on the market for months while owners begrudgingly make mortgage payments. By their very nature, auctions are set up to sell property on hand, and those on the bidding side of the aisle know it. These conditions allow for faster sales cycles than traditional listings, which means less time on the market and less manpower to sell it. Builders sitting on unsold or recently completed units are also finding that auction sales draw attention to other subdivisions and lots. And anything that generates visitor traffic is good at a time when buyers are wary. Quick to spot a need, Motley’s has marketed its benefits to struggling companies by helping them figure out ways to downsize. “We’re not the grim reaper anymore,” Motley says. “We’re working with companies to be a business opportunity problem solver.” Translation: Motley’s can help sell off unused equipment, vehicles and other assets at auction to help offset and prevent revenue dips that might otherwise lead to layoffs or bankruptcy.
For example, many builders and land developers own trucks and earth-moving equipment sitting idle right now. Motley says that he’s been busy auctioning off that equipment to buyers via online internet auctions in places as far away as Mexico and the Middle East, where so far building construction remains robust.
“While our economy may not be the best, there are lots of people all over the world that still need this equipment,” Motley said.  And then there’s the issue of the subprime meltdown that started this mess. Relief does not appear close-by. Home sales fell 31% in the first three month of this year compared with the same period last year. Although, things aren’t as bad as they could be. The Richmond foreclosure rate ranked 95th out of the nation’s largest 100 metropolitan areas, according to a February RealtyTrac report. Local bankers don’t expect the subprime mortgage fallout to let up anytime soon. According to Union Bank & Trust Co. President and CEO John Neal, most potential buyers are sitting on the sidelines because they believe home prices have yet to reach bottom.
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