Post-Layoff Options: 8 Strategies to Pursue If You Get the Axe (and 3 Mistakes to Avoid)
“M&A is all I know! What else could I do?”
-Banker Fearful of Potential Layoffs
This quote comes from a story a reader was telling me the other day. With layoffs spreading, even those currently employed in banking are starting to think about their “Plan B.”
We’ve previously looked at how to get into the industry in spite of a bad market, as well as what to do if you can’t get in despite your best efforts.
But if you get laid off, what can you do besides M&A?
“M&A is All I Know” – Really?
It’s easy to believe this one.
But in my experience it’s not true, especially at the junior levels. Analysts or younger Associates often jump into new pursuits without much hassle – the less experience you have, the easier it is to switch. Mid-level guys trying to transition face a much tougher task.
Also keep in mind that little of what you learn in finance has much to do with finance.
You spend more time learning people/teamwork skills, proper email and phone etiquette, and even how to present yourself than you do learning Excel (don’t tell that to anyone who just spent $10,000 on a training course, though).
So even if you think M&A is all you know, chances are you’ve picked up some other valuable skills along the way.
Your Marketability Goes Up, Not Down, After Working in Finance
After investment banking, your options increase – even if you get laid off before your “time is up.”
You have more skills, more contacts, and you have a much better idea of what you actually want to do. Yes, there are a few options that may become more difficult to pursue, but nothing’s 100% certain.
The banker who thought that “all she knew was M&A” made a common mistake: underestimating yourself. Thinking small, rather than Thinking Big.
And thinking small harms you far more than getting laid off.
Private equity is one area that becomes more difficult to pursue post-layoff. Like banking, PE recruiting is very structured and most people who get in from banking have followed a “standard” path. PE recruiters view anyone who did not finish a 2-year analyst stint with suspicion.
Earlier this year, some friends ran into this exact problem – they ended up going to industry or spending months pounding the pavement at smaller PE firms to win offers.
You’ll have better luck with hedge funds and anything that lacks structured recruiting. They care more about what you can do rather than whether you “put in your time.”
Ok, So Give Me Some Strategies!
Here are 8 “strategic alternatives” outside of finance you might consider in the case of a layoff.
1. “Moving to Industry”
Although bankers sometimes look down on “moving to industry,” when times are bad they start saying, “Wow, you’re employed? Cool!”
Coming from something as intense as banking, you also have an advantage over others competing for Corporate Finance / Business Development roles at companies.
Yes, you will take a pay cut, it will not be as “prestigious,” and the advancement opportunities will not be as good.
But it pays the bills. And it might just be more interesting than spreading comps.
2. Teach for America / Peace Corps
Both these programs have excellent reputations and in some cases even have established recruiting programs, so either one could be a good option.
One warning, though: make sure you actually care about what you’re doing – don’t use it as a way to time the market.
Let’s be honest, not everyone actually likes this type of work. Don’t lie to yourself if you really want that new Ferrari that only a $200,000 bonus could finance.
There are plenty of other nonprofits you could join, but these are 2 that are well-positioned to help you with recruiting in the future.
3. Government Agencies
In past recessions, laid off financiers sometimes went to government organizations like the World Bank or the International Monetary Fund.
Those are still good options, but these days we should add the US Treasury – and any other governments that now own stakes in public companies – to the list.
Effectively, these government agencies are now mini-private equity funds, with portfolio companies such as… Citigroup. And they’ll need some financiers to help manage their new holdings.
Yes, it will be a pay cut and it may not be as “prestigious,” but this one is going to become even more attractive in future years.
4. That Ski Bum Idea
We covered the ski bum option before from the perspective of someone trying to get into finance.
But for someone who has been laid off, traveling or taking a “gap year” can also be viable – the major issue comes down to whether the economy will be better or worse in a year, which no one can predict.
However, if you’ve already been working for years and have some experience, market recovery is less of an issue in the long run.
You do need to figure out how to pay the bills, but if you have enough saved up this is not a big deal in the short-term. And the cost of living is so much lower in countries outside the US / Japan / Western Europe that paying the bills becomes easier while you’re traveling.
Note: I am off being a ski bum as I write this, and would seriously consider it if I had been laid off.
5. Medical / Law School
Most people go into medicine and law for the wrong reasons – so neither is at the top of my list.
Medicine in particular might have a negative ROI if you look at the amount of work, school and money required compared to what you eventually earn.
Law can be better, but corporate law is even more mundane than finance and you still take a pay cut – even at the Partner-level.
You shouldn’t jump into either one unless you’ve already had strong inclinations to pursue them in the past.
Other grad school could work as well, but again make sure you have an actual reason for doing it.
6. Move Back with Parents and Reassess Life
You might combine this one with some of the others on this list, so it’s not a completely separate option.
There’s no shame in moving back home, cutting back on expenses and figuring out what you want to do. To be honest, I think people don’t do enough of this.
Many readers email me with questions on the lifestyle, whether they really have to work 16 hours a day, and how long it will take to “make it.” If you’re contemplating any of these right now, you should reconsider any plans to work in finance.
And taking a time-out might just be a good way to do that.
I don’t mean “Management Consulting” – I mean actually taking on clients of your own.
For example, let’s say you know a lot about the investment banking recruiting process and you decide to start a website to promote yourself and your services.
You’d be copying me, of course, but you’re welcome to try. :)
It’s not just junior employees who do this, either. I know of several Managing Directors who found themselves out of work and consulted for companies during the last downturn.
Of course, you probably don’t want to do consulting forever – but it can boost your reputation and give you a lot of useful connections.
Anything you’re an “expert” in can be something you turn into a side business. I have friends who consult in everything from fitness to personal finance to fashion.
8. Start a Business
I’ve received some questions about this one since I’ve done a combination of this and #7 post-banking.
You could be like Johnny Drama and open your own bar in New York, you could start a retail business, or you could start the next Microsoft or YouTube.
Your biggest fears will be failing and/or losing a lot of money – and the best way to deal with these is to start small, test frequently, and avoid anything that requires huge upfront investments. That’s why everything I do is online.
You could argue that banking is good preparation since you’ll develop a great work ethic; in other ways it’s not so good since you don’t learn much about implementation.
The best time to start a business is during a recession – that’s when others run away scared and when big companies cut their budgets and stop exploring new markets, which creates more lucrative opportunities for you.
What NOT to Do
Ok, so those are 8 strategies you could pursue if you get laid off and the prospects of another finance job don’t look promising.
But what should you not do?
1. Worry About Gaps on Your Resume
These days almost no one has a standard career and a “perfect” resume almost strikes me as suspicious.
As long as you can explain your time away from work, you’ll be fine. Sure, if you took 6 months off to watch Cartoon Network all day, I won’t hire you – but if you can say that was part of your study to be a cartoonist and you have a portfolio to show me, you’re in a much better position.
(Just not in finance – we don’t accept artists, sorry.)
Over the past 4 years alone, I’ve hopped between technology, consulting, banking, and entrepreneurship, and I’m still fine. In fact, I still get buy-side opportunities forwarded to me, despite the market and my random background.
2. Think Your Life is Over
This one drives me nuts.
If you’re young and don’t yet have a family, house, or other major obligations, your life is never over if you get laid off. VPs who get “the axe” and have 2 mortgages with little money saved up are in a far worse position than you are.
Cut back on your expenses, move back home if necessary, sell some of your stuff, and cover your expenses while you’re figuring out what to do next.
Resist the urge to prematurely declare that your life is over.
3. Let Others Tell You What to Do
So, which “post-layoff strategy” is best? Which one has the best “exit opps?”
These are pointless questions because there is no “best” – there’s only what works for you and what doesn’t work for you.
When times are good, everyone tends to follow the herd (Late 90’s – Start or join a dot-com company, Mid-2000’s – Go into finance). But a bad economy actually makes this problem worse since desperation levels tend to rise.
Don’t let anyone convince you to drop $200K and 5-10 years on medicine because it’s “stable.”
I just went through a few of the more common options, but I’m curious to hear what other strategies you’ve heard of for those who have been laid off (either recently or in the last recession).
If I can get enough good submissions, I may write another article featuring financiers who have successfully dealt with layoffs.
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