Last week, an entrepreneur I know well was speaking at a private mastermind group I’m a part of and as he was talking about how tough things have been for him lately, I looked around the room and saw a lot of heads nodding.
Now this guy has always run a pretty efficient company with healthy profit margins, so to hear that he was struggling was a surprise. It was even more surprising though, to see so many other entrepreneurs say they’re going through the same thing lately.
A lot of Americans have faced financial challenges caused by inflation and stagnant wages since the pandemic, but the fact that these entrepreneurs, who typically have their finances dialed in pretty tight, have been facing the same challenges indicates that the economy is doing far worse than we’re being told.
But we all suspected that, right? I mean, when we look at the financial KPIs we track our economic performance by, things don’t look good despite what the media and politicians keep trying to tell us.
At this point, it’s undeniable.
So what do we need to do as entrepreneurs to adapt to today’s evolving—or should I say, devolving economic environment?
The first thing we need to do is to streamline our operations. This is generally a pretty quick and straightforward task. You identify and cut costs that aren’t essential to your business’s ability to serve your clients.
This means skipping the fancy parties, expensive vehicle leases, extravagant gifts, and other things you don’t absolutely need to run your business. One area of your budget that tends to provide a lot of room to cut is subscriptions, which are also easy to quickly and easily find, too.
You can also look for ways to merge services. Maybe you’re using three programs, but the same functionality can be achieved with one. Or maybe you can replace an expensive program with more cost efficient option that still meets your needs but doesn’t have quite as many features. (Most of which you probably don’t use anyway.) But cutting costs can only take you so far, so we need to take a couple of additional steps.
Another thing we need to do is to line up as much funding as possible, and ideally, use it on a recurring basis to bolster you business credit profile. Most entrepreneurs make the mistake of waiting to request funding until they are in a financial crisis. Unfortunately, it often means they no longer qualify at that point.
That’s why it’s so important to build business credit credit well before you need it, and then continue to nurture it over time. I do want to make an important note here though—even though you can and should get credit in your business name as opposed to your personal name, you will still be required to provide a personal guarantee, also known as a PG. This means that if your business goes under, you will be personally liable for the debt. Don’t let that scare you away though, because that capital can mean the difference between going out of business or thriving through the economic downturn. This is something we do for our clients at Fund&Grow, but this is something you can DIY if you have the time and knowledge.
And a third thing we need to do is make our companies virtually irreplaceable to our clients. I say virtually only because it’s impossible to achieve this completely, but the goal is to make your value proposition so compelling that only a complete moron would say no.
That might mean offering a bulletproof guarantee, concierge-level service, proprietary technology, or something else that matters to your clients and puts you in a different class than your competitors. This is easier said than done, though. After all, if it was easy, you’d already be doing it, right? But the effort will payoff in a huge way because when consumers start cutting expenses, it’s not just a numbers game. It’s about where they get the most value.
If you can replace what a client is currently getting from two or three different companies, and especially if you can do it at a lower cost, your company will be a shoe in.
Bottom line—our economy is weak and getting weaker every day, and that’s going to continue for at least the next several years. Because of this, we all have a long hard road ahead of us, with growing inflation and declining consumer confidence grinding progress to a crawl. But while the outloook seems bleak, it’s times like this that uncover the biggest opportunities.
Those who are prepared and take bold action despite the fear and uncertainty they face will be the ones that future generations of entrepreneurs cite as examples to follow.