Every business has cycles. Since I have been in the business world (from way back in 1995), I’ve seen numerous cycles run through numerous industries. The industry I was heavily involved in, real estate, took a major hit in 2006 – 2007 with the real estate meltdown. Like many, I was involved in the dot-com bubble in 2000 – 2002, when dot-coms littered the barren stock market landscape. I watched the web hosting industry meltdown in 2008 – 2010. Now I’m watching as we are in the midst of the large ad / marketing agency meltdown.

Here are a few indicators I’ve noticed when an industry is reaching meltdown status (these are in no particular order):

1. Everyone is talking about the industry and are all “experts” – When the waiter at your local restaurant asks if you’re “in” bitcoin, you know it’s time to exit. When someone tells you their brother’s cousin’s uncle’s girlfriend’s boyfriend is a consultant in the field you are in and they mention that the person they knew just wanted to “jump” into the industry; but, had no experience – it’s time to start evaluating.

2. Market indicators – When the real estate market was reaching the first stage of meltdown, the signs where apparent if you knew where to look. First, home builders were decreasing their land purchases dramatically due to the land inventory they had on hand and the fact that the price per acre for land was exorbitant. Second, every sub-par piece of property was being sold to office condo developers at top dollar with no slowdown in sight. Third, due to the high price of raw land, condo developers started renovating and flipping existing apartment projects as condo developments and the inventory of condos spiked as interest from buyers started to wain.

3. When the race to zero has been won – This happened to the web hosting / domain registration business in 2008 – 2010. Everyone jumped into the business reselling shared web hosting and domain registration services and the price point dropped faster than a mafia snitch sinking to the bottom of the ocean with concrete shoes. Without differentiation between the service providers, the war for price was on. As the master, Seth Godin, says “But the problem with the race to the bottom is that you might win.”

4. The industry is becoming automated – Whether it be robots or AI, an industry’s death knell is being rung when you see the human element being removed from the industry. The auto industry is a clear sign of automation killing a workforce. We are seeing this take place right now in automated marketing, robotraders, blockchain, etc.

5. The mass exodus – We are seeing it clearly now in the marketing agency world. Agencies are shrinking, as many businesses no longer want to pay exorbitant agency service rates. With the advent of Fiverr, Upwork, Guru and other freelance websites, you can see the trend moving to freelance project work in the industry. The big agencies are fed by the larger corporations; but, the smaller marketing firms are becoming more lean and mean and are learning to keep costs down for their clients based on efficiencies and the new resources of freelancers.

6. When you are no longer needed – Sometimes industries just go away. Just look at the horse and buggy. Days before the first car was to roll off the assembly line someone bought 10 new horses for their horse and buggy business.

7. When your business is a trend or fad – Whether it be a certain fad or hot trend, know that these businesses cycle often. There is money to be made in these types of businesses; but, just be aware that the business will go as fast as it came. Be prepared for the switch before the market turns on you (and your stocked inventory). You will start to notice some of the other points / factors inside this article and that is the signal to start looking for the next opportunity. I’ve known many successful entrepreneurs that specialize in capitalizing on trends. One prime example was fidget spinners – a ton of money was made in that fad; you only had to see the trend coming and jump on the trend when it started or before it reached the tipping point.

The benefits of “knowing when to fold them” is when you are the innovator tipping a market by creating the industry automation, building businesses on employing the freelance mass exodus, developing the next business that takes down the status quo industry (UBER to the taxi cab), can see trends coming well before they are enjoyed by the masses, develop the system that forces the race to zero and can capitalize on the low price model, can see when market indicators are starting to turn from bad to good and jump into the business / investment or just plain “knowing when to fold them” to move on to a better opportunity.