WARNING to all small business owners

Literally this morning there was a survey of small business owners in America and there's a 48 year low of sentiment. People are freaked out. Small business owners are having a very hard time finding employees, getting funding, and we're struggling. Let me talk to you about what I see currently happening in the small business world. I'm in home improvement, lawn care, landscaping, but all sorts of contractors. I've talked to and seen these consistent themes throughout the economy. And I want to talk about today what you can do to prepare both if you're an employee and an employer. So first and foremost, if you're an employer, realize that the game is going to be played in a couple ways this year, in the next couple years. I believe I've gone on record saying that the next couple years are going to be some of the hardest years that small business owners have ever had. I also feel like the next 10 years though, is going to be a great boom and a great opportunity for the people who get through the next couple years. But the next couple years are going to be absolutely brutal. As interest rates go up, people are going to be less inclined to spend money. They're going to start to be more frugal on their spending, especially as they see their stock market gains evaporate, their crypto gains evaporate, and soon the real estate market will soften and they'll see the equity in their home start to plummet and you'll even see foreclosures start to tick up. Right now we are seeing the foreclosures going up. We're seeing a number of houses on the market go up. We are seeing repossessions of things like cars, used vehicles, people that have overextended themselves and are now in debt for far too much. Overextended themselves. As we go into a high interest rate environment, this is all a recipe for disaster. How do you prepare for this? As a small business owner, first and foremost, you gotta realize that the game is going to be won by the person that's able to fill their positions. In terms of jobs, 51% of small business owners reported that they could not fill some job position in their small business. Literally 51%, like more than half of small businesses in America, have jobs. They have positions ready to go. They have work services and products that need to be fulfilled. And they cannot find anybody to do the work. So who's gonna win this game in the next couple years? Who's gonna get through it is gonna be the ones who wins the next decade. If you can just survive this inflationary time, if you can survive some of the lowest unemployment numbers we've had in decades, if you can survive all of that, you're going to be able to thrive in an environment where you're very, very lean. If you're gonna survive the next couple years, you've gotta lean down, you've gotta get rid of debt, you've gotta be focused on margins, you've gotta be able to increase your prices. And this is the thing that kills me some people right now, and maybe I'm guilty of the same thing, and that is saying, well, just raise your prices. Like that's just the way to fix inflation. Just fix, you know, just, just raise your prices. Well, this is the problem for small businesses that have started in the past 12 months or just got started recently. The trouble is the reason you can raise prices if you create a sticky product or service. In other words, you have customers that are not going to leave you when you raise prices because they've got to know like and trust you. They know you do a great job. They're not going to leave you over a $5, $10 price, 15%. They know there's inflation. However, if you haven't built up that relationship, you haven't done service with someone for six months, 12 months a year, two years, three years. If you haven't done that, they're more inclined that when you raise prices, they go shopping. And as the consumer becomes more price sensitive, they will go shopping and they'll go get other bids. They'll go try to get you priced you lower. And that is very difficult when you're smaller because you don't have that sticky service you haven't been around for a long time. You don't have that brand awareness that allows you to raise prices in an inflationary environment and be just fine. Based upon what I'm seeing right now, now, small businesses that have been around for five, 10 years, they are the ones that are able to have pricing power. They're the ones that have built brands in their local community. They're not having to spend a bunch of money on marketing right now. They're taking that money and able to deploy it into covering the extra cost of fuel, going, doubling the extra cost of wages going up, the cost of taxes and everything going up. In terms of materials like in the landscaping and lawn care industry. It's not just fuel. Everything is affected by fuel because now it's a matter of transportation, of equipment. Well, now the used truck prices are like doubling. It's crazy. I used to Back in the day before 2020, I never spent more than $9,000 on a pickup truck. And usually it was like five or six thousand or less. And now you can't get a rust bucket for five or six thousand dollars and you gotta spend 15 grand just to get a half decent truck. And so literally a doubling, a tripling of those type of expenses. And furthermore, it's not just the trucks and equipment, it's the fertilizers, the seed, it's every single supply that has to be transported in is double, triple the price that was even just a couple years ago. And for some people it's like, oh, just raise the price. You can't double prices. And especially you can't if you just got started. And for many people watching this, if you've started your business in the past 12, 24 months, this is hurting you the most. So what should you be doing now? Number one, focus on those services in your business that are the highest margin that you're able to take a little bit of margin compression. You're not gonna be able to survive in this environment and grow your business without some margin compression. Margin compress is Instead of getting 25% profit this year, maybe you get 22%, maybe you get 21%, maybe you get 18% because you're able to kind of take and absorb some of those extra costs of fuel and all the things going up in price because you have that baked in margin. However, if you're growing your business and you've been pumping every single dollar back into your company in order to grow, hire, expand, market, advertise, et cetera, you don't have a lot of cash, you don't have a lot of room to absorb the extra burden of inflation that we are currently going through. You can't just like, oh, I'll just raise my wages so I can get more employees like you. You can't do that. If you're just getting started, it will literally go bankrupt. You'll have the room to get more capital. And right now it's very difficult. If you look at the survey that came out, I'll link it down in the description below. It's very difficult to find capital right now for many small businesses because as interest rates go up, banks are also trying to make sure that they aren't subject to high risk loans. So a small business in the past 12, 24 months got started. Do you think they want to touch that right now? Not a chance. Especially with inflation and interest rates going higher and higher. They're not Wanting to touch it with a 10 foot pole. So number one, you've got to focus on the services in your business that are high margin. The things that right now you might be doing that are really low margin, you might want to cut them out or not focus on them as much. Focus on those services. You're able to get a good healthy 15, 20% minimum profit margin on. And I don't mean like gross profit because everyone's like, well I get like 80, 90% profit margins. Like. No, no, I mean gross like in your pocket. If you can get 20, 25, 30% profit margins. Net. Net net in your pocket. Those are the you want to focus on. If you've been doing services in the past for say 3, 4, 5% or maybe even at a loss just to get in the door, those are the type of things that are going to eat your lunch right now and it's just going to be really, really hard to make it through the next couple years. So focus on those high margin services. Number two, you've got to focus on your team. The people that will win the game in the next couple years and survive this whole craziness that we're going through are the people that can actually hold on to their employees. And this is going to mean doing things that you, maybe in the past you would have been like, hey, look, if you don't want to show up to work, just leave. Well now you might actually work with them through their personal issues. Now you might actually give them more outside of work. Maybe you let them have a more flexible schedule. Maybe you try to reduce overtime. Maybe if they're asking for more overtime, you give them overtime even if it costs you more money. These are the type of things that now you might actually have to do. And you have to change your way of thinking when it comes to management running your business, employing people so you can retain and attract good talent, those are the two things that you gotta focus on right now. Increasing your margin and focusing on the margins that actually bring in more revenue and focusing on that revenue that actually brings in higher margin as well as keeping those employees, because that's who's going to win the game. When half of American small businesses literally are saying they cannot find employees and they cannot keep employees and they have positions that they cannot fill, the people who are going to win are the ones that are able to keep the employees. Now finally, if you are an employee, you got to ask yourself, is the business I'm currently with going to be able to withstand a recession now? No. One likes to hear this, but honestly, you've got to ask yourself, do I trust the owner, the manager, the person that I'm working for, do they have a track record of being able to stay in business? Because you do not want to lose your job right now. Losing your job is not an issue, right? Literally, you can go get 10 other jobs tomorrow. It's not a big problem. If you're a good performer, there's jobs all over the place. But you do not want to be in the position where in a year or a year and a half, if we go into a recession and unemployment goes back up to 6, 7, 8%, which typically happens in a recession, if that happens, you do not want to be caught in a position where your company goes out of business simply because your owner is not heeding these early warning signs of cutting the fat. I would actually be looking at an owner right now if I was an employee that was trying to cut out the fat, cut out the extra waste in the business, extra breaks, the extra snacks, people that were slacking off. I'd be really, I'd be all over that. As an employee, I'd be like, that's who I need to be around. That's where job security is going to come. Because as margin compression happens, as it gets harder and harder to make money and be profitable and inflation continues to go rampant, like you better be making sure you are the company that they know how to make a margin, they know how to make a profit. And if you don't, probably not the most job secure thing you're ever gonna do. So I'm Mike Andes, founder of Augusta Lawn care. Check out mikeandys.com Check out the links in the description below. There is that link to that survey and it's really, really helpful talking about small businesses and just how much of a pinch we're gonna be in the next couple years. Again, I believe if you can get through these next couple years, the survivors are gonna be the thrivers over the next decade.