As a Business Mentor & Author I believe that one of the main responsibility business owners have is to master Financial education. Without which your future will be short-lived. As someone who has invested the past seven years in studying economics, it doesn’t make good reading what is coming. When you begin to understand the causes of inflation the very basics of history from fiat currency lifecycles. The absence of gold back currencies, what CBDC’s are really about, the demise of the petrodollar and the consequences of QE (Quantitive Easing-Money printing) it is time to prepare.
I hear you say “Denise don’t be so pessimistic!” Unfortunately if you scrape just the surface of our Financial system and delve a little into History it’s time for us all to ‘wake up and smell the coffee’.
But firstly let us discuss what is a Recession? As a business owner or CEO do you know the definition of a Recession? Or a Depression?
What defines a RECESSION?
Recession: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. Signalled by an increase in unemployment, a drop in the stock market, and a dip in the housing market.
Depression: is characterised as a dramatic downturn in economic activity in conjunction with a sharp fall in growth, employment, and production. Depressions are often identified as recessions lasting longer than three years or resulting in a drop in annual GDP of at least 10%.
But more importantly have you considered how you would prepare for a Recession? Or may I even suggest a Depression?
In my book The Enterprise; Black Box Thinking I talk about Financial lifecycles like the four seasons in a year.
“Like nature we have our spring, summer, autumn and winter with differing rewards, challenges and demands.
Spring: Like the farmers we sew our seeds, planning and preparing for extra labourers and managing our flow of money.
Summer: We harvest our crops, spending our profits and expand with new equipment, the hiring of new farm hands; we enjoy life and a little extravagance.
Autumn: We do our housekeeping, we get rid of dead wood reduce our costs, repair our equipment and buildings. We prepare for the downturn and look after what we have.
Winter: We look after what we have, trim back on our labourers save the pennies and the pounds we look after our existing customers. We tighten our cash flow and buy up- cheap bargains, reducing our overheads, getting back to basics.”
Over the past 18 months I have been subtly preparing business owner’s for the inevitable economic fallout from the excessive QE that began in the GFC(Global Financial Crisis)of 2008 and has reached its peak with the accelerated money printing in 2020-2022 . Many Financial Experts & Economist stating;
“The Financial System has been on life support since 2008”.
And for young infancy businesses (Post-2008) that have never experienced the peaks & troughs of owning a business in a recession this coming ‘Winter’ is going to be an exceptionally harsh season in business.
With a historical view of the economy from both a Macro & Micro perspective I have looked at the difficult questions business owner’s need to ask as we prepare for the coming financial year. Considering the possibilities of inflation -hyper inflation, higher interest rates – potential crash in commercial mortgage backed securities, employment challenges -wage disputes, further supply chain issues -geopolitical challenges & unrest, plus rising Energy & Fuel costs.
Have a quick look at just a few simple questions I have been asking companies:
- RISK ASSESSMENT; When was the last time you had made a critical assessment of your business and it’s vulnerabilities & weaknesses. Truthfully evaluate the impact of: further supply chain disruptions, interest rate hikes, higher inflation and a potential stock market crash or correction.
- CASH FLOW; What actions could I take this week to improve my; cash flow, accessibility to cash, cash savings. Secure future sales and new income?
- TRIM FAT; What unnecessary expenses/luxuries, overheads, services, outsourcing, capital assets can we reduce, eliminate, dispose of that can be better invested elsewhere in my business?
Later this month I will be launching a programme (a mentored & self study option) for CEO’s that offers practical ideas and solutions to the challenges facing small to medium sized businesses in the U.K. in 2023. Helping them plan, prepare & strategise for various possible economic scenarios. From taking a risk assessment of their business, re-evaluating the operational & financial efficiencies of there business model to the mundane practical exercises every business owner can implement immediately.
As fiat currencies pinned to the WRC (World Reserve Currency- the Dollar) gradually loose more purchasing power and the petro dollar diminishes business owners face the challenges of more expensive imports & supply chain disruptions. Further energy/fuel costs and an economic downturn internationally- every business owner should have a planned response to a Recession (or potential Depression).