What I learned in 2008 - A BLIP Investor's Perspective

Well, it certainly has been hard times for many people, including some BLIP members. I hope others will pipe in with their personal challenges so that we can collectively grow and share our wisdom.

What I learned in 2008:

1. It's very, very hard to be an investor while simultaneously run a retail operation.

A retail business is an extremely capital and time-heavy investment. It sucks every last minute of your day and every last dollar from your bank during startup. No one could have prepared me for all the unexpected expenses that I encountered such as equipment problems, stocking, relentless royalties, surprise GST payments (they come every three months), payroll and other labour costs, downswings in sales cycles (slow near the holidays in our area), and more. In short, I ran out of capital 3 times in 8 months and had to borrow more each time. All the while, I was consumed with the relentless demands of running the business. This left little time to read articles on investing, keep up with the global trends before they hit, or basically just sharpen my investing axe. So, it was a double edged sword. On the one side, I didn't have enough time to properly study investment and then when I did and had the sure-fire confidence that I sometimes get, I didn't have the capital to invest! One such event was Maple Leaf meats. I read about it, I studied the situation, I knew they would pull out of it and I said to myself, "Self. You need to quickly buy Maple Leaf stock while they are rock-bottom." But self had no money left because of the retail operation so all self could do was watch the opportunity sail by. And self's prediction was right about Maple Leaf. Time and money are completely consumed when you start up a retail operation. Be sure this is the correct direction for you.

2. CashFLOW is king.

Cash is good, but cashflow is king. Being a wise steward of whatever cashflow you have is the key to not getting nailed. During up times, I spent too much. I didn't prepare for a downswing. Then, when we swang down, I needed to borrow more to get the cash flowing again. Meanwhile, I could have/should have started analyzing my expenses in extreme detail and cutting them earlier.

3. Focus on Net worth.

Thankfully I learned this while sharpening my axe. A few of us read a couple of good books that suggest that a person who desires to be financially free should not focus on income but instead on net worth. I agree wholeheartedly with that because although I can't rub two pennies together on certain days, my money is certain occupied with building greater net worth. However, this MUST be balanced with #2, cashflow. Net worth is of no value if you can't make your payments and lose the asset.

4. Make an exit strategy (and stick to it)

This is something I've known about for a while but is very easy to forget. Sometimes we hold onto our investments for emotional reasons. In my case, I have a great tenant so I am hesitant to ever sell the property. In another case, I like my coffee shop and the customers so it is already hard to consider giving up that new part of my life. And then there is our own house....it's always emotional to try to move or sell your principle residence. But, we must make these hard decisions and separate our emotions from our investments. Pride can also be a scary enemy of our success. Sometimes we know we should exit but our pride doesn't want to let go because, perhaps, we've already lost something on it and don't want to admit it, or, we've already spoken to lots of people about how good it is and don't want to have to back-peddle.

5. The Work/Play Balance (aka keeping the sabbath holy)

We need to rest. I don't recall smelling many roses in 2008. In fact, it may go down as one of the hardest years of my life for work and stress. Certain weeks when we took over the store I was working 7 days a week. We need to secure that sabbath day and make sure we don't get lured into more work. As an investor, it's tempting to want to make every minute 'useful' but in reality, rest is more useful!

And those are the main things I've learned through the challenges of 2008. All I can hope for is that this will translate into practical wisdom and that 2009 will be much better on every front as we start a fresh year.