A few months ago and again last week, I sent out some emails about what I was seeing in our economy, and frankly – in the global economy.
And what I’ve been seeing has been quite alarming and disturbing.
Again, as I mentioned in both emails, it’s not my intent to scare anybody or to be an alarmist, but at the same time, there’s a biblical principle that says we should be in the world but not of it.
In other words, we have to be able to be in it and aware of what’s going on around us, but we also need to keep our spirit pure.
As I’ve mentioned before, I’ve been an entrepreneur since 1988, and it’s been said that ignorance is bliss.
And it is. Back when I started my business in the 80’s I didn’t know we were in a recession. I didn’t know that when I was knocking on businesses' doors, offering them my services.
The only logical reason I thought people weren’t buying was because I wasn’t knocking on enough doors. All the while, they were preparing to go out of business.
I didn’t know, and I'm grateful I didn’t know because I was starting a business at exactly the worst time. And had I known that, I wonder if I would have kept going...
A recession would be the worst time to start a business, but it wasn’t. In fact, it proved to be one of the best times.
I started another business in 2006 and 2008 and that was right in the midst of the financial crisis.
I also managed my business during the dot com bubble in the early 2000s.
So, needless to say, I’ve been around the block through some hairy, scary economic downturns.
And I’ve learned a few things along the way.
And here’s the first thing I want you to know.
You will never be able to save your way out of a recession.
That doesn’t mean you don’t cut costs, tighten your belt, hold off on large capital expenditures…. You probably have to do a number of those things.
But those things are not enough for you to survive and actually thrive during economic downturns like we’re facing right now.
What I’ve also learned is that tough economic times can be a really great backdrop for those entrepreneurs who are willing to do things others are unwilling to do, (like work really hard), and be strategic about how they manage and grow their business.
Tough economic times have a way of “shaking out the loose hands” – meaning those businesses that provide mediocre services don’t make it.
Let’s just look at an example of a restaurant.
If a restaurant is average in their service and in their food quality, when tough economic times hit and people can no longer go out to dinner twice a week – perhaps they cut back to just once a month – when they do go out, they certainly don’t want to spend their money on average.
It becomes a treat for them to go out for dinner. And so they’re going to go out where the service is best and where the food is best – not necessarily the cheapest.
It’s not that people don’t buy in recession times. People do buy. They just buy smarter. They reward themselves with the best.
So for entrepreneurs that are disciplined in their quality of service, in bringing the best value, the best product, the best service – those companies are the ones that remain standing.
Tough economic times also create massive opportunities to purchase things that normally may have been out of reach.
Some companies will close up shop and equipment will go on sale.
I remember back in the 80’s during the recession, walking into my vacuum cleaner supply store and seeing 3 nearly brand new vacuum cleaners that normally would have sold for $400 each, now on sale for only $200!
I thought for sure there had to be something wrong with them. And the guy at the store assured me there wasn't anything wrong with them.
Why were they so cheap? He was able to get them from a company that was going out of business, and then and he was able to pass those savings on to me
And again, I had no clue we were in the middle of a recession at that point.
But as I grew in my business understanding, I realized what was happening.
And later during the economic meltdown from the dot com bubble, there were companies (competitors of mine) that were making cut backs while making some rookie mistakes.
They were going to cut back on their labor. They were going to let go of their highest-paid employees, keeping the lower-priced employees, not realizing that the reason why their highest-paid employees were the highest paid was because they were the ones bringing the most value to the business.
…They fired the eagles and kept the turkeys.
But I did something different. I was able to go and hire eagles that would normally have never been on the market. And I was able to tear down and cut some of the turkeys that I had in my block.
And so I went into the early 2000’s with a team of eagles and it served the business well.
I’ll be sharing more strategies over the next coming weeks that I think every business – large or small – should keep in their awareness.
Last week I asked you to look and take inventory of your people, your systems, your processes and resources, and make sure that you’re getting a value return on those investments.
If you found any of those in your inventory: people, systems, programs, or expenses that weren’t contributing to the growth and sustainability of your business, now is the time to begin to release those.
Don’t wait until it’s too late. Don’t wait until your back is right up against the wall.
The #1 rule for all entrepreneurs is preservation of capital and cash flow.
So, if you have staff positions, subscriptions, recurring costs, or equipment that are not meeting the value base that they need to bring to the business, you need to be a disciplined manager of your resources and release those things.
I’ll be honest. It’s the toughest thing to do as an entrepreneur, and it’s the toughest thing as a human being to let people go or to “ be ruthless.” But at the end of the day, you’re responsible to and for your business’s sustainability.
And you have to adjust yourself to the economic structure of the marketplace.
And right now, without question, all signs are leading to a significant economic downturn.
And we want to be prepared for it by being prudent, disciplined, and focused on our opportunities.
Please be on the lookout for more strategies to survive and thrive during financial downturn in the coming days and weeks. We're in this together.