[MUSIC] So by the great recession of 2008, you had built quite a nice business as I recall. But that recession was not kind to most IT hardware businesses, including yours, so how did you cope with that surprise? >> Well, as a little bit of background to that, when I started the business in 1989, I effectively had $2,000 of capital and about 28,000 that I had loaned myself for three months to do cash flows and stuff. And after that that was my sole investment. Well, by 2007 I think we were at $70 million in revenue and we had 360 employees across the country. Across the world, actually. We were operating in five countries at that stage. So the recession was not kind because the first thing that happened in the recession almost immediately and we got hit with the recession about six months before it started sort of becoming global issue on the media. And the reason that happened was because the first thing you stop spending money of if you get nervous is replacing capital equipment that you've currently got. You just decide to delay the refresh cycle. >> Yep. >> So even when the board of directors of companies were saying no one's talking about a recession yet. Guys are still getting a little bit nervous and they're saying, we're just going to pause for a while. Well that pause was devastating. Those decisions in the board room, we saw an immediate 25% drop in revenue. And within six months because everybody's fighting over what limited business there was we saw a drop of 50% in our gross profit. And our gross profit or gross margin is what we pay our bills with. So here we are running a 360 person company and suddenly the money we've got to pay the bills is cut in half within six months. So it was pretty tense. >> Quite a shock. So what kind of tactics did you use to solve that little problem? >> Well, the inevitable tactics. The first challenge was to get over the shock of recognizing that this wasn't a blip, that this was the new normal. And I won't claim that I was faster than the average person at recognizing this. I was probably as slow as everybody else, I was hoping that things were going to turn around in the new year, well, they didn't. So then you start looking at where you're spending what you've got fixed variable overhead, and you say if this is the new normal, what do we really need in terms of infrastructure and staffing and skill sets and stuff like that? We unfortunately set to start closing down. We had ten facilities. We had to start closing down facilities and doing layoffs, which I absolutely hated doing. >> And then at the same time you were doing that, that sort of affected the cost side of the business, getting your costs in line. But you've also talked to me about the kind of tactics you used to begin to get customers to pay you earlier. Because, of course, if you could get revenue, that was just as good as cutting costs, and in fact, it was maybe better than cutting costs because there wasn't the human toll there. What kind of things did you use to get people to pay you soon? >> Well, we did several things. The first was we had a debt that was growing, because when you've got expenses but you don't have the profit to pay for it, then you've got to fund it somehow, and you've been through your cash surplus and you start adding debt. Until you adjust yourself to bring it back into balance. So watching the debt climb, we started saying, well, what do we do to reduce this? We started focusing not on being so much responsive to what the customer wanted us to supply, but we'd always encourage the sales guys to say, well, If the customer says he wants to buy a blue widget, you ask him whether he can use the red widgets because we've got the red widgets in stock. And if we sell those, frankly, even if we sell them at or below even sometimes below cost, we're converting that inventory into cash which is driving our debt down. So it was one of the things that we did. We did things like, saying to people, I mean there's constant price pressure because people understand that the market's become very competitive. >> I can get a deal, I'm going to ask for a better deal. >> I suddenly realized that I've got a purchase order in my hand and there's a lot of people willing to bend over backwards to get that purchase order. So the inevitable question was, what's the cheapest price? Or I need a cheaper price than that. And when we get down to the point where we felt we were at our limit, we'd say to a guy, okay. And if we wanted a reason to be able to give the guy the cheaper price without looking like we were overpriced in the first place, we would say to someone, okay, I can give you the price you're asking for, but what I need from you in exchange is I need you to prepay for this order or I need you to pay for it within seven days, whatever we felt was appropriate for the organization. And most people, most of the people we were dealing with, they're not really concerned about the cash flow issues. If they can get a better price by paying it upfront, and we've been in business for a long time and they trusted us. That's what we'd get. >> And you were selling it to businesses, of course, and most people in the middle of a business who are charged with buying things are bonused on their P&L, they're not bonused on uses of cash, right? >> Correct. Although what we did see, over time, was, as the media started talking about cash flow. We starting seeing large companies started to get very focused on cash flow, the companies we were selling to. And the companies we were buying from, we found that both of them starting trying to squeeze us in the middle, and suppliers tried to shorten their trading terms with us and their customers tried to lengthen our trading terms with us. >> How did you deal with that? >> Well, and to give you an example. One of the very large companies in the world, everybody recognize their name if I told them, turned around and told every one of their staff that their new trading terms, their new minimum terms we net 120 days. Or if you wanted to get paid in 30 days, like we'd contractually done for decades, you have to take a 3.5% discount. Well we weren't prepared to do that. We started telling our customers we're not going to do that sort of terms. The funny thing is some of those guys just said, look, I know it's unrealistic, just jack your prices up 3 or 4%, and I'll prove it. [LAUGH] >> [LAUGH] >> But, we dealt with it by, on individual cases, the supplies was a little bit easier, because of course they're trying to get their revenues as well. And we just make it very clear to them we guarantee you will be paid in 60 days. because their normal trading terms we became 60 days. We said, we guarantee you'll be paid in 60 days every day, every month you will get paid exactly on time. But we're not doing 59, we're not doing 58, we're certainly not doing 30 days. It's 60 days, because that's the pressure from our customers. And they had to, the sales guys, of course they want the business. The financial guys say no, no, no, no, they need to pay in a week and the sales guys are saying I'm not going to get the sale. So. >> Yep, yep, yep, true. At the end of the day, it has to work. So lots of entrepreneurs these days are thinking about starting businesses. Maybe they've got a business idea but they haven't gotten started, and they think they need to raise some capital or maybe they've gotten just kind of barely underway, created some technology, maybe, or done something like you did in your early days. But they all think they sort of now need to go out and stop at what they think is the first port of call, and that's an angel investor. Somebody who wants to go give them the cash they need. What kind of advice, given your history, would you give an entrepreneur starting today? [MUSIC]