…Like An Oversexed Guy in a Brothel (Buffett)

"Wall Street," reads the sinister old gag, "is a street with a river
at one end and a graveyard at the other." This is striking, but
incomplete. It omits the kindergarten in the middle.

Frederick Schwed, Jr., Where Are the Customer's Yachts?

Some of you may fear that I have jumped feet first into the Prozac laden, Doom & Gloom crowd. I am actually just the opposite right now. We have spent much of the past two years getting liquidity in our portfolio so, unlike 1999, we are going into this down draft with a light number of existing investments to navigate through these troubled waters. I am actually looking forward to finding our next generation of successful investments.

There are a couple of areas that do well in these  kinds of markets.  The most obvious are those solutions that eliminate distinct & meaningful chunks of expenses from companies's income statements. "Productivity" savings with secondary benefits don't count. This means that there was an expense before (credit card fee or brokerage fee or inventory cost) and now its gone. You will find very willing buyers if it is clear cut and does not require lengthy or expensive implementations or retraining.

Performance based revenue models also excel in these times. Customers have little spare capital to spend so they don't want to use it with the "hope" that they will get something back. If your proposition is that you get paid when they get paid, companies will view this as significantly less risky and much more acceptable. Also, if you are in the customer acquisition world, these can be gravy days as acquisition costs (advertising, search, etc) grow cheaper by the day.

There are an array of other models but these are two clear, classic ones for these times. Our company, Performics, doubled business every year throughout the tech bubble and crash. It was one of the leading performance based marketing firms in the US and now owned by Google.

So, while everyone is either dispondent (last week) or manic (this week), you should focus on business models that work in times of low budgets and exceptionally skeptical buyers. Nod your head to all of these horror stories and build up your business quietly in the background. It is the best of times and the worst of times.

Just remember: "If you're gonna panic, do it early." –Peter Lynch
Click here for other funny & interesting Wall Street quotes collected by Michael Ross