In London's financial district, companies are jobs are closing as the City suffers from the credit crunch

There has been a sense that good times go on forever, and they have gone on for an enormously long time, which has been terrific. But it was always going to reach this point because around the world people were being given credit to borrow money that they couldn’t actually afford. You have to run your personal life as if it’s a little company, you’ve got some money coming in, some going out. Do you want to be beholden to MasterCard or to yourself? If you don’t know how to say no to yourself in terms of that extra new handbag or whatever, then you’re putting yourself at risk. When you’re buying a new home, I strongly believe in saving up 20% of the down payment and then getting an 80% mortgage and that’s it. An 80% mortgage can’t be more than three, three and a half times your combined salaries, and if you’ve gone outside of those basic rules then you are at risk.

Back to basics

I’ve lived through a number of recessions and difficult times; the first thing to do is to sort out the basics. If you have a business with a sound core but you’re adding on new bits that are more risky, more difficult, it may not be the time to add those new bits. You may want to stick to what you know. Make sure your core business; your customers; your supplier relationships are all sound and in place. And if your financial situation is at all rocky, deal with it straight away. People get into trouble when they pretend there aren’t problems, and that there aren’t going to be issues.

It’s back to what I learned at Go, to adapt really quickly is important, it doesn’t mean panicking, it doesn’t mean firing everyone, but it does mean rationally and quietly assessing what you need to do to get through a recession. You can get through recessions and when you come out the other end you have a great structure in place that you can begin to develop and grow once the national economy starts picking up. Wishful thinking is not the right way to approach a recession; you should be very calm and very realistic.
Companies that have broken the rules because cheap money was available and they borrowed a lot, they’re at risk. They either need to retrench and recalibrate, or to look for lower risk ways of moving forward. For the last three or four years I’ve felt out of touch and old fashioned, because I would go to business meetings with people and they would talk about extraordinary prices for businesses. After my calculations the numbers didn’t stack up, and I would walk away from the deal. I thought I must be crazy. I must be the only one out there who’s saying the numbers don’t add up, but now I’m kind of glad I did, my savings are safe – well not all of them – but it will come back.