Preparing for ECONOMIC UNCERTAINTY

Welcome to success story the most useful podcasts in the world. I'm your host Scott D. Cleary the success story podcast is part of the HubSpot podcast network The HubSpot podcast network has other great podcasts like marketing made simple hosted by dr. J. J. Peterson Marketing made simple brings you practical tips to make your marketing easy and more importantly make it work now If any of these topics out interesting to you, you're going to love his show how to write and deliver captivating speeches How to market yourself into a new job how design can help and potentially hurt your revenue and how to create a social media ad strategy That works if these topics hit home and there are things that you want to learn about go listen to marketing made simple wherever you get your podcast All right today we're going to be talking about economic uncertainty and how to prepare for it now is business owners Uncertainty is one of our worst enemies of course it is after all the one thing that we can't control with our business our Businesses are livelihood and nobody wants to see their livelihood jeopardize unfortunately There are many factors outside of our control that can impact our business Negatively and one of the most significant ones is economic uncertainty we're all dealing with it right now However, I want you to know I'm not an economist and the last thing I want to do is strike fear and panic into the hearts of business owners This is not a warning of the hard times ahead But because the economy has such a significant impact on our businesses It's important for us to be aware of the potential risks and take the steps to protect our businesses and ourselves Now where did this topic come from? Well, it's very relevant now in the impending if not current recession in a recent interview I spoke with Ron Grunner He's an expert in all things US politics and economy It was fascinating to hear his insights on the current state of affairs as well as some of his reflections on history Monetary policy well only a small segment of our conversation was devoted to economics It was enough to get me thinking is it so unlikely that another major recession or depression could happen in our lifetime Or even in the near future how bad is this particular one going to get and if it does happen How can we be prepared as business owners? We can't afford to bury our heads in the sand ignorant is not bliss. It's dangerous So let's take a closer look at the economy and some of the things that we can do to help cushion our businesses from potential Negative impacts. So before diving in I want to give a brief recap of who Ron is in his career so far Ron is one of the most knowledgeable people I've ever spoken to in terms of US politics and Economy he has a unique perspective as he's not only an expert on these topics But also an established entrepreneur and computer engineer. Here's an overview of some of his achievements Ron has been a pioneer in the commercialization of corporate transparency for over 20 years He founded shareholder.com in 1991 effectively inventing the industry of online investor relations Prior to shareholder.com Ron served as chief executive officer of a lion computer systems a Super computer company that had a market cap of nearly 500 million dollars Ron also designed many successful computers including the Nova 1200 and eclipse series Currently Ron is a founder and chief executive officer of the legal services firm Sky Analytics He recently released a fascinating book we the presidents which focuses on major issues Effecting the population today seeing his many areas of expertise I was excited to grill Ron on all things economic uncertainty and to hear his projections for the US economy moving forward Let's start with a few insights pulled straight from the interview So first let's talk about modern monetary theory a big topic We touched on in the interview as a concept of modern monetary theory and without going too deep into the weeds The theory essentially believes that our country could run a deficit for an extended period of time without any Real consequences the government could simply create more money to spend or give away if it wanted to Well, this theory is gaining traction in some circles It's important to note that it's still just a theory Ron is not convinced that we'll actually play out in practice and believes that our government Would quickly hit a debt ceiling if it tried to implement these policies We've seen the government implement these policies over COVID with all the stipends They handed out to people all the checks that they were cutting It's going to be wishful thinking if we think that we can issue as much debt as we wish to issue as long as we can find buyers for that debt That's just begging for the system to fail if buyers for that debt begin to back away Interest rates go up and the whole thing could collapse like a house of cards Well, modern monetary theory certainly has its merits more money for public spending universal health care creation of jobs It does seem to require an element of wishful thinking that could hold dire consequences for our economy To quote Ron, it's all based on optimistic thinking what's happening now is going to continue happening in the future But ideally Politicians should have the courage to tell people that we may have to tighten our belt whether that means cutting spending Raising taxes or both to get our fiscal house in better order now the U.S. economy throughout the history has Faced a variety of ups and downs if the U.S were to face a recession or depression It wouldn't be unprecedented. We've seen these cycles through our history the panic of 1837 Ignited a major depression that lasted six years The panic of 1873 that led to a depression that lasted four years The great depression of the 1930s was the worst economic downturn in world history lasting for a decade The most recent recession 2007-2009 was one of the worst in U.S. history with the unemployment rate reaching 10 percent The U.S. has also experienced no less than 12 economic recessions since World War 2 Each causing strife for business and individuals alike not only is Ron well-versed in these events But he also sees a potential for a 2008 recession rerun if policymakers follow the modern monetary theory mindset and framework To quote Ron, I'm worried that with national debt climbing like it is based on the theory that will just keep pushing debt out Or we can always refinance. It's going to be a repeat of 2008 on steroids now. What does this mean for us again? I'm not speaking about this topic in order to fear monger or to try and convince you that the sky is falling I'm simply wondering what could happen if or when the U.S. economy takes a turn for the worst in reality We've already had our experience with the economic downturns in very recent history the COVID-19 pandemic saw businesses and individuals all over the world scrambling to protect their income and savings recent events only make this conversation more relevant So how can we as individuals and business owners protect ourselves from future economic uncertainty? How do we withstand an economic crisis? So this isn't the first time I've touched on the topic of crisis proofing your business in a past interview with Machenzo Guzo He's a shark a dragon rather on dragons than we spoke about the power of flexibility and adaptability in the face of challenging times Today though, I want to focus on financial preparedness rather than adaptability It's crucial that we have a plan in place for dealing with difficult times whether that's a pandemic or an economic recession Let's go through a few steps step number one maintain your financial hygiene with geopolitical tensions rising and still coming off the backburn of COVID-19 all businesses should be maintaining their financial hygiene and preparation for a potential downturn Why? Because history tells us to hope for the best and prepare for the worst run your business as though you're Actively preparing for a recession and you'll be in a much better position when not if one hits operate within your budget This should be a given for any business, but it's especially important during uncertain times Don't crack open the piggy bank just yet operate within your means and be mindful of your expenses This doesn't just mean raining in unnecessary spending It also means ensuring that you're getting the most value for your money Evaluate your suppliers Renegotiate your contracts when necessary Explore other ways to save money without compromising the quality of your product or your service Next tip build a cash reserve in difficult times It's important to have cash reserves to fall back on this will help you weather the storm while you work on long-term solutions When setting your budget make sure to allocate a portion specifically for rainy day savings If you can try and increase this cash reserve as much as possible the more money you have saved up better off You'll be if things take a turn for the worst invest in your business Well, it may seem counterintuitive to invest in your business when the economy is uncertain This is actually a very smart move think about it if the economy does take a turn for the worst the value of your business Will likely decrease, but if you're already invested in your business during tough times You'll be in a much better position when the market rebounds So this is also why cash reserves are important plus Investing in your business can help you grow and expand which can lead to even more success and opportunity down the road Next point stay ahead of the competition during a recession not all businesses face the same odds In fact the past few recessions saw 14% of businesses accelerate their revenue and profits rather than decline If you want to be one of the businesses that thrive during uncertain times you need to stay ahead of the competition Keep a close eye on your industry Monitor your competitors moves and always be looking for ways to differentiate yourself from the pack Now that we've covered how to maintain your financial hygiene Let's move on to step two which is planning for the worst It's much more comfortable for us to avoid thinking about potential downturns altogether But history tells us that this doesn't do anyone any good In fact, it's much better to be proactive and plan for the worst case scenario What would happen to your business if the economy took a turn for the worst? How would you survive? What are your backup plans? Well, let's go through a few First suggestion would be to start an emergency fund many individuals devote a portion of their paycheck each week to an emergency fund and Businesses should do the same this ties into cash reserves as well It doesn't have to be for anything in particular It can just be a pool of money that you can access in case of emergency This is especially crucial for businesses that are heavily reliant on credit when the economy goes south Credit lines often get tightened to making it difficult to get the money you need to keep your business afloat Keep in mind that also counts for businesses that rely heavily on cash flow from customers that have net 30 net 60 net 90 terms If those customers can't pay you won't have money for your business as a guideline Work towards an emergency fund that can cover your business over six to nine months This will give you some breathing room while you figure out long-term solutions Next tip would be get familiar with your liquidity So liquidity is the ability of a business to turn its assets into cash quickly before uncertain times hit getting familiar with your liquidity options Will give you a leg up now? There's a few different sources of liquidity that you should be aware of business assets Can you sell any of your assets quickly if you need to accounts receivable? You have any customers who are likely to pay their invoices quickly Credit lines you have any credit lines available to you how easy would it be to access them if you needed them? Inventory can you sell any of your inventory quickly if you needed knowing your liquidity options will help you make informed decisions If the economy does take a turn for the worst keep an eye out for government grants and loans that could help you as well Next tip reduce your expenses just as you discontinue a gym membership if you only visited once in the past year It's helpful to eliminate unnecessary business costs where you can whether that's overhead expenses marketing budget Last last thing you should ever do, but sometimes it has to happen employees salaries Look for ways to reduce your spending. It doesn't mean that you have to cut back on important areas of your business Just identify areas where you can save money without compromising quality or service Some of these areas might include renegotiating contracts with suppliers and vendors switching to a less expensive supplier Streamlining processes to reduce waste Reviewing employee benefits and salaries outsourcing non-essential tasks going back to emergency funding You could even redirect the savings from these cuts directly into your fund The final step so we covered Financial hygiene we covered planning for the worst the last step is to set your business up for success So a great mindset when it comes to your business is to act as though you're raising a child You want them to be independent and to survive on their own You want to equip them with all the tools they need to be self-sufficient This is the same mindset you should have towards your business You want it to be resilient you want it to be able to thrive in any Environment any economic climate the best way to do that is to continuously improve it There are ways you can go about this Investing your business. Are you watching industry trends? Are you staying ahead of the curve? Are you upgrading your technology and equipment? Are you expanding your services or product offerings? Train your employees. This could mean on the job training It might be professional development. You could always be pushing your staff to excel and grow Evaluate your processes are there any redundancies or inefficiencies in your business Can you streamline things to make them run smoother? Automate where possible. This could be anything from automating and counting tasks To using a CRM system automation is a straight path to time and money savings So make sure to explore this opportunity Invest in your client relationships when disaster strikes you want to solid and loyal client base to fall back on Make sure you're doing everything you can to foster these relationships and keep them strong Of course, we don't always have the means to invest in our businesses But that doesn't mean we can't take other steps to improve resilience We can always be proactive in our problem solving and stay ahead of potential issues For instance being friendly and reliable towards your clients builds trust Having a solid backup plan in case of emergencies shows preparedness Tracking your expenses and profits helps you stay mindful of your financial situation The most important thing is to remember that resilience is something that can always be improved There's no one size fits all solutions. So take the time to tailor your approach specifically to your business The bit of effort you can set your business up for success no matter what the future holds now If this was useful for you the success story podcast interview featuring Ron grunner only touched on this issue briefly So we spent most of the conversation talking about past US presidents, which was also fascinating I highly recommend listening to the full episode if you haven't already And ask yourself these questions How prepared do you feel financially? So if disaster was to strike have you put measures in place to help your business rebound You'll get some lessons from the interview. Hopefully you got some lessons here Again, I'm not predicting 2022 Wall Street crash or a great depression My aim for this video is simply to get us all thinking about these questions To provide some starting ideas and how to prepare your business for anything Remember hope for the best But prepare for the worst and stay ahead of the curve If you enjoyed this definitely go check out the full podcast If you're listening to this share it with somebody who'd find it useful If you're watching this like subscribe leave a comment below any business topics you want to talk about I'll cover them in a future video have a great one