‘Recession’ and ‘Inflation’ have evolved into the two buzzwords of economics that you see on every platform you open up on the internet in 2023. Recent years have seen some of the greatest rates of inflation in major economies. The U.S. economy alone is seeing the highest level of inflation since the early 1980s. This has led to continued worries of a 2023 recession.
As business owners, let's learn some of the basic terminology so that we can assuage our minds and learn to distinguish between the fear-mongering and the fiction versus the factual circumstances that we need to spend our energy preparing for in the challenging months ahead; in 2023 and beyond.
What is “inflation”?
When inflation remains high, interest rates are elevated, and access to credit tightens. Housing prices drop; while mortgages increase.
Price increases, or inflation, can be thought of as the gradual loss of purchasing power. The average price increase of a selection of products and services over time can serve as a proxy for the rate at which our buying power declines. A unit of currency effectively buys less as a result of the increase in pricing, which is sometimes stated as a percentage.
Deflation, which happens when prices fall, and buying power rises, is comparable in nature to inflation.
What is “recession”?
A significant, pervasive, and protracted decline in economic activity is referred to as a recession. Although complex calculations are utilized, a general rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth indicate a recession.
The National Bureau of Economic Research (NBER) employs a much more comprehensive approach to measuring recessions by taking into account non-farm payrolls, industrial production, and retail sales, among other indicators.
What can we do about these macroeconomic concepts as business owners?
As individuals, co-founders, and business owners - the people I like to refer to as the “self made nation", you and I don't have control over whether or not there is a recession; or what the inflation rate is.
So, what do we have control over?
We have absolute control over one thing.
Our thinking.
Think
and
Grow
Rich
Keep control over your thoughts,
your mindset,
your attitude.
To help keep us steadfast on that path, I have curated some nuggets of inspiration from 260+ episodes of my podcast “I’m a Millionaire! So Now What?”.
https://iamamillionairesonowwhat.libsyn.com/ep262-where-is-the-opportunity-in-economic-turbulence
Recession thinking inspiration: The obstacle IS the opportunity.
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Rethink your subscriptions and vendors: One business owner shared that he and his team looked to the impending slow down in their business as an opportunity to review all of their business expenses, subscriptions, tech, and more. They got together as a group, and they looked at all of the line items. What was most valuable? What was underused or not valuable? If they were the latter, then it was time to cancel them. If they were underused but still had promise, maybe it was time to start properly leveraging those services or subscriptions.
Don’t forget your subscriptions. They can rack up. Think of them like major contracts similar to your mobile phone bill (a mobile phone bill for a large team can offer substantial savings when appropriately negotiated). The business owner I speak of, said, “Okay, what do I have to lose? I'm going to reach out to these major suppliers and I'm going to negotiate some rate reductions.” Their team got on the phone and were able to reduce some of their bills by as much as 20-25%.
There is always some super practical opportunity around us when we're faced with an obstacle. Seize any opportunity to take a look at, and get rid of, expenses that are not needed.
Review the balance sheet
Review your revenue
Review your clients
Review your profitability
Review your cash flow
A recession presents a great opportunity to take a second look at things in your business.
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Rethink your decisions when it comes to long term investments: I had lunch with a friend who's a business owner who said: “Colleen, maybe you don't realize it, but I read all your material. And you said something about, never missing an opportunity like a good recession.” (originally a quote from Jack Welch). She said, “Listen, I had second thoughts about this real estate development that I was working on for a number of years. Like a lot of large construction developers I contemplated putting this project on hold because of increasing interest rates and inflation. But then, thanks to you, Colleen, I gave it another thought. The whole idea of looking at recessions, and the obstacles they bring, in a different light helped me to move ahead with the development.”
So there you have it. Two very practical ways that your peers in the Self Made Nation have taken obstacles and turned them into opportunities during this offbeat time in history.
If you’re among the brave and inspirational who are forging on with building out your business with a cash rich exit in mind, recession or not, I applaud you!
I'd love to chat about how I can support you in planning that cash-rich exit.
I have resources and connections that I am happy to share.
Reach out to me via DM me on LinkedIn or email me at colleen.campbell@rbc.com
TTFN,
Colleen