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How to Take Advantage of a Bear Market

We are in a bear market. 

The toll of the COVID-19 Coronavirus on human life is terrible. The loss of family members and friends is painful and the entire team at The Heavy-Duty Parts Report prays for the families of the victims of this pandemic.  

We also want to take a moment to remind everyone that staying healthy and doing what you can to protect your family, friends, and community is more important than business, finances, and the world’s economy. 

The purpose of this article is to provide business leaders in the trucking industry with practical information about navigating a bear market but in no way are we suggesting that it’s more important than taking care of your physical, emotional, and spiritual health. 

When this pandemic comes to an end and the world begins to recover, we are going to have to turn our full attention towards getting people back to work and rebuilding our economy. Over the last 100-years, every bear market has been followed by a bull market that exceeds the one before it.  

That’s important to realize, and since the bull market that followed the 2008 Great Recession brought on by the US Housing Crisis caused the markets to go higher than it has ever gone before in its history, even if that trend does not continue, we will still see a massive recovery.  

According to a recent CNBC article, this is what you need to know about a bear market: 

  • A bear market is when stocks see a 20 percent decline or more from a recent high — resulting in overall pessimism on Wall Street. 
  • Bear markets usually last 13 months on average, and stock markets tend to lose over 30 percent of their value. 
  • Amid these conditions, stocks take an average of 22 months to recover, according to an analysis from Goldman Sachs and CNBC. 

What does this mean for trucking companies, repair facilities, and heavy-duty parts stores? 

It means that we will see financial difficulty take its toll on business owners and their employees. Due to the severity of the impact of the COVID-19 pandemic, it might take longer than average to recover. For most people, this is a scary situation to be in and unfortunately, that fear makes things worse. 

But it also means that aopportunity will present itself in the future and it’s important to be prepared to take advantage of it! 

Warren Buffet in an interview about what it takes to be successful in business was quoted as saying, “it’s not rocket science, in fact, you only need enough intelligence to get from where you are to the mall and back again. What is more important than intelligence is to have the correct temperament. You need to be comfortable going against the crowd.” 

To me, this means that while everyone is running scared in the opposite direction, you need to be thinking about moving forward with a calm purpose. 

In his best-selling book Unshakeable, written specifically to help people who were hurt by the 2008 financial crisis and beyond, Tony Robbins wrote specifically about how bear markets create the opportunity for geometric growth. Geometric growth means expanding your business 3 to 5 times or more in one year.  

Being part of the trucking industry presents a unique opportunity during this bear market and in the recovery that will happen over the next few years. This pandemic has taught the world something we all knew all along – trucks supply our entire world with everything that we need to survive – this includes medical supplies, food, clothing, and energy. 

Our industry isn’t going anywhere. 

The main reason that our markets have always expanded larger and larger every time we go through the bear/bull market cycle is that technology creates more economic output.  

The trucking industry will continue to be expanded by technology so when you combine technological advances with recovering markets you create the foundation for geometric growth. 

The Strategy for Geometric Growth  

Before we continue, please note that the below strategies are based on my opinion, ALWAYS consult professional accountants, lawyers, and any other professionals or government officials that can provide you with accurate information that is tailored for your individual needs. Never make business decisions solely on the opinions published on the internet or social media websites.  

With that established, I’d like to share with you the simple strategies that will lead to geometric growth in your business. 

What you need is the correct mindset, accurate information, and the courage to execute when the time is right.  

Typically, the opportunity presents itself in four scenarios: 

Scenario 1 – A Competitor Wants to Sell 

Some of your competitors are going to be in financial trouble and will be looking to sell their business. You can capitalize on their financial needs and acquire an entire company for a drastically reduced amount. Done right and the seller will see you as a rescuer. 

This can be an amazing opportunity to acquire capital in the form of buildings, vehicles, tools, and other items related to your business as well as the opportunity to add qualified people who will have skills and abilities unique to your team. 

You will also acquire their customer list, social media sites, websites, phone numbers, and business listings on search engines like Google. As well as take advantage of new product lines, new services to offer, and new suppliers that previously you were unable to acquire on your own. 

In a very short time, you may see returns of triple or more by removing inefficiencies, streamlining, and systemizing operations, and providing your newly acquired customers with a diversified buying experience. 

It is extremely important that you do not overpay in this situation, this will require you to do your homework and negotiate firmly while still allowing the seller to maintain a measure of dignity. You may have to walk away if the seller has not yet realistically valued their business, but that’s okay. Leave the line open in case they reconsider. 

Often what happens is that the market will correct their expectations. At that point, the seller will return to you and continue negotiating with the understanding that you are their best option. 

Scenario 2 – A Competitor Wants to Retire 

Some of your competitors may decide that at this point they are finally going to retire. 

How you approach this scenario is going to be very different from the last. Remember the motivation of this competitor is different. They may not be in financial difficulty at allrespect that this company is their life’s work. Therefore, a lowball offer will no doubt be a turnoff. 

Simply put, these business owners just may not have the energy left for another bear market and they may not want to keep struggling forward until the inevitable recovery. 

Make no mistake, this does not mean that they are going to fire sell everything and it also doesn’t mean that they don’t care about their employees, customers, or the legacy of their business. 

When you approach this scenario, do everything you can to create a win-win business opportunity for the soon to be retired seller and for you. 

Communicate how you will take care of their employees, customers, and how you will honor the legacy of the business that they built. 

At times it can be advantageous to have the seller stay on in a part-time or consultative capacity to help make the merger a success. 

For example, if your company specializes in the private carriage business while the seller does for-hire freight carrying, it would be extremely beneficial to have them stay to facilitate the merger.  

Personally, I prefer only a short-term consultative arrangement.  It can be difficult for a person with 30plus years as the boss to relinquish control and it can be confusing for the employees and customers. This will ultimately result in a smooth transition, with minimal disruption to customers and employees. 

Scenario 3 – A Competitor is in Financial Difficulty but Not Selling 

Some of your competitors are going to be in financial difficulty and will be wanting to eliminate parts of their business in order to save money and streamline operations. 

This is a great opportunity for a win-win scenario. The seller gets to offload something and balance their budgets and you gain something overnight that may have taken you years to develop on your own. 

You will expand your customer list, gaining the ability to cross-sell to these newly acquired customers with the products and services that you were already sellingDoing this will create the possibility of geometric growth. 

In this scenario, it is ideal to have the seller provide support as you master how to sell this newly acquired product or provide this new service.  That support can come in the form of technical knowledge, training for you and your staff, and even having the seller communicate with the customers on your behalf, directing them to your website or phone number for a period of time after the acquisition. This will effectively reduce friction for your customers and your sales and marketing departments. 

Scenario 4 – They’re Not Interested in Developing a New Product or Service  

This happens all the time. The industry is changing fast and sometimes dealers and aftermarket distributors are too slow to respond to the needs of their customers. 

Diesel Laptops

Tyler Robertson is the CEO of Diesel Laptops. They’re a $50 million dollar company that 5-years ago didn’t exist. Tyler worked for a truck dealer and was in the parts department after working in service for many years. He knew that there was a need in the industry for diagnostic laptops. 

Tyler was willing to develop and sell these diagnostic tools on behalf of the truck dealer he worked for, but they showed no interest. With their permission, he started selling them independently. Once things started to take off the truck dealer could have made a deal with Tyler and they could have been partners but instead, they gave Tyler the option of an expanded role in their company if he abandoned selling those diesel laptops. 

He chose to start Diesel Laptops and in 5-years he has become a dominant player in the diagnostic tool and parts information sector and has experienced geometric growth every year since.  

My Own Experience is Very Similar  

I was working for an aftermarket parts distributor after I sold my contracting business in 2016. I saw that the heavy-duty truck parts industry was being underserved in the podcast space. 

I approached my bosses and volunteered to create a podcast on their behalf and start producing a regular video series to help them connect with their customers in a new way and serve the broader needs of the industry. They have 150+ stores across the US and Canada so the opportunity was there for the taking.  

They were not interested.  

I started The Heavy-Duty Parts Report podcast in June of 2019. In December of 2019, I had a discussion with my boss about my future with the aftermarket parts company I had been with since 2016. He basically told me that they had no opportunities at the moment for me to advance my career, they would need me to relocate 125 miles (200 kms) to the city where their head office was located when they did promote me, and although they couldn’t stop me from doing the podcast they would like it if I did.  

My decision was to resign in December of 2019 and in the first quarter of 2020 – despite there being a global pandemic that has dramatically slowed our world and economy to almost a standstill – I have hired two people and generated more revenue than I made in the entire 2019 year as a Sales Account Manager.  

The Heavy-Duty Parts Report is showing no signs of slowing down and we are quickly becoming an industry leader. When we move to the next phase of the plan and start supplying distributors with the opportunity to connect with our listeners and sell them parts I hope my former employers will not continue to ignore this opportunity. 

As you see from these 4 different scenarios there is opportunity everywhere to not only expand your business geometrically but also to serve our industry in many ways.

A Quick Word About Money 

Money is going to be very cheap for the foreseeable future. This means that low-cost financing options are available. The government is providing incentives to financial institutions to loan money. In some cases, these loans are interest-free for a period and guaranteed by the government. 

The Four Things You Need More Than Money 

You might think that you need lots of financial resources to execute these strategies. But surprisingly, there are several things that are more crucial. The more you develop in these areas, the less financial strain you will experience and the more your business will grow. 

Mindset – Bear markets are primarily fueled by fear, pessimism, and speculation. You must see this as an opportunity and be courageous. Remember though that there is a big difference between being pragmatically optimistic and being foolish. Developing the correct mindset is one of the things that will propel you to the top. 

Due Diligence – This is a fancy way of saying “DO YOUR HOMEWORK!” You need to know more about the acquisition than the seller does. Although I don’t recommend being adversarial, I do think that the expression “know thy enemy” applies.  In other words, know who you’re going to approach, why you are approaching them, how you are going to approach them, and your desired outcome when all is said and done. This is a good time to get professional help before, during, and after you execute one of these strategies. 

Negotiating Ability – As I discussed earlier, there are specific strategies that you need to use when approaching and negotiating with a potential seller. You must understand WHAT will motivate them to want to negotiate with you. Once you understand what will motivate them you will have to decide HOW to use that information.  

One of my mentors always said, “it is a sacred trust, you can use this information for evil or for good but remember that people have a long memory and are much more motivated to do you harm if you abuse them.” In other words, your reputation in the trucking industry will be affected whether good or bad. Influencing how, not only competitors, but also your customers, employees, and suppliers will see you. 

Creativity If you’re looking for the one skill that will drastically reduce your payout while increasing gain, you’ve found it. For example, you could acquire a soon to be retired competitor’s entire customer list for a small amount of money or you can buy an entire business with no money down and no money out of your pocket.  

The key is creativity. 

Being creative goes hand in hand with being adaptable. I’ve always appreciated the saying “don’t panic, pivot!”  This not only applies in negotiation but in the everyday running of a business. If something isn’t working, shift gears! 

By coming to understand a bear’s behavior, they become much less dangerous. In the same way, bear markets should not be feared, they should be embraced as a rare opportunity for geometric growth for your business.  

I wish you good health and great success as we navigate these difficult economic times. None of us know what will happen next but historically more money is made during and immediately after bear markets than any other time in the economic cycle. 

Don’t fear the bear! 

Be pragmatically optimistic, get creative, do your homework, enlist the help of professionals, and achieve geometric growth during this challenging but rare opportunity. 

Would you like some help to develop your strategy?

Jamie Irvine works with forward-thinking heavy-duty companies as a consultant. Developing a Business Development Strategy that encompasses acquisitions is part of the consulting work that Jamie does with heavy-duty truck & trailer companies.

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Author: Jamie Irvine

Jamie Irvine is the host of The Heavy-Duty Parts Report and a consultant that works with manufacturers, distributors, and SaaS companies serving the heavy-duty truck parts industry.


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