2022 Recession: How to Survive

Summary

• Understand that being informed about recessions allows for better preparation and increases the likelihood of success.
• Realize that during recessions, unemployment rises, leading to a surplus of labor that may reduce staffing costs.
• Acknowledge that purchasing power generally goes down in a recession, causing people to cut back on non-essentials and large expenses.
• Expect manufacturing to decline as businesses cut down, which can ironically lead to higher prices due to reduced supply.
• Reflect on the COVID-19 pandemic as a learning experience similar to a recessionary environment, particularly for my businesses like gym launch, Prestige Labs, and software services.
• Remember the importance of creating a financial decision-making framework in anticipation of revenue changes.
• Embrace a positive outlook on recessions by viewing them as opportunities for improvement and testing your business's strength.
• Foster a sense of camaraderie within your team, especially when facing challenges, as it helps build a stronger collective force.
• Communicate frequently and transparently with your team, shifting from a peacetime to wartime mindset as necessary.
• Prioritize direct communication with clients and be prepared to work extra hours to maintain client relations and business health.
• Plan in advance for potential revenue drops using the "fat, muscle, bone" concept to make critical decisions in a calm state.
• Educate your team on the differences between peacetime and wartime strategies and adjust accordingly.
• Modify marketing approaches to resonate with clients' current emotional states, focusing on preservation instead of growth.
• Act despite personal feelings and look for ways to use challenging circumstances to your strategic advantage.
• Acknowledge that business challenges are not unique and use them as opportunities for team development and personal growth.

Video

How To Take Action

I would suggest making a plan now for the tough times ahead. Think about your business like it has fat, muscle, and bone. If money gets tight, cut the 'fat' or things you don't really need, like maybe some extra services or luxuries in your business. If it gets worse, you might need to cut down to the 'muscle', which could mean letting go of some things that are good to have but aren't absolutely necessary. If things get really bad, make sure you only spend on the 'bone', the things your business can't live without.

It's also important to know when you're switching from 'peacetime' to 'wartime'. Read the book "The Hard Thing About Hard Things" to understand this better. When it's wartime, you work harder and focus only on what's really necessary to keep your business going.

Change your marketing so it talks to people about getting through tough times, not just reaching their big dreams. People want to feel safe and be sure they can take care of the basics when they are scared.

And work hard, even if you're worried or scared. You can't just blame a tough economy for your problems. Use this time as a chance to make your business and team stronger. Remember, you're not alone in this. Every business has hard times. It's your chance to grow and get better.

Quotes by Leila Hormozi

"I say this to inform you because if you're informed of the situation then you can properly prepare for it"

– Leila Hormozi

"Recessions are really good for the winners and they're really bad for the losers"

– Leila Hormozi

"Camaraderie on a team is formed when you guys all have your back against the wall and you have to work together to drive out of that situation"

– Leila Hormozi

"Communication and messaging when times are hard is the number one job of the leader"

– Leila Hormozi

"The best Founders act despite how they feel and they will win despite circumstance"

– Leila Hormozi

Full Transcript

million small businesses went out of business for good so today what I want to share with you is how to prepare for the recession that's coming or many may say it is already here whatever I'm not an expert regardless I don't say this to scare you I say this to inform you because if you're informed of the situation then you can properly prepare for it and you're much more likely to succeed given the circumstances that are to come than if you're not to think about it you're to avoid it you're to think I'm going to think about that later so for full transparency I have not been through recession myself I'm not really old enough that the last one didn't really affect me I think I was in high school and so it wasn't really relevant but what I have gone through is I've gone through recessionary like environment which was covet and so I'm going to share that story here in a couple minutes to give you a little bit of insight as to how a recession affects businesses here's a couple of the ways that it does one is that unemployment goes up what does that mean that means that a lot of people lose jobs what you see right now is that a lot of employees have the upper hand in terms of what they're asking to be paid and the fact that there's less of them to Source from what it changes to is typically there are fewer of them in demand there's less jobs available and you can pay less for the talent the second thing that happens is that purchasing power goes down you can already see that in a few articles that come out about 75 of Americans are saying that they're reducing their spending in preparation for a recession and so what that means is that most people they stop spending money on things that aren't necessary someone installing a pool for example probably not going to do that during a recession it's not necessary and it's a large capital expenditure the third thing that happens that typically manufacturing declines the reason for that is because there's less people working because businesses are cutting down and so their ability to produce Goods actually tends to go down and ironically sometimes then the prices also go up because they have less manufacturing they have less people so they're charging more to recoup their costs so though I've never been through a recession I can tell you about the time that I went through covet a lot of people ask Layla how was covid when you owned a gym launch and I was like it was fantastic we had brick and mortar gyms it was great no it was absolutely freaking horrible it was horrific it was a blood back Jim launch brick and mortar gyms that's who our clientele is prestige Labs Services the clients of those brick and mortar gyms so they sell those supplements through their physical locations and then Alan the software was built to help people get people to show up to in-person appointments so when covet hit it not only affected one business it affected all three of our business drastically Alex and I remember we're on a walk and it was about two days into covid when we had heard coveted hit and people are saying there's a shutdown for like two weeks and we were like what do you think's gonna happen we're like two weeks yeah probably longer than two weeks and so we were looking at the effect on our businesses and we knew that we couldn't sit around idle and just wait for things to turn around and so we knew that we had to take action we looked at each business and we made a plan as to what we were going to do if X Y and Z happen if our Revenue drops below X we do y if we're in the red we do y and so we made basically a decision making framework for each of the businesses that was tied to our financials now the second thing is that our team was terrified now I don't think Alex and I were terrified because I look at it as an opportunity to get better I'm lucky to have mentors who they always told me they were like Layla recessions are really good for the winners and they're really bad for the losers and what they meant by that was winners are always going to take advantage of an opportunity like the recession it's a chance for you to get better it's a chance for you to also see where your deficits where can you improve and where can you get better because maybe you're not as strong as you thought in a certain area that's okay though you wouldn't know if you weren't tested and so I look at this and I really think of our core tenant competitive greatness and I think back to why we created that core tenant and a huge reason was going through you know two and a half years of covid in a gym business and in brick and mortar Services it was rough but what I saw is that that period of time made our company stronger than any good times could have made it and that is why winners utilize times like the recession so if you feel scared and you feel afraid that's totally fine but you also have to understand like there's such a huge opportunity here this is an opportunity for you to strengthen yourself to strengthen your team and to strengthen your business camaraderie on a team isn't formed when you're winning camaraderie on a team is formed when you guys all have your back against the wall and you have to work together to drive out of that situation that's really how we viewed covid and how we went into it with that mentality now what I knew is that my team doesn't necessarily see it like that they don't know what's going on and all they want is they want a leader to show up and lead the way for them and so what we made sure to do during that time was show up for our team have more communication than ever so that meant I was sending weekly updates to our team via email Sunday night every week every three to four weeks hosting a full team meeting talk about what was going on and the biggest mindset shift that I gave to my team is I said listen guys we've been in peace time since this company was born we are now switching to wartime here's the things that are going to change one we all work nights and weekends now why this is a phrase that I got from Josh Graves who was my boss when I worked at a gym about seven eight years ago we all feed the business and the business feeds us and that's why I told my team I said we all feed this business me and Alex don't just feed this business we all feed this business together if we want to make this work in one of the worst and hardest hit Industries we need to work nights and weekends we're not doing any of these virtual happy hours we're getting rid of all this like birthday holiday celebrations I know that sounds bad but I'm saying for a short period of time this is what we need to do because we need all of our energy focused on how do we prevent our clients from going out of business and ultimately present ourselves from going out of business and so that's what we did and I explained the mindset shift from peacetime to wartime and I put it out on slides and I said this is exactly the activities we're going to to change and the thing was that a lot of people don't want to ask that of their teams our team one thousand percent got behind it every single person stepped up to and Rose to the occasion because they all understood they're like we all feed this business if one of us slacks off we don't have room for that right now that person shouldn't be on the bus if they're slacking off because the reality is is it doesn't take a leader to get a business through a recessionary period it takes an entire team to get through that recessionary period so not just the leaders have to change their mindset but the whole team has to shift their mindset so on the other end of this there was our clients right so at that point in time we had about a thousand high-end clientele in our gym launch program and 2 000 people selling our supplements on Prestige Labs these are all brick and mortar gym owners Alex and I jumped back in we started hosting calls with our clients because what we felt like is they really needed to hear our voice during that time and I think that a lot of people think Layla there's so much going on I'm trying to save my business I don't have time to take more calls with my clients and take more time with my team you have to make time communication and messaging when times are hard is the number one job of the leader and a lot of people have passed that and they say I'm too busy I've got to go figure out how to drive more Revenue figure out how to do all these things the reality is you kind of have to go psycho bunny mode and work overtime and do both here's the four things that I would do tactically if I were preparing for a recession one is I would make my plan now what a lot of people do is they wait to make a plan of how they're going to adjust their business until when the bad thing comes all of a sudden your business isn't making money and you're like what do I do in that state you're so emotional that you're not typically making good decisions my CFO gave me this advice she said when you're thinking about preserving a business you want to think about fat muscle bone when your business drops to a certain amount of Revenue what Revenue triggers that you would need to cut some of the fat maybe it's cutting fat like it's cutting positions because they're really just not needed because you don't have enough demand the second level once you get to this level where maybe you're breaking even what are you going to cut out of the muscle what activities and maybe key roles are not going to make sense to have when you're at that muscle level it's not something you necessarily want to do but it's going to make sure that you can preserve the business so it can be around to preserve the rest of the bones and then the last level below that which this is typically when a business might be in the red or on the verge of losing money the bone what are the fundamental things that though they seem like they are necessary for the business if I try to sustain them I might put the rest of the business under listen guys I know that's not fun to think about but you want to think about it now so you make sound decisions rather than thinking about it when you're an emotional state and then you probably make the wrong decision the second thing is making the message about what is wartime and what is peacetime now if you want to reference this Ben Horowitz has a great book called the hard thing about hard things where he talks about what a peacetime versus a wartime leader is I would go in that book and I would read that section literally just so you could capture this and then you can understand what you as a leader need to do in terms of Shifting your behavior as well as what your team needs to do in terms of Shifting your behavior and I would make sure I was very transparent with my team about making those changes I would do an entire presentation to them explaining what the shift is going to look like and what we're all going to do differently now the third thing I would do is I would actually adjust my marketing a friend of mine he actually made most of his career during the recession because he was the only one that continued to market during that time and what he did was he shifted his marketing message from building this insane Empire and achieving your dreams to preserving making sure that you can at least have something for your family switching from goal-oriented marketing to preservation based marketing because when people are in a state of fear they're not thinking about these crazy wild audacious goals right they don't have the capacity instead they're thinking about dude I just need to make sure I make rent next month so you need to speak to the audience and what they're feeling and that's how you would want to shift your marketing and then the last thing is I would understand that the best Founders act despite how they feel and they will win despite circumstance there is always a way for you to win despite what's happening around you and what you have to understand is you can't blame the recession you can't blame the economy instead you need to look at it as your strategic Advantage how will I win when everybody else is losing anybody who owns a business in time is going to go through a recession and so the number one thing that I want you to remember and this should give you peace this shouldn't make you feel bad is that you're not special you're not special everyone goes through these times what's really isolating is we think I'm special my situation is worse than everybody else's but the reality is that's just not true and this is just an opportunity for you to get better your team to get better and yourself together