Turning Economic Crisis into Business Opportunities

When we're dealing with a recession, the most impactful thing we can do, the most empower thing we can do, is to build up our cash resources so that we're in a position of power again, so that we're strategically in a position where if opportunity arises, we can capitalize on it. Because so many others are pulling back with fear. Hey guys, Bob Govreau here. Welcome to the Wealthy Entrepreneur podcast. Ultimately, our goal is here to empower business owners just like you to achieve financial mastery in your life, in your business, and empower you with good information so that you can change the world by changing the lives of those you serve. Want to talk today a little bit about a recession and how that can be impacting you? Because if many of you, unless you've been hiding, you will notice that our economy is in a bit of a struggle right now. We continue to see interest rates rising. We, which is never great for business owners who want to reinvest in growth. Obviously the cost of that borrowing continues to rise. So it becomes more challenging not only to invest in the future, but to continue to manage our cash resources in our business. And this is what a recession starts with. And the second piece is we're watching the demand for our services continue to drop. And if you're a service based business like me, what we're watching is the demand that maybe was there three or four months out is starting to shrink a little bit. And that can be a little scary, right, because we're ultimately responsible for our teams, for our families, to make sure that we have the financial resources we need. And I don't know about you guys, but I remember I went from zero employees up to 95 employees right now, or somewhere around 95 right now. It seems to change on a daily basis, but that's a lot of responsibility. I've got 95 families that I'm responsible for. And a recession can be the most scary thing that faces all of us. And I know if any of my team is listening to this right now, hey, don't be afraid. This is something that the media introduces to us. So so many business owners take a step back in this moment, in this recession, in this type of economy, business owners take a step back. They become fearful. The media scares us, right? We became, we become afraid to borrow, right? A lot of this is because we're not financially aware of how our business is performing. If, if we know where we're performing, we should have the confidence we need to be in a really great position. And so what I want to See, for each and all of you is to not only be able to survive, but to thrive in these types. Because I can tell you from personal experience, when the economy is struggling, when interest rates are rising and everybody's pulling back, I want to lean in and you need to be able to lean in. And yes, there might be some fear associated with this, but if you are grounded on the financial performance of your business and you have strong strategy on how to ultimately overcome this, you will be in a great position to achieve more during this period than you would at any other time. Because recessions are an opportunity for entrepreneurs to conquer and achieve greater market share. So I want to talk to you about our survive and thrive model that you can introduce in your business. Because when we are heading into a recession, we see the demand maybe drop for our services. That's okay. It's okay. We need to be aware of it, though. We need to be not putting our head in the sand. We need to be aware of what's happening so that we can say, what is the next step to achieve success. Now, the very first thing, in any type of recession, we should always be positioning ourselves with solid cash, right? Cash is king. If you've never heard that before, business success rates, I believe it's over 90% of businesses fail because they run out of money. Not because they don't have a great team. They not because they don't have an incredible business or an innovative market or a product or service. None of that. It's because they run out of cash resources. And cash resources can be managed. And I wanna share with you today how in our survival mode of preparing for a recession, what we can introduce. So let's talk about cash in our business right now. If we wanna maximize our cash, this is what we do. We think of our balance sheet, okay? Our balance sheet is our assets and our liabilities. So a couple things on here. Let's focus on assets. The higher our assets go, aside from cash, the higher our assets go. That means we're using cash to create those increases. For example, if our inventory goes up, we're using cash. If we're buying or adding equipment and vehicles, that's using cash. If our accounts receivable, the money people owe us for our products or services going up, that's using cash. All of those areas are using cash resources. So if we want to maximize our cash, what do we need to focus on? We need to focus on them going down. Okay, so let's talk about accounts receivable. Right now, accounts receivable is the greatest opportunity for you to collect that money right now. Let's get active. Let's allow them to pay. Credit card, e transfer, PayPal, online payment, who cares? Whatever it is, allow them to be able to pay. You use Stripe, any, any sort of form of payment. I will take it. Why? Because I would rather have. And if we're worried about fees, I would rather have. Let's even say it's 5% fee. I'd rather have 90, 95% of that cash than zero. So let's go collect it. By having that cash in our business right now, it gives us the power to invest. And when everybody's pulling back the cash and that power to invest is so great and to have those resources available allows us to eliminate the fear and know that we can cash flow through this maybe rough economic time. Let's think of other assets that are there. Inventory. How many of us, if you have inventory. Again, I'm in a service business. I don't have inventory. If you have inventory. Well, we. Let's look at any of the inventory that you could probably blow out. It's maybe outdated, it's maybe old. We want to blow that out. So let's create a sale. Yes, maybe you're not going to create profit from that sale. You might discount it and blow it out at what you paid for it. But let's get rid of it. Let's put that cash in our bank. If you've got $100,000 of inventory on hand, you could likely put $20,000 in your bank account just by blowing out old inventory. Let's not let it be become completely obsolete. Let's get it in there. Let's get that cash going. Equipment, vehicles, machinery, anything that is sitting on the sidelines right now or we're not using it. Hey guys, I know entrepreneurs. We like to invest in different things. Equipment, furniture, fixtures that end up. Oh, that was a great idea at the time, but it's sitting on the sidelines. Let's sell it, liquidate it. By bringing down that asset value, we're going to increase our cash. Let's get rid of those items. Put that cash inside our bank account. All right, so that's the asset side of things. Let's think about our liabilities. So we've got our trade accounts payable. We likely have bank loans, we probably have credit cards. So let's think of those for a moment. First off, from a cash flow management standpoint, we've got to get rid of that higher interest credit card payment. Let's shift that Out. The number one way we could look at any of this is to try and shift high interest into low interest. Or, you know, we don't want to pay everything off because we want to manage our cash resources. But now is a really good time before the recession gets even more impactful, to go out and get an overdraft or a line of credit. And maybe you can't get that right now, but what assets do you have? Did you buy a vehicle? Did you buy equipment? What sort of assets do you have in your business right now that you could go out and get refinanced so that you could pull that cash in your business? Yes, it might introduce an increased liability. But if we're looking at managing cash flow, increasing our liabilities is not a bad thing. For example, with your business loan, you might have $100,000 business loan. We've got to pay $1,000 a month to get that paid off. Let's renegotiate our bank loan. Let's try and get that thousand dollars a month down to 600amonth or 500amonth. Maybe we double the amount of resources we have and double the debt, but we continue to keep that thousand dollars a month in bank payments. So what is that going to do? It's going to manage our cash outflow and bring a lump sum of cash back in. We need to be looking at these resources. Now. One side piece, I always get asked, you know, when I meet with clients at the end of the year and we'll say, Listen, you made $100,000 this year. And they go, well, where did our cash go? Bob, one of the liabilities that continues to happen here is that shareholders pull money out. So during times of recession, we also need to be looking at our personal budget and say, maybe now's not the time to be pulling all these resources out of our business because we want to be in a position of power. The other liability as we work our way back up is trade payable. So this is where you've essentially received a benefit of a service or a product from a supplier and you owe them money. Well, one of the things that we can do in this is if you think of, let's say you have $50,000 of purchases that you make a month. If you push that back from paying them in 30 days to 60 days, that will leave you with an extra $50,000 in your bank account over a 30 day period. That will allow you to bank your cash resources so that you are going to be able to be in a position of Power. This is very important. So when we're dealing with a recession, the most impactful thing we can do, the most empower thing we can do, is to build up our cash resources so that we're in a position of power again, so that we're strategically in a position where, if opportunity arises, we can capitalize on it because so many others are pulling back with fear. Once we understand how to maximize our cash resources, here's what we need to look at. We need to look at our business financial model, and I'm going to go into detail and into this in another episode. But what I want you to understand is we need to look at what our revenue is right now, what our profit is on that revenue right now, and focus on what our overhead expenses are. Because I guarantee you right now, in all of our businesses, we've gotten a little fat in the overhead expenses. We've got dues and subscriptions that we're paying likely for an Apple app that's on our phone for 50, $100 a month, likely multiple of those that are in there that we could eliminate right now. I know for me, a few years ago, I've corrected this now, but it did take me a while. I had two CRM client relationship management platforms. I had transitioned from one to the other, but I was just afraid to close the other one out because it had unfinished business. And ultimately, I kept those two $500 a month payments going through every single month that was costing me $6,000 a year. So instead I dove in, I reviewed how I could make sure that all the information got transferred, and I shut that down. That's $6,000 of cash resources back in a year. And if my sales start dropping, I need to be very conscious of closing down my expenses as well and lowering them to the lowest possible point. Now, here's one other piece on financial model. A lot of us have revenue coming in and costs of delivery. And one of those big costs of delivery is employees. So as our business revenue drops, our need for employees drops. In a recession, if your revenue starts to drop, you're going to have to take quick action to make sure that we look at our employee resources and we get that down to as low a level as possible. And nobody wants to essentially have to put anybody out of work. But what happens is normally when our business grows, we're adding, adding, adding employees. It's a variable cost as we continue to grow. But what happens is if we have $10,000 of salary a week, yes, we might have capacity to take on More. But if our revenue drops, our employees still are at $10,000 a week. If we're not generating enough revenue to cover those costs, we could be putting ourselves in jeopardy. So you need to review the elements of wages and make sure, if they're not at full capacity, that we're looking at strategies to either get more revenue or to eliminate some of those wages and get it down to a more reasonable level. So once we've got our cash resources in place, we've corrected our profitability, we've eliminated any of those fad expenses, we're now in a position to open our eyes and be available for opportunity. And I can tell you, over the last couple of years, with bounces of global pandemics and recessions and consumers looking to reduce what they're spending on, one of the things we've seen, especially in the trade market, is that a lot of people who are getting up in their 60s or 70s are going, I don't think I want to go through another recession. Right. It gets harder. Life gets harder. And if us as entrepreneurs, we're fighting and clawing to continue to build something remarkable, because that's what I'm trying to do. And if that's what you're trying to do now is the opportunity to open our eyes, have our cash available so that we can jump in and capitalize on these opportunities. Because I guarantee you, when those tradies are looking at exiting their business, or you've got a business owner who's saying, I don't want to go through another recession, I'm going to look at selling. Those opportunities are around us more than we think. Now's the time to start asking those questions. If you've got a competitor who's getting a little bit older, having a discussion about what it would look like taking over their business, those opportunities are here. And that's us leaning into opportunity versus taking a step back. We want to lean into these moments. So that's a little bit about the recession again, let's get our cash resources in place. Let's increase our safety net, let's get our business in a strong position so we can capitalize on opportunities that will be lying ahead in the short term. So I want to thank you guys for joining in today. This is the Wealthy Entrepreneur Podcast, excited to continue to empower entrepreneurs and business owners to grow their business through financial mastery and ultimately change the world. Now, what I have for you guys today is we've pulled together a little bit of a recession guide for you. It's gonna help you understand the Survive and Thrive model. It's included in the link below. Would love for you to download that. It's an extra resource to help you get to the next level in your business and become the 1 wealthy entrepreneur. If you like what we've talked about today, I would love for you to follow us. If you have any comments or questions, drop it in in below. Happy to answer those and continue to work on building you up as the wealthy entrepreneur. Thanks guys.