ACCOUNTANT EXPLAINS: The Real Way To SAVE Your Business This Recession

This topic can be hard to digest intellectually. It can be hard emotionally to recession proof your business. You're not going to, you're not going to see this one coming.

There's going to be some like shuffling. There's going to be. Everybody's business is going to get shook a little bit. And the strong are the ones that survive.

They have clients, they have customers, and they don't know how to serve them. Go meet with that person, say, hey, can I buy you out? Do you want out? Some people are like, just take over the loan on my trailer and my lawnmowers. You can have the damn business. Welcome everybody to this week's episode of the Main street business podcast. My, my name is Mark Kohler, cpa, attorney, author, influencer, Main street business owner, freaking lovin the American dream. And I'm here with Matt Sorenson, the self directed guru of America who wrote the book self directed IRA Handbook. We're here to help you guys recession proof your business.

Yeah.

Can we do it?

Yeah, let's do it. I mean, we're entrepreneurs, business owners, lawyers. And Mark's also, I mean, a YouTuber. You know, my stepdaughters, they're nine years old, they told me they want to be a YouTuber. Oh, if you Google Mark Kohler, I don't know if you know that it says YouTuber.

Oh, well, thank you.

So you left that one out.

Okay. But amongst nerds, I'm a YouTuber.

Yeah. I just want to give you context. We're out there this recession proofing your small businesses. We are business owners. Mark and I have done the 10,000 consults with small business owners in good times and in bad, and we don't know where everything's going. We're going to dig into that a little bit here. But there are some principles that make you strong in a recession, no matter where we may be going. So you can be prepared and not get caught with your pants down.

Boy.

Was that the wrong one?

I don't know. I never wanted that junior high exposed. Yeah, that happened to me in junior high. You know, you get pants. Yeah, whatever you call it, you know,

that's what we call it.

You know what, that, that happened to me once in science class. I had underwear on, but I got.

See, that was the danger. You were like boxers and they pulled in the right spots. You could be totally, totally exposed. We don't want that happen to your small business. All right.

Yeah, I know. Oh, my gosh. I was wearing whitey tighty, so I was, I was fine. Good, you know, smart. So Those were the days. 80s.

Was those your he, man?

Okay, we're moving off that topic.

All right.

Okay. Well, everybody, we like to keep this fun and keep it real because this topic can be hard to digest intellectually, it can be hard emotionally. And attorneys are classic accountants, CPAs, attorneys for making these types of topics difficult and complex. We don't want to do that. Okay, so let's just jump right into it. Recession proofing your small business. Matt and I have both brought a list to the podcast today. I think we're going to. Matt and I usually are aligned for the most part, but I'm excited to see what's on your list. You're going first. Can I go first?

You can go first, yeah.

Okay. This is the biggest one to me, I think to recession proof your business. You're not going to, you're not going to see this one coming. It's going to be good people. You need to do a financial statement. How can you know what to do if you don't even take, what do you call it? Take store, take inventory of what you've got. You may find out, ooh, I'm, I'm a little stronger than I thought. You may find, oh, my gosh, here's my weaknesses and people. It's not that hard to do a balance sheet and an income statement for this year compared to last year the same time. Hopefully many of you are, are on QuickBooks. If you're not, that may be a step in this process too. If you don't even know what's coming in and going out and what's on the shelf and what's there, you've got to take inventory of what you got

and that can be a little refreshing and it could put you at ease. And when we say financial statement, I want you to look at your business and your personal assets. We know as small business owners, you know, and we've done this, you know, Mark and I have been here. You can't make payroll. What are you going to do? You don't, you know, you got to pay your employees. You don't start getting money. You might have to go on to. What are your other personal resources you have? And we can look at everything from your savings to, to you have a, a three month kind of like savings reserve, reserve. Do you have equity in your home?

Now? We're going to cover some of these other things is to reset. But the first step is, yeah, I got to get an inventory. Yeah, take a look.

But I want to say personal Inventory. Because as business owners love it, that's where we're going to tap into. And hopefully you've been building wealth and that makes you stronger to weather the storm in addition to your business and what resources you have there.

Business and personal. I love it. I. I'm gonna. I gotta say number two, at the same time, you do a financial look, do a legal look, get a consult with one of the tax lawyers. If it's not our office, find who's your business lawyer. Look at your structure. Are you. Are you jacked up? Do you have everything deeded where it's supposed to be? Let's say, you know, the storms come.

Yeah.

Is everything buttoned down?

Yeah. Well, not too. Because that. What is one of those biggest expenses you have in your business? Taxes.

Yeah.

Are you being efficient on how you're paying your taxes? Are you in the right structure that's minimizing taxes. Whether you're having an amazing year, you're having kind of an average year or maybe even a down year, you're still going to have a tax nut to cover. And that savings is like free money back in your pocket.

Absolutely. And you may not. You may be like, oh, that's easier said than done, Mark and Matt, because my accountant, I can barely get a phone call. He's busy right now on extensions. I don't even have my 22 tax returns done or whatever. That's fine. Get a second opinion. This is where a consult with one of our tax lawyers or another boutique firm of your choice. Of course, this is not an infomercial, but we're doing consults around the country in all 50 states with clients that say, look at my last year's tax return. Here's my structure. It can be very, very affordable. We don't have some $5,000 BS, you know, premium plan thing that you've got to pay to come on board, call our office, make an appointment, say, I just need a review. And then you can go back to your regular accountant or regular attorney and go, hey, I got an outside look at this. I think I'm a little jacked up.

Yeah.

And so take a look.

Yeah. And I think that's like the trifecta. Many of you know, the trifecta we talk about. We have your operational business. You have your assets, and we're growing our. Our assets from our operations in many ways. I mean, a lot of times assets can create income and create more assets. You're gaining equity. Those assets can go up over time, but we're peeling stuff off from Our operations to go invest and build assets. And if you've been doing that right, you are sitting in a strong position because you have assets. You can rely on that if the, you know, if you have business problems or you start taking losses in your operational side of your business. So that's. So having the trifecta and doing that, earning income, building assets is what makes you stronger too. So I just want to think it's not just about growing wealth. It's also about helping you in times if we do hit a recession.

Yeah. And on this note, when you're looking, doing your legal review. So I'm saying do a financial review panel, balance sheet, you know, personal and business. Do the legal review. How do things look? Look at your lease agreements. Do you have rental property? When did the leases come up with your tenants? If you're trying to recession proof, you need to be looking at all those relationships. Are your relationships with your partner strong? Vendors, suppliers, affiliates, tenants? What are those agreements look like? Because if the storm comes again, what's on paper? And so that legal review I think is very important. Yeah. Okay. What do you got? What's after that?

We got to talk about the big D. Debt.

Oh, I thought you meant Dallas. Divorce. No. Okay. Debt.

Yeah, I'm with death too. Yeah, but debt. And this is again in your business and personal. This should come up. And the first step there in taking inventory and looking at doing a personal financial statement. Debt weighs you down and it hurts you the most when we're in a difficult economy and in a recession. Because that is money you are throwing away, especially that high interest debt and the credit card debt. I don't want to get all Dave Ramsey on everybody right now. But we, we need to get out of debt. It's a, it just, it's one, it creates that, just like that freedom. But also it's what can cause problems in business. And what, you know, you could have a bank or a lender come in and start chasing you down. You get lawsuits. It could be crippling.

Yeah, no. By the way, let's make sure we're clear here. There's good debt and bad debt. And so when you. So do it. When you're doing your financial statement, you're going to look at all the debts you have now. Anything that's part of a business debt or a property debt that's creating rental income or value or growth in your business, a credit line in your business.

Hey.

Equipment loans that might be necessary for production. We're not talking about that type of debt. We're talking about consumer debt, the credit card debt, and doing a debt snowball if necessary immediately so that you're lean and mean. But debt is actually a hedge against inflation. So if you've got a rental property with debt on a fixed interest rate, that can be a good thing. So it's not all debt's bad. So. But get rid of that consumer debt.

Yeah. Love it.

Oh, by the way, I'll say this. If you email markjcohler.com and just type the word snowball in the subject line, snowball, I will send you a video and a spreadsheet that is really programmed well to help you build a little debt snowball. And it's so easy, so fast. I know they're out there, but if you don't have a resource to get out of debt Quickly, just email markjkohler.com or markqoslawyers.com any of my emails and put the word snowball in your subject line. We'll get you out a little bit. Support software and program, blah, blah, blah.

Yeah.

All right.

Are you ready for the next one?

Yeah.

This might be a curveball for some of you guys. This might be the time to invest, grow and take market share in your business because your competitors are going to be facing the same headwinds of a recession or any difficulties are about to come again, if that's what's going to happen, you know. And so I, I want to think of this as opportunity because what's happening in everybody's industry, we're all in different businesses and industries, is there's going to be some, like, shuffling. There's going to be. Everybody's businesses is going to get shook a little bit, and the strong are the ones that survive. And so this might be the time where you got to spend a little more time in the business. You got to take out a little bit less. They're going to be sacrificing some things in the difficult times, but that is when you can really stand out and grow market share and grow your business compared to your competitors.

Yeah, I think there's two messages you said there. One was grow market share by looking at competitors. And then there was a subtle comment about efficiency and pricing and products. Let's come back to that.

If we could, I mean, touch that yet.

Yeah, so, but let me say grow market share. You know, what we've launched here at the law firm in just this year is a business acquisition, group, service and group. Yeah, we've got lawyers now dedicated to just helping clients sell their business or buy businesses because it's so prevalent. And this is a great time to look at the other competitors and go, this guy's on his last leg. A lot of people, sometimes they'll walk away from the business for almost nothing. There's CPAs that are walking away from their business because they're like, I don't even know how to sell it or what to do.

Especially when they feel like the economy could be going into recession. They're trying to time it to get out. Right. They might take seller financing, let you take it over. They're like, this is the perfect time for me to get out. And you can really dictate terms and pick up some.

Some good.

Some good business.

Yeah. Let's just use another example. Let's say you're a landscaper, and you're in the landscaping business. You know, there's a guy that's struggling. His equipment's not working well. He doesn't know how to hire. He just doesn't have, maybe the business acumen you have. And there's tricks to running a business in your industry. Well, look at the people that when a recession. Recession hits, they have clients. They have customers, and they don't know how to serve them. Go meet with that person. Say, hey, can I buy you out? Do you want out? Some people are like, just take over the loan on my trailer and my lawnmowers. You can have the damn business, please. You know?

And you're like, all right, keep my employees that I. You know, the guys that I've got on my team that need. That need the jobs. Yeah, yeah.

Products, services, a little deli. It could be food service. It could be janitorial, landscaping. Any sort of small business where you see someone starting to struggle, jump in there, and you may be rescuing them, but also building a stronger base of clients for yourself.

Yeah. All right. So that's kind of being the vulture.

Yep.

I guess there. Well, let's see. We didn't. I don't really hit pricing. You mentioned that. I want to talk about pricing for a second, because I think one of the things that's intuitive for people is, oh, I better lower my prices. No, no, no, guys, what have we had?

Let's.

Let's stay. Pay attention. What's been happening in our economy? Massive inflation. Every other product or service you've been consuming, you're paying more than you did a couple years ago. Right. And so if you haven't been raising prices in your business, this might be the problem of why you're struggling this might be the problem of why you can't recruit and retain employees is because you haven't raised your prices and your competitors have and they're paying more. And so you're kind of handicapping yourself by not doing that. So reevaluate your pricing. If you haven't done that recently, in the last few years at least, there's been incredible inflation. Look at where your competitors are at and also think about what is your brand. I mean, we've had to do this in our own companies, you know, even at directed Ira, we looked at it. We're like, man, we're on the low end of the pricing. Is that our brand? We provide a premium service compared to our competitors. I'm like, we can't be the low price leader. I don't want people coming here because we have the lowest price. I want people to come here because we have the expertise to perform and the most amazing service that can be offered. And that is what dictated an increase in price. Which, you know what? I did not get one complaint. I'm sure at this point I might get an email out of this now about raising our price. That was worth it, you know?

Well, and the converse to not raising your prices or lowering your prices is providing more value. In a recession, consumers are looking for more value for their dollar. Address it head on. Let people know, hey, we're giving you more for what you're already paying because we want to keep you as a customer, as a client, as a patron of our business. And so if you can, rather than just go right after price, look at your mix of services you provide. Maybe there's some services you need to get rid of, some products you need to get rid of that are dead weight. Take the resources from that and apply to a better service or a better product and not even need to change products pricing. And customers will be more loyal during those time periods and you'll come out on top.

Yeah, I love that one. And that kind of. There's a little tangent there to another one. It's almost related, but separate, is stop wasting time on customers and services or products you might have that are low margin. If you got the friends and family and you're cutting their hair for five bucks a pop and you're, you know, you got a salon that you're running and trying to cover bills and everything, stop doing that. You know what I mean? Like, if you've got some product or service that is, you know, takes a lot of time to complete or is very costly and has a lower Margin, stop doing it or change the pricing on it. So I think sometimes we just get in a rut of our business. We're adding services or products and we're not focused on do I actually make money doing this?

Yeah. Love it. All right, next. Cash. I think this is important to say you've when you're doing that financial statement and we talked about that for your business and your personal, we alluded to it. What are your reserves? What do they look like? The kind of the standard that we've seen over our entire career, we've taught it, I've written it in my books, I know Matt has as well, is that you want to see at least a three month reserve. That's typical in your business operation as well as your personal life. Now, in your business, if you've got a track record of certain stable amount of revenue every month, your costs are pretty measurable and predictable. You may have just a one or two month cushion. Excuse me. But if you're in your personal life, that's where things are really going to hit the fan. In a recession. Have at least three months of cash and it doesn't have to be making a lot of interest. Although in the market right now you can get a freaking three to four, four and a half percent money market account at TD Ameritrade. So putting away five grand, 10 grand or 15 grand or 30, whatever that number is, that if you say, hey if any, if all shiz hits the fan, I've got three months of reserves, cash and getting out of debt. Selling crap you don't need. You didn't even people. Did you even use that RV this year? Did you even use the boat on the side of your house? You still have that piece of crap fishing boat in the backyard on blocks. Sell it, get rid of it. Get lean, get mean, get conservative. They call this austerity. Implement a level of austerity in your life and get rid of the crap you don't need.

Love. And I think you should be doing this in your business. How many of us aren't focused on the expenses coming in our business? I mean we've had to do this every once in a while. I'm like, what is this king that hits our card every month in the business? It's 250 bucks. No one knows what the hell it is. It's some service or subscription we signed up for that we used four years ago and no one's been using it since. You know and I know a lot of you business owners have some of that stuff that's like, it just keeps hitting and you're not focused on it. You're running your business, you know, and

so report your card stolen. Yeah, stolen. And then like all of a sudden you're getting all these calls. I didn't know I was paying you.

Anyway.

Yeah, you lose her.

Yeah, that is the great strategy because then you're gonna remember the things you do need and you're gonna go update it for those and then cut off all the ones that are bs. But that's just look at your expenses. What do I really need? And sometimes there's stuff you're not even using. You've just kind of been putting it off because you're busy in your business and there could be a lot of pickup layup opportunities there to save some money.

Yeah. Well, my list is complete. I've got seven items. Okay. Do we need eight to be great? Do you have one last one? You want to more?

Okay, okay, I got one more. And I think you can look at like, what do my customers need right now? I mean, our world moves fast and I don't care what business you're in. But what are their opportunities? Do I have to sell my clients other services and products? I just haven't been putting in front of them. Rather than going out and trying to find new customers or more customers, what are my customers I've been doing in my business for years need that. I haven't been providing them, you know. So if you are the landscaper, do you have a tree trimming business or do you let them use someone else for that? Like I use someone separate out. My landscaper doesn't do that. I use someone separate for that. Like if you're the hairstylist, are you selling product to people when they come in that you put in their hair? Like when I go get my hair cut, they sell me the same crap I put in my hair because it's so easy and it's right there. And I'm like, oh, this looks good. So think of those things that you should be offering your customers that could be new opportunities to actually make more money. And it's a great time to do it.

I'm going to define that number eight as identify new revenue sources that are low hanging fruit.

There you go.

And I'll give a couple examples too. I love the landscaping industry. I speak at a landscaping conference every year. I speak at the RV conferences. I just love the main street bread and butter, blue collar, small business. It's just out there on the streets every day. So back to landscaping. The landscapers that I know are making money. They've gotten very efficient with electric equipment. They're charging with solar on their truck. They're eliminating the cost of gas, which is so high right now, and these little efficiencies with the type of equipment they're expanding into. Example. But when it comes to revenue sources, I love the landscapers that are like, hey, if you need to buy a new hose, you need to buy a new rake, a new shovel. Don't go to Home Depot. Don't. Just, I'll send you a link of what I think is the best product out there right now. And you send. Become an Amazon affiliate, because you don't need to carry a bunch of inventory in your business to sell more product. When you become an Amazon affiliate, you can create your own webpage. And as a landscaper, in that example, you'd go to all of your clients, go, hey, I've got a great page to give you the best prices on all of your landscaping needs, whether it's fertilizer, lawn equipment, planting resources, or anything like that. Go to my website first, because I've chosen what I think is the best products out there. I've even got YouTube videos on my site to help you with your own landscaping that you want to do. And I've got links to everything. And you're making money. You're making money off of everything they buy off your website. And you don't even have to open a warehouse and buy inventory. Just a small idea there.

Just a little one. Just a little one.

Start selling more online. Use your website more efficiently. Make it easier for your customers to buy things. If there's any way you could partner with someone, there's just.

Yeah, it's a lot of these little things and kind of. It's kind of what, just like a little reassessment time in your business, even just like the paying, like, making it easy. A lot of small business owners don't make it easy to pay, and that's the areas where you're gonna start losing customers. Because what happens in a recession is they start finding the reasons why they shouldn't use you, and they maybe move to someone else and you start having a little more competition. Well, you want to have all that stuff dialed in. Have you made it easy for your customers to engage you and hire you and work with you?

I'd love it. And another idea is I love that Matt brought up hair salons. I went to my barber, I think it was a month or so ago, and Okay, I needed a mani pedi, you know, because I just like self care. I need, I wanted it look nice, you deserve it. I deserve it. I wanted to do a little self care and spoil myself. So I asked my barber for a guy, do you have a place nearby that you'd recommend for a mani pedi? And she was like, no. I'm like, how do you not when you're in the self care haircutting business, how do you not have a relationship with a nail salon for men that you could send all of your clients to and get a little kickback and vice versa? You should be over at the nail salon taking them donuts once a week going, hey, when your nail people come in, let them know I'm a kick ass barber down the street.

Here's what we're saying, guys. You need to fire up that entrepreneurial spirit again. Start getting a little more creative. I went up my Airbnb, I went with my kids to Italy. Like we show up, the guy shows us Airbnb. He gave us like three restaurant recommendations. I'm telling you, he got a fee on everyone we went to because make sure you drop my name when I go there. And we do, and we got great seat and everything. But I guarantee you that guy is getting a little piece of every restaurant we went to. He's just being a little entrepreneurial about it, thinking of his customers and how can he make more money per customer?

I'd love it. I was got in a Turo car up in Alaska last week and when I got on the Turo in the little cup holder, there was a free coffee at a local shop, a little card for a free coffee and their name was written on it. And so I was like, wow. And I thought that was really smart. I mean, what are the little things you're doing to network with others in your industry? Even if you're not going to go out and acquire that business, how can you be protecting each other? Building your own little mastermind group, finding

others that have an services, you help them.

Yeah, it's a great idea. So that, because if you're going to recession proof your business, remember it's a village and Main street is a village. Get out there, network with those other small business owners that have any ancillary indirect relationship to you and talk about how you can help each other get through this. I hope these eight points help you. We're just grateful to be a part of your lives. Please give us a five star review. Share this podcast with others. Let other people know that we're the small business. America is alive and well. We're going to save freaking America. Yeah.

Go out there and get it like that. Let that entrepreneurial fire go, man. I mean, let's like turn that on fire and go out and tackle these things. I think whether there is a recession coming or not, these strategies are something that are protecting up market or a down market.

Yeah.

Yeah. And we'll be back next week, of course, with another amazing Main street business podcast episode. We'll see you then.

See you next week.