How to Make Money When You Fall

It seems as if each time I read news on the state of the economy, one common theme persists: companies are still recovering from the market crash of 2008. For the most part, this is old news, but the effects of the market crash are still felt in unemployment rates, company closings, new mergers and acquisitions, and regularly fluctuating stock prices. However, the aftermath of the crash also brought opportunities for some struggling companies to get creative.

During my time at William Blair in 2008, I saw some of the largest banking institutions in the world collapsing every Sunday. In fact, it became a running joke around the office. The situation became so traumatizing for some people that my job description turned from institutional salesperson to psychologist almost overnight. I spoke with clients every day, listening to how their financial problems were becoming marital problems, and then, without fail, they'd look to me to tell them that everything would be all right and that the market would turn around.

The reality was that there was nothing I could do to help them, financially or emotionally. And with that crux, I began to feel frustration for my career as well. If I could not help these people make money, then I could not do my job -- which ultimately meant that I would not advance very far as an equities sales. "All sales is timing," my boss used to say. Unfortunately, I'd picked the wrong time to head into the market.

But after speaking with a mentor from my undergrad, I decided that my problem could turn out to be a great opportunity. So I picked up my things and headed to graduate school. This decision would ultimately lead me to starting a business, and then venturing out on my own as a financial columnist, and eventually an author.

Years later, I described my situation at William Blair to another mentor of mine, and he assured me that I got out at the right time. Tim Padavic, VP of Business Development for Providential Bancorp, is an expert on the market crash, in a way, because his company took a big hit following the mortgage crisis of 2007. In the aftermath, Padavic and the remaining executive board members were tasked with developing a radically new business model in an industry where innovation is a foreign concept.

The result was the successful creation of a virtual platform where loan officers could work from around the country, thereby enabling the company to recruit top sales talent. In the process, a commission-only compensation structure was set in place, which transformed the company into one focused on loan volume rather than selling higher interest rates to less customers.

Long story short, Padavic told me that Providential survived for one reason: "We did what our competition didn't." What he meant was that my clients and colleagues at William Blair were doomed because they were trying to profit in an old model.

"A lot of times when companies fail, it's due to the fact that they operate on accepted industry practices," he explained. "Most companies in 2008 were all log-jammed, trying to drive through a roadblock... all they needed to do was get out and walk."

In Padavic's view, there are five ways to make money when you fall:

• Trial and Error: "We survived the 'great shakeout' by taking the opportunity to rebuild the company with innovative strategies... there was no way to tell what would work. But we were less concerned about our image in the industry when we were facing bankruptcy."

• Cut out roadblocks: "After we laid off thousands of employees, we were left reeling. But then we felt that since most people shop for mortgages online anyway, why don't we just automate the system? With a little bit extra administrative work from each employee, we can do just as much with less."

• If you can't sell lemonade for that price, find a way to get cheaper lemons: "In 2007, we sold mortgage loans to higher income customers because our sales people were salaried with commission. So they needed to sell at a higher interest rate to make the sale worth it. But when we decided to recruit sales people on commission-based payment, we could sell mortgages at a lower cost than competitors."

• Time is money: "With the state of the economy at the time, and even now, we are able to recruit loan officers that want to be rewarded for their time and effort. So when we developed the platform where they could not only work from home, but access all necessary information with one click, we were able to eliminate training and travel costs altogether, while still recruiting top sales talent."

• Volume is the name of the game: "There are no home runs in mortgage lending. We realized pretty quickly after the crash that we needed more customers than money. So we focused on bringing in new customers, and eventually that turned into profit because we cut out all the overhead of office expenses, training and development, electricity, etc."