Is Winter Coming?

The First Snowflake Of Summer Has Fallen

When the first snowflake falls, we tend to stick out our tongues to get a taste of winter. Well, our tongues are out, but we’re not enjoying this chilling experience. Gas prices are skyrocketing to eye-popping 👀 rates, supply chains continue to break, grocery shelves are a bit naked, and what remains on the shelf is getting close to needing a second mortgage to buy… holy shit, the sky is falling.

OK, I was a bit dramatic in my opening paragraph, but I am a storyteller after all. Besides, a second mortgage will cost you more these days too.

Well, folks, it looks like we are heading into a recession, and it might be a bumpy ride. So, fasten your seatbelts and prepare for the worst; it’s not going to be easy to weather this storm.

Take a deep breath. It’ll all be OK.

How Did We Get Here?

Is this really important to your business brain? So many people spend too much time spinning in their minds about how we got here. Does that really matter? Look, the United States has been through 33 recessions since 1857. Here’s a pretty graph from Business Insider that shows what this cycle looks like.

Credit: Yuqing Liu/Business Insider

I am not an economist, but, If you want to understand more about recession cycles, here’s an article that might help:

https://www.businessinsider.com/personal-finance/what-is-a-recession

We Can’t Spend Our Way Out Of This

As of the writing of this article, I have 55 years on this earth and have seen this cycle repeat itself a few times. It’s scary for consumers. By the way, we are all consumers. But it’s even scarier for us business owners because we have to navigate this with more complexity and care than many.

I don’t know your business situation, the number of team members, or revenue, but I do know you’re either thinking about what’s going on with the economy or, if you’re like a few people I know, you’ve buried your head in the sand and are living in denial. Hey, if you don’t look around, you can’t see the train coming, right?

If you’re living the latter lifestyle, I want to tell you something you need to hear. It will be ok, and your business will survive if you take the steps to get lean, efficient, and super-serve your existing customer base. We have to make smart cuts to preserve our capital and keep our cash flow healthy. Right now, there are literally tens of thousands of business owners running their businesses like an ATM. They make money, take what they need from the business, and have no idea how much runway they have left.

Runway, for those of you who are new to business or perhaps don’t know this term, refers to how many months your business can keep going before it's out of money. It’s like a clock ticking away, except it’s the cash coming out of your account that determines how much time you have left to live.

Just like an airplane speeding down the tarmac, eventually, it must take off or it runs out of runway, the plane crashes, and everyone dies. Knowing how much runway you have is a crucial tool for budgeting, forecasting, strategizing, and if necessary, funding.

We can’t spend our way out of this. Although, there are some areas where spending can and should increase, while other areas decrease.

And It Cuts Like A Knife

So how do we keep our businesses healthy, where do we conserve cash, where should we cut expenses, and where should we invest more?

You need to first look at the absolute cash needed to operate your business each month. This number should include the following:

Salaries
Contractor Wages
Health Benefits
Advertising
Office Rent
Internet
Utilities

Typically, employees or salaries are the largest monthly nut to cover. People are pricey and great people are priceless.

You have to ask some very difficult questions when trimming the fat. Are all of your team members bringing 100% of their value to the business? Let me clarify, that DOES NOT mean are they a 24-7 slave to your every whim. No, it means, are they giving their personal best to the organization every day?

On your team roster or spreadsheet, start methodically scrolling down the list and ask yourself these questions:

Are they giving their personal best?
Am I receiving the necessary value for what they are paid?
Are they adding to our bottom line?
Is their role mission-critical?

If you hesitate to answer this question when going through your employee list, you already know you have some fat to trim. While this is not easy to do because people have lives and families, the only way to stay in business and support all the other members of your team is to operate lean and efficiently.

Think of your business as a truck. If you’re a truck pulling a 10,000-pound trailer, you are burning way more fuel than without it. If the trailer is necessary, it stays; if it brings value, it stays; if it’s mission-critical, it stays… you get it.

Quick, Cut The Advertising Budget!

OMG! Those words come out of the mouths of so many leaders, managers, and business owners when the economy goes south. Can we please have a real conversation about this?

A little lesson in supply and demand may be necessary here. If you fully understand this concept, jump ahead to the next section, or go back to doing the important work you do.

Ad inventory works just like cars, gas, and consumer goods. As businesses buy up the available ad inventory, supply shrinks. The demand on the finite number of ad avails causes the value of those slots to rise and the cost of buying ads increases. This holds true for the following:

Radio
TV
Billboards
Google
Facebook
Instagram
LinkedIn
Pinterest
TikTok

Yes, each of the above-mentioned advertising platforms has a finite number of ad units available for sale. If they sold nothing but ads, they’d have no users, no viewers, no listeners, etc. They must maintain a healthy balance to keep a healthy business.

The math is simple, and since I like simple, I will explain this in simple terms using one of the platforms I mentioned. Let’s assume Facebook only has 100 ad slots available to sell.

If 100 businesses buy an ad on Facebook, their available inventory goes to zero, and the value of those 100 slots just increased due to demand. People will pay for what they want. So, they can’t sell any more ad space when suddenly 2 new businesses want to advertise on the platform. Lucky for them, 2 other businesses decided to advertise elsewhere, and the ad slots opened up at a much higher price but are still worth it for the business. This cycle repeats itself over and over each day until smaller budgeted businesses can’t afford to buy ad space on their platform because bigger-budgeted businesses pushed them out by driving up the price per ad unit.

Contraction. Pain. Push.

Like a woman in labor, economic contractions are the squeeze we all feel right now. With each painful contraction, there is slow movement. Some of the contractions squeeze so hard businesses fail. It happens.

When that business fails, there is pain, but that’s our opportunity to push… hard!

As businesses go under, the available ad slots open up because the advertising dollars they infused into the market are no longer there. This causes the price of advertising to contract, and buying ads becomes more affordable. Yes, those money-hungry platforms get to feel some pain, and that puts a smile on my face. You too?

It’s A Fire 🔥 Sale

There’s a reason they call a fire sale a fire sale. When a store catches fire, its inventory is damaged. Some of it is burned beyond usable, some smells like smoke, and the rest is soaking wet from the firehoses.

But the opportunity for a consumer during a fire sale is HUGE!

Because the only way for them to rebuild is to sell off everything in their inventory. They slash prices, and savvy shoppers get to take advantage of great deals. Sure, they may buy soggy, smokey goods, but they can wash the smoke out and dry off the wet stuff. They bought at a discount and got a great deal.

This same theory holds true in advertising. The fire sale hasn’t started as of the publishing date of this article, but it’s coming. When it does, you should not cut your advertising budget, you should go on a shopping spree.

I am not advocating you take on debt to advertise. Look at your cash position and increase your budget according to your available runway. If you have the cash to buy, take advantage of the moment. The coming fire sale will give you a growth opportunity that wasn’t there 10 months ago.

I Hate Roller Coasters Too

There are people who love roller coasters, and then there’s me. I hate them. I don’t particularly enjoy the feeling of not knowing what’s coming as we inch our way to the summit, then suddenly hurl downward. My stomach is in my throat, and speaking of hurling… I once barfed all over my dad on the Cyclone at Coney Island. Maybe we should have waited to have Nathan’s hot dogs until AFTER the ride, Dad. Just saying.

Unfortunately for you and I, we don’t have a choice.

We are strapped into this coaster, and there’s no emergency brake to stop it. We are about to experience a nauseating drop and a wild freaking ride. Eventually, the ride will end.

While we may not have enjoyed the gut-wrenching ups and downs or the volatile twists and turns, we all get off the ride with a smile on our faces because we survived. We exit the ride with a feeling of accomplishment. We overcame our fears; we stayed in our seats, and we didn’t let the ride get the best of us.

Don’t let this ride get the best of you. We know it’s going to be wild and scary, but it will eventually come to an end. You get to choose if you’re smiling or crying when you exit.