613: Is A Recession Coming In 2023?

The priority of our work is to liberate business owners from chaos, and most of those business owners have between 2 and 50 employees. We get the question often, “are we in a recession?” Our response is usually the same, “does it matter?” Seriously, in your day to day life does it matter? Over the last two years, I have watched some moments of real irony.  We obsess over downturns in the market, a decline in business, and recessions or depressions. Just last week, anyone who had money invested in the crypto-currency exchange FTX (some reports put that figure around $1.8 Bn) lost it all.   $1.8 billion…poof. Was that a product of a recession, or recession like market movements?   No.  It was a problem of poor management and leadership. Throughout 2020 and 2021 the market was red-lining at high RPMs and many businesses had converted their business development and outbound sales departments into order takers trying to handle the inbound demand from a flood of cash pumped into the market now being spent on new homes, background kitchens, boats, and cars.   Business owners were pulling their hair out as they tried to manage customer expectations, a volatile supply chain, and prices that had the discipline and direction of a squirrel. Now the outcry is, “what if we lose all of this work?”  We have switched one cry to another rather than quietly leading through a boom and quietly leading through a bust. We do not individually influence macroeconomics, but we can certainly lead well within the economic climate we’ve been given, whether cloudy or sunny. Here are 9 elements you can implement to lead well during the boom or the bust so you will stop asking the question, “is a recession coming?” First, write your vision down so those who read it may run.  A written vision story compels, clarifies, guides, and motivates. A business without a vision is like a ship without a compass and that is somewhere no one wishes to be. Second, write an annual letter to your business team.  Reflect back on the year that has passed, and project on the year to come.  What have you seen and what do you see?   Write it down to share, and write it down to keep a history of how you and your business handled like-situations in the past.  Third, build a calendar exclusive to the culture you wish to create.  Culture is not accidental, and good culture does not follow those with luck.  Solid culture is built through intentionality, repetition, and predetermined meaning. What do you want your culture to be?  The ingredients of that culture will need to be planted intentionally and thoughtfully throughout the year. Fourth, subdivide your cash.  Every dollar that comes into your business is not your dollar.  Some of that dollar is for your business, or for you, and some of that dollar is intended for other destinations (i.e. taxes, vendors, fixed expenses, etc.). Open up multiple bank accounts that will house the major payouts from your business so you can subdivide every dollar as it comes in right away. The fifth element to help you lead predictably through boom or bust is a simple cash tracking spreadsheet.  Every week, go review your actual cash balance and record it sequentially on the same spreadsheet so you can watch your cash. A winning strategy in any market is to always have a bucket of cash to pull from.  You won’t have cash if you don’t watch your cash.  This does not give us license to obsess over cash and hoard it.  Our financial warehouse should have a receiving department and a shipping department, an in and an out.  Sixth, a well-led business has a simple budget.  Thoughtfully review the prior year’s profit and loss statements with its chart of accounts, and think through where future income should be spent to best align with the mission and vision of the business. Seventh, a well-led business should have basic estate planning to provide clarity to heirs in the event of a surprise.  Do you have written operating agreements, employee agreements, wills, powers of attorney, or trusts if needed?  Sitting down with a qualified estate planning attorney is a gift to the business and to your family. Eighth, insurance should be reviewed and mapped out as well to insure sound coverage.     Finally, a well-run business is being led by an owner who has thoughtfully walked through their own personal finances.  What income is needed?  What desires and goals do we have?  What income is needed for those desires and goals? An owner who has little discipline over her personal finances, is likely to have little discipline over the finances of the business.  Booming economies in many ways can actually exacerbate bad financial discipline allowing a business to grow habitually accustomed to overspending and underpaying. Let’s stop living within the anxiety of an emerging recession, or not, and instead commit to solid leadership, and build a better boat that can handle both a placid lake, or a raging sea.