Hypothetical Scenario: 100k, no debt - biz dwindling - what would you do?

[jschmidt]

I am saying "hypothetical" because a good friend who is the owner of a home based web company is in kind of a pickle. Here is the scenario:

- No debt (owns a modest house out right), supporting family of 4.
- Recently took on some programmers for a year (appx $2000/mo for a yr - commitment)
- Business is down by literally 50% or more, with no signs of ramping up (has probably netted 35k this year only so far)
- 120k in the bank
- has done no advertising
- $3000/mo or so in residuals

Part of him wants to try and sell the business, though he knows he will get much less from it based upon this years current sales. The other part of him wants to either get a business guy to handle day to day operations, but again, money just isn't coming in like it was. And finally, the other part wants to blast out some advertising dollars.

I am more or less looking for the informed / wise users of this board for advice to give him. Any help/thoughts greatly appreciated!

[catherine]

I think the question begs more questions:

Why have the sales declined?
What does he know about the industry he's in? Is it trending up or down?
What is he personally willing/able to risk to increase traffic/sales?
Has he analyzed competitive sites to see what they're doing that he's not?


I think he needs to answer those questions (at LEAST those questions) before he decides whether or not to pack it in.

[Rogar]

Without knowing more about the company and it's pros and cons, it's sort of a tough call. If he sold the business, say for 100K or even 200K, it wouldn't be enough to scale back on employment, but enough to buy some time to look for someting better. I don't know how the job market is for his skills, but jobs are tough to come by these days.

My father was a business owner and he went through hard times and good times, but made a life-long living by sticking to it and changing plans when needed. He worked very hard. I don't know if those life-long type businesses exist much in our modern changing world.

[puglogic]

I would ask the same questions that Catherine suggests. I am in the same line of work and business is actually UP this year, likely near double of last year. So it's not automatic to say "bad economy," because web work is not geography-dependent. More likely, there is a shift in his business approach or service offerings that will perk things back up. Is he looking for that? I'd also question why one would take on programmers on such a retainer -- and whether, since there's now not enough work to employ them, they can't be cut loose.

[TVRodriguez]

I'm not in his business, and I've always been an employee, but my DH has his own medical practice, and he has always found advertising to work for him. When he pulls back on advertising, revenue drops. And like puglogic, his revenue has been up this year over last year. Although it's apples to oranges, I know, it's still just to say that the economy may not be the whole problem here.