On September 29th of 2008, the DOW dropped 777.68 and closed at 10,365.45. This amounted to a decline of almost 4,000 points from the previous year. On February 05, 2018, the DOW dropped 1175.21 – the single biggest drop in history. These days a 700 point drop barely causes an eyelash bat and consumers are somewhat bullish as indicated by solid retail, mostly e-tail, spending on Black Friday and Cyber Monday. With a lukewarm real estate confidence index, and many investment gurus screaming that the sky is falling yet again, the question is this – are we in a recession and if so, what can we do about it?
In my neighborhood, For Sale signs are popping up like dandelions. My friend, a luxury realtor, tells me that the ultra-wealthy are panicking a bit. It would seem that the big gains people experienced in 2017, and early 2018, have fizzled out. As someone who specializes in teaching productivity to small business owners, I will be the first to tell anyone who is in the throttles of panic, to calm down. Repeat after me, ‘there is abundance everywhere if you know where to find it.’
With this in mind, business owners do tend to panic during a recession. Whether we are fully in one or not, remains to be seen at the time of writing this article. That being said, an article in Tech Crunch cited that 60% of Fortune 500 Companies were started during a recession and frankly, if you know what to do, you can absolutely come out ahead.
During the last recession, I was diligently building a network marketing business. I did more meetings, showed-up more consistently, brought in more people, and developed more leaders during this time, and did so because I focused on a simple principle – how to pay your mortgage using network marketing. It wasn’t super glamorous however it was real. My team grew and I still benefit from those efforts today in the form of residual income.
For the last year, I have been sharing from stages, podcasts, and my weekly videos, that a recession is coming. Business owners, especially, have got to work harder and be smarter during this time. Anxiety and fear is never the solution. What works is to identify potential mistakes and avoid them.
With this in mind – here are 5 mistakes business owners make during a recession and how to avoid them:
1.Panic. Laying awake at night and focusing on problems is never the answer. It is essential to focus on solutions as tough as they may be. Instead of anxiety, consider that there are always options and the more proactive you are, the better. To avoid panic, learn from the last recession. If you were in business during this time, you will remember that many people lost their homes and businesses – why? Instead of focusing on solutions, they panicked and that cost them the energy required to dig themselves out of a hole. Take a breath and remember that you always have more resources at your disposal than you realize.
2.Not Taking Stock of Resources. If you are serious about avoiding financial devastation then it is essential that you take stock of your resources. Time, people, and your health are all resources. Being able to monetize your ideas, consulting, products, and services are all resources. In the last recession, many business owners saw only liabilities and not resources. Make a list of all of your resources today so that you can take comfort in knowing what you have access to.
3.Not Creating an Emergency Fund. One of the things Dave Ramsey talks about is building your emergency fund first. He says that the irony tends to be this – if you have an emergency fund, you likely won’t have an emergency.
In 2000, I lost my health club. I refused to listen to the emergency fund advice as there were always ample places to spend money – new equipment, store merchandise, staff raises for hardworking employees, you name it. It was a $40,000 bill that sank us. We had no emergency fund. Start an emergency fund today! Reduce how much money you spend on non-deductible items and know this – cash is king. Start putting money into an account that you can access in 24-48 hours but that does not have a debit card attached.
4.Not Letting Employees Go Soon Enough or Giving Options. On November 26th of this year, it was announced that GM was laying off 14,000 employees and closing 5 plants. This is heartbreaking! Many employers wait until layoffs are essential and then tend to do it toward the end of the year. Happy Holidays! Letting people go is one of the hardest things about business.
The reality is that when the economy is vibrant, employers tend to hold onto mediocre employees instead of cultivating new talent. In the face of economic uncertainty, now is not the time to hold onto average. What you want is extraordinary. If you have someone who hustles, and you want to reduce your costs, let them know that you may have to lay people off. Ask them if they are willing to do a performance-based commission structure instead. Many people would rather keep a job than be laid off.
5.Being Naïve About Spending. We often make purchasing decisions when things are looking up however we sign contracts and make agreements that we have to live into and lack the cashflow to do so. This is why student loan debt will likely be one of the things that topples the economy.
There is no glory in foreclosure or filing Chapter 11. Therefore, you can drive a 5-year old car, recycle your wardrobe, wear jeans from American Eagle, and be just fine. This past year alone, I reduced my non-deductible spending by over 33% and for Christmas – everything has been purchased with cash. I am so over worrying about what people think. I have beautiful clothes that I have had for over a decade and now they are vintage!
In a recession, cash is the commodity. You can hire talent for cents on the dollar, buy real estate, and do a myriad of things that would normally cost more if you are sitting on cash. The bottom line here is not to spend money on stupid things. Yes, spend money on marketing, and anything that will make you more money.
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