MBA2081 How to Prepare For a Recession

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So a recession's here. How do we protect our business? Make sure that we succeed despite it and also take advantage of what happens during a recession. Let me start with my first and most important tip, I want you today, as soon as possible, to start reassessing your financial priorities in your business. What does this mean exactly? Well, you need to just take a look at your business from a wide angle. What I mean by that is I want you to just analyze what actually makes your business go, what keeps the lights on, what are the must, must, must haves in your business. Write these things down. So, for example, if I create online courses and sell them, there are a few things that I need to have in order for my business to, to actually function, to actually serve my customers. I need to have a website. I need a way to charge people like a payment processor like Stripe. I need a way to deliver my content and I need a way to bring in new customers. That's basically it. That's all I actually need for this business, this hypothetical business. Everything else are nice to haves. So I'm going to look at every expense I have that relate to these must haves, whether it's team members, whether it's service or software, or even consultants that I hire to do this work. When you do this exercise, you actually start to realize you're spending a lot of money on things that are really not essential. They might be moving the needle like 20%, but if you had to, you can run your business without it. Now, the reason why this exercise is important is because before it's too late, you need to start cutting out expenses. You need to start earning more cash. Because we're going to talk about later why cash is so important during a recession. You need to make sure that your profits are quite significant compared to what they are today. Your aim really should be increasing your cash in the bank, your profits, by 20% by lowering your expenses, by prioritizing your finances. Now, the reason why I call it prioritizing your finances is because if things start to improve for you and the economy improves and the market improves, or maybe you're just going to kill it in the next year, you know, what is the next thing you're going to spend money on? Because you've already said these are my must haves. These are all the other things that I'm spending my money on. I can start prioritizing and say, okay, I'm going to start doing this again or start spending money on this again once I hit that 20% increase in cash reserves. Now, the reason why cash is so important, why you actually want cash in the bank, you want profits during a recession, is because cash is king. Okay, now I'm going to Take a little side note here. If you have debts, if you have loans or credit card loans, your first priority is to make sure you pay off those loans. Because interest rates can change, they can increase, and you want to make sure your debt is under control. Why? Because it will affect your cash flow month over month, because your payments will increase. But ideally you don't have those loans or you pay those off as soon as possible and you have cash in the bank. And when you have cash, you can negotiate and get the best deals. As business owners, we can negotiate some amazing deals if we're willing to pay upfront. If you reach out to any of your service providers, your software providers, hosting providers, whatever, even if you have an office and you're paying rent for that office, if you negotiate an annual rate saying, I'll pay a year in advance, people are willing to discount heavily. Just reach out to that company, to that service, to your landlord. Or I've received discounts up to 50% because they're like, hey, we want a bulk sum of cash right now because we're in a recession and we need the cash. We're happy to give this person a discount and they're already making a pretty good profit. Their margins are pretty thick, so they're happy to do that deal. I've done this with big companies like Amazon Web Services. I've done this with small companies, like small independent software companies that I use their services for. My advice, don't just use the pricing on the website. Contact somebody from support, say, hey, I see you have some sort of discount for annual pricing. Do you have any additional discount at this time? I would be happy to pay a year up front if I can get an additional discount. Most software companies, most services, their customer support team have some authority to give some level of discount and you'll get an additional discount to the discount you'd get normally by going to annual and saving a bit of cash. This is why cash is so important, because you can pay things upfront and get major discounts. Because recessions don't just last a month or two, they last years. So you want to make sure you're good to go and you're saving money for the next couple of years. Next recession equals creativity. It's time to get creative about how you bring in new customers. The old ways of spending cash on ads and just converting customers, they often don't work in a recession because the market is all strange. You'd think paid advertising pricing would go down, but some weird reason it doesn't. So my Advice is when it comes to marketing and spending on marketing in a recession, get creative with creative work, meaning content. Content marketing is evergreen. It actually makes more of an impact. It's more engaging, whether it's video or a podcast or blog post or whatever. Twitter, invest in your content marketing. If you don't want to do the content, no problem. Hire somebody to do it for you or partner with somebody who's already creating content and say I want to get in front of your audience. I'd love to sponsor your work or put an ad in your newsletter or sponsor a podcast episode or whatever. Be a part of the content that's already existing. In fact, recently our company we decided we're not spending any more money this year in 2022 and possibly beyond on any more paid marketing on social media like Facebook ads and Instagram ad and Google. I wrote a whole Twitter thread on that topic. If you want to check out my handle on Twitter, heomarzenholm, you can learn about why we decided this. But basically we're spending all our money on supporting creators because we see a more long term ROI with that investment. Next, during a recession, often many governments will offer some sort of support in forms of grants. Do some research on this topic. You can actually hire an agency. There's agencies that do all the work for you, do all the paperwork for you. They take like a percentage of the grant. But there's a lot of grants that come about from government when there's a recession, especially for small businesses, because small businesses sustain the economy. There's so many small businesses out there and there's a very good chance your business will qualify. Now I got to give some really serious advice for those of you who are side hustling, maybe in a job now and you're building your business on the side or thinking about building a business on the side, it's now time to put your side hustle into overdrive. You need to really start growing that business. If you haven't started yet, now's the time to start going. Now is the time to start building that business, start making some revenue, getting some customers. Why? Because you might be forced into your side hustle full time. It's a reality in recessions that people get laid off, people lose their jobs. And if you're in a job right now, that's awesome and I wish you all the best. But you got to have a plan because your job is not guaranteed. And by having a side hustle, by building that business on the side, you're making your own safety Net. If you haven't started a business before, don't worry. People do it all the time. I mentioned in our pre roll, our course, our audio course, start your first online business. You can check it out. It's actually free with a free trial on Himalaya. So you can learn how to do this for free. You can come back to this podcast every day and learn how to get better every day. But now is the time to get started. If you haven't, if you have started, it's time to double down, okay? You got to put in the time. You got to focus because you might find an opportunity where you might be laid off and you can work on your business full time. And you've given yourself that Runway, that head start where everything's set up packages by Expedia.

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To wrap up today's lesson, a recession should not scare us, okay? This is going to happen several times in our lifetime. It's just like the seasons. Winter comes around every four seasons, right? It doesn't get skipped, okay? Recessions don't get skipped. Our job is to be prepared. Our job is to know what to do. Our job is to take advantage of the situation. Because every season has its advantages. Yes, summer has the warm weather in the beaches, but winter has the snow and a chance to go skiing and hot chocolates by the fire. So we need to take advantage. I want to give you one more tip. When it comes to preparing your business for a recession, this is the time to start expanding your business, to start growing your offerings. Launch a new course, launch a new training, launch a new product or service or software. And you could do it on at a lower price point. It doesn't have to be this expensive thing where no one can afford it during a recession. It could be a $99 course. It could be a low tier software plan. Why? Because when people buy from you, even if it's a low tier product, they earn trust with you. They see that you are of value and guess what? Time will pass and they're going to be able to afford your higher ticket items, your higher plan on your software. But now is the time to start offering these entry level products. Don't get complacent. Don't say, you know, I got my offerings and that's it. No one's going to buy anymore. No, people will buy new. People will buy. Especially if you give them a product they can get started with, get some wins and look to you to say, hey, what's the next step? What's the next thing I could buy from you so I can continue on my path? Thanks so much for listening to the $100 MBA show. If you love what you hear, please hit subscribe, hit follow on your favorite podcast app. We're on Spotify, we're on Apple Podcasts, we're on Google Podcasts, we're on Overcast, we're on them. And to make things super easy just go to our website 100mba.net. We have these really cool buttons that you can just click to subscribe on your favorite podcast app. Before I go, I want to leave you with this One of my favorite things about a recession is that it forces you to re examine your business and sometimes just simplify things, cut things that are unnecessary, get things to the bare minimum and it just creates less headaches for you, less things to maintain, less things to worry about. And it reminds you what's really important, what really makes your business go and encourage you just to double down on that. Thanks so much for listening and I'll check you in tomorrow's episode. Free ride Friday. I'll see you then. Take care. Foreign.

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