March 17, 2025 • 51 mins
In this timely episode, Michael Barbarita reveals how business owners can not only survive but actually thrive during economic downturns. While most businesses retreat during challenging economic times, this episode uncovers counterintuitive strategies that can position your business for unprecedented growth while your competition struggles.
Powerful Business Strategies is broadcast live Mondays at 12 Noon ET Music on W4CY Radio (www.w4cy.com) part of Talk 4 Radio (www.talk4radio.com) on the Talk 4 Media Network (www.talk4media.com). Powerful Business Strategies is viewed on Talk 4 TV (www.talk4tv.com).
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Powerful Business Strategies is broadcast live Mondays at 12 Noon ET Music on W4CY Radio (www.w4cy.com) part of Talk 4 Radio (www.talk4radio.com) on the Talk 4 Media Network (www.talk4media.com). Powerful Business Strategies is viewed on Talk 4 TV (www.talk4tv.com).
Powerful Business Strategies Podcast is also available on Talk 4 Media (www.talk4media.com), Talk 4 Podcasting (www.talk4podcasting.com), iHeartRadio, Amazon Music, Pandora, Spotify, Audible, and over 100 other podcast outlets.
Become a supporter of this podcast: https://www.spreaker.com/podcast/powerful-business-strategies--6198916/support.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The topics and opinions expressed in the following show are
solely those of the hosts and their guests and not
those of W FOURCY Radio. It's employees are affiliates. We
make no recommendations or endorsements for radio show programs, services,
or products mentioned on air or on our web. No
liability explicitor implies shall be extended to W FOURCY Radio
or its employees are affiliates. Any questions or comments should
be directed to those show hosts. Thank you for choosing
(00:20):
W FOURCY Radio.
Speaker 2 (00:27):
Welcome to Powerful Business Strategies, where you will find out
that everything you have ever learned about growing your business
is wrong. Finally, a show where you'll learn the right
way to grow your business by learning business and financial
strategies that your competition isn't doing. And now here is
your host, President of NeXTSTEP CFO, Michael Barbarita, and joining
(00:52):
Michael for today's show as an executive moderator is Chooky Obia.
Speaker 3 (01:01):
Welcome to Powerful Business Strategies. And by the way, today
is Saint Patrick's day. I am wearing green, so I've
got that COVID. But the reason why you don't hear
the more invigorating voice of Chucky Obio. Welcoming you to
the show is because Chukey and his wife recently had
their first baby. It was the daughter and they welcomed
(01:23):
Chelsea to the world. So congratulations to Chukey and his wife.
He will be on leave for a little while, so
in the meantime, my name is Michael Baberta. I'm president
of Next Step CFO, and next Step CFO is a
fractional CFO and strategic implementation firm. Business owners hire us
to double and triple their profit using business and financial
strategies that their competition isn't doing. Our vision is to
(01:47):
ensure overwhelmed business owners achieve the time, freedom, and consistent
profits to build a legacy and the life that they desire.
Our mission is dedicated to guiding small business owners to
leveraging their time, floating their profits, and building a meaningful legacy.
The show Powerful Business Strategies in our book of the
same name, is a step toward accomplishing that vision and mission,
(02:11):
and Chuky and I are both affiliated with a number
of different organizations. Chocky currently serves as a managing director
of business development for Better Price, which they global business
focused law firm, and in addition to that, Chucky and
I collaborate to moderate business roundtables around the country and
around the world and document those insights as part of
(02:32):
our book, Powerful Business Strategies. But please don't that the
views expressed on this show are personal views based on
our own successful experiences, and this is something that i'd
like to share that I've announced the last few weeks.
If you have a business problem that you'd like us
to answer, or a business question or a strategy that
you'd like to ask us about, please email us at
(02:54):
ask at NEXTSTEPCFO dot net. That's ask at NeXTSTEP CFO.
Doesn't matter what the business problem is or what the
question is, and we'll just answer it for you. But
there are a couple of things that we do ask
Number one, please state whether it's something we can answer
on the ear or if it's confidential, let us know,
(03:15):
and of course if it's confidential, we won't put it
on the air. And number two, please provide your phone
number because business problems can be complex and we might
need more context or clarity. That email address, again is
ask at NeXTSTEP CFO dot net. And they also want
to point out that we've had we've had questions, but
they have requested confidentiality, which, of course we will always
(03:39):
always honor. You know, throughout history, the most extraordinary success
stories weren't written during times of ease and abundance. They
were forged in the crucible of challenge and uncertainty when
the wins of economic change blow fiercely. Remember this truth.
(04:01):
Diamonds are created under pressure, steel is strengthened by fire,
And the most resilient innovative businesses are often those that
navigated through economic storms, not those that sailed only in
fair weather. Right now, somewhere in your market, a business
owner is looking at the same economic landscape you are.
(04:23):
But while others see only threat, the exceptional few recognize
disguised opportunity. They understand that economic contractions don't just test businesses,
they reveal which ones are built on solid foundations. You know,
during the Great Depression, IBM expanded. During the two thousand
(04:46):
and eight recession, Netflix grew its subscriber based by twenty percent.
These weren't accidents. They were the result of leaders who
refused to retreat what others did. Today, a challengeuld be
that exceptional busines, this owner, the one who sees possibility
where others see problems. Because when this economic cycle inevitably turns,
(05:09):
as all cycles do, it won't be the business that
simply survived that thrives. It'll be the one that use
this moment to innovate, that use this moment to strengthen foundations,
and that use this moment to capture market share while
all others pull back. Remember that tough times don't last.
(05:35):
Tough business owners do. There's what I'm having this show
today is because some of my clients are telling me
that their customers are pulling back, that they're postponing large projects,
they're ordering less, they're more price conscious, or downsizing what
they used to do at the moment. It's not all clients,
and it's not all industries, but it is fascinating to
(05:57):
note that the ones who are not feeling the effects,
I'm doing some of the things that I will talk
about today. You know, when storm clouds gather on the horizon,
most captains head for the harbor. They seek safety, battening
down the hatches, hoping merely to survive the coming tempest.
But throughout history, the successful navigators have done something different.
(06:21):
They prepared their vessels to sail boldly, into the storm.
The same is true in business. Economic downturns don't create
or destroy opportunity, They merely transfer it from the unprepared
to the prepared. Although there's retreat, the visionary business owner
understands that the greatest opportunities often emerge during the most
(06:46):
challenging times. And remember, more millionaires and billionaires have been
created during economic contractions than any other time period in history.
Why is that Well, because downturns separate those who build
businesses on solid foundations from those who have separate those
who prepared from who are prepared, from those who simply
(07:11):
hope for the best. Today, I want to challenge you
to be among the prepared, to be the business owner
who not only weathers the storm, but harnesses its power
to propel your business forward. Because the question isn't whether
you can afford to prepare for an economic downturn, it's
whether you can afford not to. So today we're diving
(07:37):
deeper into a topic that's on many business owners' minds
these days, how to prepare for and thrive during an
economic downturn. You know, business is terrifying, and it's terrifying
because we're responsible for so many other people's lives. And
the scariest thing about business is that when you wake
(07:58):
up in the morning, we really never know what to expect.
And this uncertainty is amplified during economic downturns. What traditional
wisdom says to cut back, preserve cash, and essentially go
into survival mode. But today our objective is to give
you something different financial and business strategies that your competition
(08:20):
isn't doing that will help you thrive during economic downturns,
reducing the terror and uncertainty of business. So let me
be clear from the outset, you can never really be
ready for an economic downturn, but you can be prepared,
and our job as business owners is to be prepared
to adapt. This means to be flexible to change. You know,
(08:44):
what I find is is that many are resistant to
change and therefore don't adapt. And that's why. So if
you thrive during economic downturns, and as we all know,
business is always changing. And this is June now more
than ever. Just a short time ago, interest rates were
low and many industries were having record years. But with
(09:05):
interest rates, you know, staying relatively high, higher than we're
accustomed to, credit card delinquencies rising personal savings and decline,
and now tariff's being introduced, many industries are now facing
some significant uncertainty. And as a fractional CFO and profit
growth strategist, I see this uncertainty every day, and so
(09:26):
business owners ask me three critical questions. Number one, why
are some companies winning while others are struggling? Secondly, what
are the winning companies doing differently? And third how can
I win during an economic downturn? So today we're going
to answer these questions comprehensively and we'll explore proven strategies
(09:48):
that have helped businesses not just survive, but thrive during
previous recessions and economic contractions. So in our first segment
will this the foundational mindset and preparation needed to prosper
during downturns, starting with laser focused on your personal goals
(10:10):
and a leveraging and leveraging a visionary mindset rather than
falling into survible thinking. And our second segment will dive
deep into financial clarity, understanding your numbers and using tools
like the Business Account Flow Forecast to make data driven
decisions when others are guessing. Finally, in our third segment
(10:34):
will explore specific business strategies that successful company companies implement
during downturns, from strategic pricing approaches to smart cost management
that actually fuels growth. And what's particularly exciting about today's
show is that most of your competitors will be doing
exactly the wrong things during an economic downturn. While they're
(10:57):
cutting in discriminately and retreating on the market, You'll be
strategically positioned to capture market share, attract top talent, and
build a foundation for exponential growth when the economy recovers.
So grab that pen and paper because you're about to
discover how economic downturns can become your greatest business opportunity.
(11:20):
And remember, if you're driving, don't grab that pen and
paper and listen to the replay at Powerful Business Strategies
dot com up. So let's dive into that first critical
component of thriving during an economic downturn, having the right
foundation and mindset to make strategic decisions while others panic.
(11:42):
So winning business owners during economic downturns have a laser
focus on their number one goal. But here is the
key distinction. I'm not talking about their number one business goal.
I'm talking about their number one personal goal for themselves.
And their families, because this is the not only the why,
but this would be their greatest motivation to adapt and
(12:05):
to be flexible to change. You know, great CEOs always
stopped by understanding their personal goals and motivations and understanding
what's really important to you and your family. I don't
know about you, but it's important to me that my
business serves me, not the other way around. And that's
(12:26):
really the basis of this show. You know, I don't
want you to feel like a slave to your business,
especially during these challenging economic times that may becoming because
the pressure increases exponentially, as you all know. Now, before
you can start to do tactical things, you must strategically
understand why am I doing this, where am I headed,
(12:51):
and what does success look like for me? And by
the way, this is not in your business, this is
in your life because I've seen this stake happened over
and over again, and a lot of you are in
the position right now where you get so excited to
make your impact in the world that you jump out
there and your creative business and now all of a sudden,
you're fitting your life around this business thing that you creative.
(13:16):
So the way it should work is that you create
the life you want and let the asset, which is
the business, serve you allow you to get to that life.
I hope that makes sense because that's a critical start
to any handling of an economic downturn. So we must
start by setting our personal goals first, then moving to
(13:37):
our business goals. And with respect to our business goals,
it's net profit goals first, then revenue goals. Revenue goals
without net profit goals are useless during a downturn. Want
more take on pay you need more profit. You want
to pay down debt. What do you need? You need
more profit? Want to hire somebody like a manager or
(13:58):
an administrative person, You certainly need more profit. This focus
on profitability rather than just top line revenue, becomes even
more critical during economic trans contractions. I got a question
from a listener. Many business owners get caught up in
survival mode during downturns. I agree, How can they maintain
(14:22):
this focus on personal goals when everything seems to be
just keeping the business afloat? Well, that's a great question.
So the key is to create what I call prior
priorities pyramid. At the top of your pyramid is personal.
The why the specific lifestyle, the freedom, the time, freedom
(14:44):
or impact that your business that you want to create
for your business that you want your business to create,
I should say, and during turbulent times, start each week
by reviewing this personal vision. Then work backward identifying the
specific business actions that's supporting. This keeps you from getting
(15:04):
lost in reactive mode. For example, if family time is
a core personal goal, you might prioritize business strategies that
increase profitability through systems rather than through your personal time investment.
This approach ensures that you'll even are that even your
survival strategies aligned with your deeper personal objectives. Next, winning
(15:28):
business owners and economic times have a visionary mindset. I'm sorry.
In economic downturns, they have a visionary mindset. It's easy
to get sucked into the doom and gloom of a downturn.
It's easy to go into scarcity mode. Don't do that. Yes,
the economy is changing, but the world isn't ending. We
(15:50):
need to adapt, not shut down. Avoid scarcity based decisions
and make visionary decisions. Think about the impact of your
decisions next quarter, next year, five years from now. Make
decisions that will serve you well in the long run.
Don't just think about those short term implications with the
economic downturn, Because when we think about the vision of
(16:11):
our companies that inspires us. This inspiration is crucial fuel
during challenging times. Remember, your mindset isn't just about positive positivity.
It directly impacts the strategic choices that you make. Let
me give you a concrete example of how this works.
So during the nine recession, I worked with two similar
(16:34):
companies in the same industry. Company A went into defense mode,
cutting marketing, laying off talent, doing terrible margin business just
to keep people busy, and essentially trying to weight out
the reception. Versus Company B, who took a different approach.
They maintained their marketing while optimizing about while optimizing it
(16:55):
for a better return on investment, They retain their top performers,
and they actually invested in new product development. By twenty eleven,
Company A had survived but was struggling to regain momentum
that they had lost market share share, their staff was demoralized,
and they had no innovation pipeline. Company B emerged from
(17:17):
the recession with increased market share, a motivated team, and
new offerings that position them for explosive growth during the recovery.
The difference wasn't their circumstances, it was their mindset and
the strategic decisions that flowed from it. So this visionary
mindset must be paired with solid financial clarity. Now, this
(17:39):
pot might freak out some of you, because I know
a lot of you aren't doing it, and we've you know,
we have assessed over one hundred business owners and when
we asked three basic financial questions, the vast majority of
these business owners just don't know the answers. So winning
business owners make the right decisions in economic downturns because
(18:00):
they make decisions based on the numbers and the data.
What times are good, you can buy? Yeah, yeah, you
can buy. Not looking at this stuff not effective still,
but you'll get by. But to win an economic downturn,
you must make decisions based on the numbers. And to
start with, I'm trying to do the best I could
(18:24):
to isolate the vital five numbers that you need to
know and that should be with you at all times.
And just by knowing these five numbers, this isn't a
big lift here, guys and girls. Just by knowing these
five numbers, you'll be able to make better business decisions
by understanding what your sales are, what your gross profit
(18:47):
is in terms of the absolute dollars, what your gross
profit percentage is, what your net profit is, and your
current cash balance. You got these five numbers down, you
will make better decisions than you make today. And you also,
of course have to understand what each of those categories are.
(19:08):
And that's a great question for the ask at next
step cf NET. By the way, the next winning business
owners understand what their financial statements are telling them. So
the three key financial statements are the p and L
profit and law statement, the balance sheet, and the cash
flow statement. And when I'm in a room of small
business owners and i ask how many people look at
(19:30):
the P and L at least once a month, I
can be guaranteed that less than half raise their hand.
And when I ask how many people look at their
balance sheet once a month, forget that less than ten
percent of the room raises their hand. And when I
ask how many people look at their cash flow statement,
what's a month where cash is canting and cash is
the lifelood of a business, I might get one person
(19:51):
to raise their hand. It's being you know, cash is
the lifeblood of a business that is being totally neglected.
So the good news is you don't have to know
how to read financial statements, but you do need to
understand the story behind them and how those financials will
guide you to make the best decisions. And if you
need help understanding your financial statements, give us a call.
(20:15):
We are strategic chief financial officers, and go get that
help that you need before this entown turn intensifies. So
let me share a story that illustrates the power of
financial clarity during difficult economic times. I worked with a
manufacturing company during the twenty twenty pandemic shutdown, and while
(20:37):
their competitors were making panic based decisions, we had a
clear understanding of their cash runway, their break even point,
and their most profitable product lines. But a great start
by the way just to get that clarity, and this
clarity allowed them to make strategic choices temporarily suspending their
(20:58):
least profitable lines while doubling down on the highest madch
of products. They negotiated with suppliers for a position of
knowledge rather than fear. They restructured rather than simply cutting
the result. While their industry contracted by thirty percent, they
experienced a fifteen percent revenue dip, but maintain their profitability.
(21:19):
So it's not necessarily that you're going to throw You
don't have during to be bad economy that your sales
are necessarily going to go up. You're just going to
manage the revenue that you get better and it's not
going to go down as much as it would have
if you didn't take some of the positions that we're
talking about today. And by the time the economic recovery,
(21:40):
by the time the economy began recovering, they had actually
gained market share. So here it's a question I'm just
getting out from a listener. You mentioned the importance of
knowing your numbers, but many business owners find financial statements overwhelming.
I agree with that. What's a simple first step that
they can take to gain financial clarity. Well, first of all,
(22:03):
you know know your vital five and then then block
out two hours with your bookkeeper or CFO or accountant
with a specific goal of understanding just three three of
those numbers, your gross profit margin, your monthly break even point,
and your current cash runway. Now, gross profit margin tells
(22:27):
you how much of each sale is available to cover
overhead and generate profit. Got to understand that it's one
of the vital five. Your break even point tells you
exactly how much revenue you need each month to cover
all expenses. So I'm going a little deeper here beyond
the vital five. But it's important to understand your break
even and your cash runway shows you how long you
(22:49):
could survive if revenue drops significantly. So that's the reason
why I want you to know your current cash balance,
but I also want to want you to know your runway.
So just understanding these three numbers plus your vital five
put you ahead of eighty percent of business owners and
provide the foundation for making confident decisions rather than fear
(23:11):
based decisions during a downturn. It's another question for business
owners who want to maintain a visionary mindset despite despite
economic headwinds. What practical habits have you seen work best well.
I recommend implementing what I call it dual focus system.
(23:35):
So each week, dedicate specific time to both defensive and
offensive planning. Maybe Monday mornings for reviewing cash flow and
managing costs those are the defensive elements, and Thursday afternoons
for innovative and growth strategies. The offensive elements. And so
this structure, the structured approach, ensures that you don't get
(23:58):
consumed by either mindset. Also create visionary council. A visionary council,
so this is a small group of forward thinking business
owners who meet monthly to share opportunities that they're seeing.
I fully recommend that that is a real that's a
great idea. And during downturns, we tend to isolate, which
(24:20):
reinforces negative thinking and damages our mindset. Intentional connection with
growth minded peers counteracts this tendency and keeps your thinking
expansive even when the economy is contracting. I call that
optimizing your environment. By the way, and so before I
continue this discussion, we're going to take a ninety second break. Hey,
(24:42):
their business owners, let me ask you something. Are you
tied of blending in with your competitors, frustrated with slow
growth and slim margins? Well, I've got news for you.
Everything you've ever learned about growing your business is wrong.
Don't worry. I'm here to let you in on a
secret weapon. Your position of market dominance. It's what sets
(25:03):
you apart, makes you irreplaceable, and has customers lining up
at your door. My name is Michael Barberrita from Next
Step CFO. I know what you're thinking. Sounds great, Michael,
How do I find my position of market dominance? Well,
that's exactly why we've created our game changing impleitation program
called Next Step to Market Dominance. In just ninety days,
(25:26):
we'll guide you step by step to a position of
market dominance by uncovering your unique strengths that competitors can't touch.
By crafting a message that resonates deeply with your ideal customer,
by building a strategy that turns you into the go
to expert in your field. Now this is in theory.
These are battle tests strategies that have helped businesses like
yours double triple and quadruple their revenue. Don't let another
(25:51):
quarter go by struggling to standout. It's time to dominate
your market period. Go to NEXTSTEPCFO dot net forward slash contact.
Fill out the form and in the message section put
the word dominate or call us at seven eight one
three two six three A two two. That's next step
CFO dot net forward slash Contact or call us at
(26:14):
seven eight one three two six three A two two.
Welcome back and remember you can catch all the recordings
at Powerful business Strategies dot com. So now let's dive
into that second critical component of thriving during economic downturns,
using powerful financials tools to make data driven decisions while
your competition is guessing. The single most powerful tool for
(26:39):
navigating economic uncertainty is a business and cash flow forecast.
Why because this forecast helps you understand the outcome and
remif and ramifications of your decisions before you make them.
For example, how many have ever been surprised by income
(26:59):
to Well, if you have a business and cash flow forecast,
you will never be surprised by tax liabilities again because
you'll always know what your projecting net profit looks like
and you'll always have an idea of what your cash
flow situation is. And CEOs of the best companies are
never surprised by taxes or anything else for that matter,
(27:23):
because they all have a business and cash flow forecast.
The bottom line is, if you want to thrive in
academic downturns, the number one tool of winning business owners
is the business and cash flow forecast. There's a reason.
Speaker 4 (27:37):
Why all venture capitalists and all boards of directors demand
business and cash flow forecast and let me explain what
a business cashflow forecast includes.
Speaker 3 (27:49):
It's not just a simple revenue projection. A comprehensive forecast
includes projected monthly income statement you know, second, a projected
balance sheet. You know you have. It's a professional forecast.
It's not a professional forecast if there's no projected monthly
(28:10):
balance sheet. Why Well, one of the thing, one of
the items that are listed on the balance sheet is
cash and as you know, that's one of the vital five. So,
and it will also show you how your assets and
liabilities evolve. And then of course you need a projected
cash flow statement and then a scenario analysis. So what
(28:33):
is that? Well, you want to know things like, well,
what happens if your sales are up ten percent, what
happens if they're down twenty percent? What does cash flow
look like if I make this decision? What does my
business model look like? So the power of this forecast
is that it allows you to test decisions before making them.
(28:54):
Want to know if you can afford to maintain your
marketing spend during a downturn, rd it to the forecast,
whether to invest in new equipment. The forecast will show
you the impact. Wondering how long you can survive if
revenue drop thirty percent. Forecast will answer that. Here's a
question that I'm getting there. Yep, there's a question from
a listener, Michael. Creating a business and forecast sounds complicated.
(29:18):
Is this something that small business owners can do themselves
or they need professional help? Well, while there are tech
plates in software available, I really you know this is
a bias, but I strongly recommend getting professional help to
set up your forecast. You know, the structure and assumptions
are critical because it's one of those things like with computers,
(29:39):
it's garbage and garbage out type of thing. And so
I can't overstate the importance of scenario planning during economic downturns.
Most businesses operate with a single set of projections, which
creates a false sense of certainty. Smart businesses develop at
least three scenarios. Best case, if the downturn is milder
(30:02):
than expected or your business is minimally affected. Expected case
and that's your most likely scenario based on current information,
and then worst case, a severe scenario that tests your
business resilience. You know, in my experience with working with
business owners as their CFO, they always like to see
(30:23):
the worst case, and because anything better than that, they
know they can survive. If they can survive the worst case,
they can survive the expected in best case. So for
each scenario, identify the trigger points, specific metrics that would
indicate you're moving from one scenario to another, and predetermined
actions you'll take when those triggers are hit. For example,
one of my clients in the retail business created these
(30:47):
clear trigger points. If sales decline less than ten percent,
maintain all operations but optimized marketing spend. If sales decline
ten to twenty percent, reduce operating and you renegotiate bend
of terms. If sales decline more than twenty percent, close
under the performing locations and restructure debt. You know, having
(31:10):
these decisions mapped out in advance allowed them to act
decisively rather than emotionally when conditions change. That's so important.
Any of your forward thinking relative to these economic downturns,
while while it's not raining, is just excellent, excellent strategy.
(31:32):
Beyond the business and cash flow of forecasts, winning business
owners implement rigorous cash management during downturns, and this includes
a thirteen week rolling cash flow, which is a detailed
week by week projection of all inflows and outflows updated weekly.
A cash cash acceleration strategies for systematic approaches to convert
(31:54):
sales to cash faster. Think about that. You want to
reduce itnumber of days in your cash conversion cycle from
start to finish, from the start of your process to
the end. What are the average number of days it
takes you from the start of your process to the
end of the process where the customer finally pays you.
(32:16):
Cash conversion protocols that defined guidelines for managing outflows cash
trigger points. These are specific cash levels that trigger predetermined action.
As I mentioned earlier, I worked through the service business
that implemented these systems just before the twenty twenty pandemic hit.
But while their competitors were frantic trying to figure out
(32:36):
their cash position, my client had clear visibility into their
cash flow and it already activated their conservation protocols, and
this allowed them to make calm, strategic decisions rather than
panicked reactions. Let's also talk about the importance of margin
(32:56):
management during economic downturns. You know, when revenue was at
the pressure, understanding of protecting your profit marches becomes even
more critical. See many business owners make the fatal mistake
of cutting prices to maintain volume during downturns. While this
might temporarily maintain revenue or maybe even increase in a bit,
it can devastate the profitability and cash flow. Instead, winning
(33:20):
business owners focus on value based pricing. We've mentioned that
a lot before, emphasizing the unique value that they provide. Rather,
they're competing on price, second product, service mix optimization, focusing
on high margen art Rooks. We talked about that a
little earlier. Strategic discounting. If discounts are necessary, applying them
(33:42):
strategically then versus across the board, just in certain spots.
Cost structure alignment, ensuring cost flex appropriately with revenue changes.
One manufacturing client implemented a margin management system that required
any proposed price reduction to be accompanied by a corresponding
(34:04):
cost reduction plan. This was brilliant. This simple rule prevented
the knee discounting that had eroded their profitability during previous downturns.
Another critical financial strategy for downturns is capital allocation discipline.
When resources are constrained, way do you invest those resources
(34:27):
to become exponentially more important? So, winning business owners developed
clear capital allocation frameworks that prioritize investments based on return
on investment, strategic alignment, risk profile, and payback period. They
also regularly review all things all areas of the business
(34:48):
using zero based thinking. Knowing what I know now, would
I still make this investment or hire this person or
offer this product? Question from the listener. You've emphasized cash
management during downturns. What are some specific cash acceleration strategies
(35:09):
that businesses can implement quickly? Well, there are several. First,
implement upfront deposits or payment terms for new customers during downturns,
customers are more willing to accept these terms to secure
reliable vendors. Second, offer early payment discounts, for example two
(35:30):
percent off if paid within ten days. Third, you can
streamline your invoicing process. You know many businesses are surprisingly
slow to invoice. That always baffles me, But they are,
and that delays cash flow and unnecessarily or segment your
collections approach. Use different strategies for different types of customers
(35:51):
rather than a one size fit all approach. And then
finally consider factoring receivables. If you have credit worthy customers
need the cash sooner. I've seen businesses improve cashflow by
fifteen to twenty percent in sixty days with these strategies,
which can be the difference between struggling and thriving during
(36:13):
a downturn. Another question, what about businesses that are already
facing cash flow challenges as they enter the economic downturn?
Is it too late for them to implement these strategies now?
It's never too late, but the approach needs to be
more intensive. But businesses already experiencing cashflow pressure, I recommend
(36:37):
what I call cashflow CPR. This is a three step
emergency protocol. First, control the bleeding. Immediately identify the largest
cash drains. Secondly, prioritize ruthlessly. Create a tiered system for
all expenses and payments, separating the must pays from the
can weights because there's always a can eight list. Third,
(37:02):
restructure quickly. Proactively reach out to vendors, landlords, and lenders
to negotiate terms before missing before missing payments. That's important.
The key is transparency and communication. Stakeholders respond much better
to proactive restructure than to surprises. I've seen this. I've
seen businesses on the brink of insolvency turn around in
(37:24):
ninety days using this approach, but it requires immediate, immediate
action and complete financial transparency. So before I continue this discussion,
we're going to take a ninety second break. Hey, their
business owners, let me ask you something. Are you tied
of blending in with your competitors? Frustrated with slow growth
and slim margins? Well, I've gotten news for you. Everything
(37:48):
you've ever learned about growing your business is wrong. Don't worry.
I'm here to let you in on a secret weapon,
your position of market dominance. It's what sets you apart,
make sure irreplaceable, and has customers lining up at your door.
My name is Michael Barberrita from Next Step CFO. I
know what you're thinking. Sounds great, Michael, How do I
(38:11):
find my position of market dominance? Well, that's exactly why
we've created our game changing impleitation program called Next Step
to Market Dominance. In just ninety days, we'll guide you
step by step to a position of market dominance by
uncovering your unique strengths that competitors can't touch. By crafting
a message that resonates deeply with your ideal customer, by
(38:32):
building a strategy that turns you into the go to
expert in your field. Now this is in theory. These
are battle tests and strategies that have helped businesses like
you as double, triple, and quadruple their revenue. Don't let
another quarter go by struggling to standout. It's time to
dominate your market period. Go to NEXTSTEPCFO dot net forward
(38:54):
slash contact. Fill out the form and in the message
section put the word dominate or call us at seven
eight one three two six three A two two. That's
NEXTSTEPCFO dot net forward slash contact or call us at
seven eight one three two six three A two two.
(39:15):
Welcome back. Now, let's explore the third critical component of
thriving during economic downturns, and that's implementing the right business
strategies that your competition isn't doing. Did you know that
ninety five percent of business and financial strategies use today
are identical identical to competitors. They don't work, particularly, they
(39:37):
don't work even in good times, so you can just
imagine how they're going to work in bad economic times.
So during economic downturns, the problem becomes even more pronounced
as businesses retreat to conventional wisdom, cutting across the board,
halting innovation and essentially trying to weigh out the sort. Instead,
winning business owners implement strategic approach is that position them
(40:00):
the capture market share while others retreat, and let's explore
those strategies. Every business should have a position of market
dominance that becomes even more powerful during economic downturns. This
isn't branding. It's a clear articulation of how you solve
critical problems that your market faces in a way that
(40:21):
no one else does. And there's ways to create that.
If we've heard our commercials. During downturns, customer problems and
pain points often shift, and smart business owners quickly adapt
that position of market dominance to address these changing concerns.
For example, during the two thousand and eight financial crisis,
a luxury retailer shifted their position from exclusive designer collections
(40:46):
to investment pieces that retain their value, directly addressing their
customers' new financial concerns. Similar to that during the early pandemic,
a restaurant rapidly pivoted from positioning as a premium dining
experience to restaurant quality faily meals that are safely delivered,
(41:06):
responding directly to their customer's new priorities. Around safety at home,
CET and living. I'm getting an early question on this
in this segment. Repositioning sounds good in theory, but many
business owners worry about confusing their market or diluting their brand.
How can they adapt their positioning without losing their identity? Well,
(41:29):
that's very insightful question. The key is to evolve your
positioning rather than completely reinventing it. Think of it as
highlighting a different facet of your existing value proposition rather
than creating a brand new one. The core of who
you are should remain consistent, but what aspects that you
(41:49):
emphasize should shift to align your customer's changing priorities. For example,
we'll give you this example. A high end fitness studio
had always focused on transformation the results, but during economic concertainty,
they emphasize the stress reduction and the mental health benefits
of their approach. Same service, same values, but a different
emphasis that resonated with their members' current needs. So it's
(42:13):
just a shift in the thinking of the same product. Second,
winning business owners implement a compelling offer strategy that addresses
the specific concerns customers have during economic downturns. See during
uncertain times, customers become more risk averse and scrutinize their
spending more carefully. Your offer needs to overcome these height objections,
(42:36):
so effective downturn office strategies include risk reversal, which is
where the seller and the transaction takes most or all
the risk. Value based bundles, packaging your core offer with
additional valuable components at slightly higher price but delivering substantially
more value. Member. If value is higher than price, they'll
(42:57):
buy segmental offerings. That's creating good, better best options that
allow customers to select based on their current financial situation.
By the way, these are all strategies that we've covered
in previous shows. Recurring revenue models shifting from large one
time purchases to smaller recurring payments that feel more manageable
(43:19):
during uncertain times. It's all great. Third winning business owners
implement strategic cost management rather than obitrary cost cutting. The
general mindset of business owners and economic downturns is to
cut everything, but you can't cut your way to success.
Use this formula for cutting expenses. You cut the expense
(43:41):
if the expense doesn't help you acquire a customer, if
it doesn't help you retain a customer, if the expense
doesn't increase the long term valuable customer, and if the
expense doesn't help deliver your product or service to a customer.
And after you apply these rules to expensive expenses, look
for investments in the three a's assets that produce revenue,
(44:05):
amazing people to help you scale, and automation to lever's time.
Success in economic downturns is not defined by those who
spend less, is defined by those who spend smart. And
let me give you an example. During the two thousand
and eight recession, A manufacturers facing significant pressure to cut costs,
(44:27):
and rather than implementing across the board reductions, he categorized
all expenses using the framework I just shared. This revealed
that they were actually under spending in areas that directly
impacted customer acquisition and retention, while overspending on internal system
that didn't touch directly touch the customer. By really allocating,
(44:50):
not just reducing, but by reallocating their spending, they were
able to reduce costs by fourteen percent while actually increasing
their marketing impact, act and customer service capabilities. The result
was that they emerged from the recession with higher market
share and stronger customer loyalty than they had going in
(45:12):
for economic downturns create unique opportunities to upgrade your talent pool.
While most businesses implement hiring freezers or layoffs during downturns,
visionary companies selectively hire exceptional talent that suddenly becomes available
as other companies can track. I've seen businesses completely change
(45:34):
that their capabilities by strategically adding just one or two
key people during downturns, people they could have never attracted
during stronger economic times. And this might be an experienced
salesperson from a larger competitor, or an operations leader who
can really drive efficiency. And the key is being selective
and focusing on roles that directly drive either revenue growth
(45:57):
or margin improvement, and positions that more than pay for
themselves even in these challenging times. Fifth downturns offer unprecedented
opportunities to ford strategic partnerships and alliances. As businesses look
for ways to maintain their market, for instance, with reduced resources,
(46:21):
partnerships become increasingly attractive. Here's one question from a listener.
Your shared several strategies for driving driving during downturns. If
a business owner could only implement one or two of
these immediately. What would you recommend our prioritizing, Well, if
(46:42):
I had dorek down, let's say that just two strategies,
I'd recommend focusing on financial clarity and cash management, specifically
implementing the thirteen week host glow and forecast that we
talked about. This gives you visibility and confidence to make
strategic decisions rather than reactive ones. And secondly, I would
(47:03):
prioritize your position and market dominance and your compelling offer
to align with your customers changing priorities during the downturn.
So as we wrap up today's discussion on thriving during
economic downturns, let's summarize the key strategies that we've covered
(47:25):
for turning challenging economic times into your greatest opportunity. First,
we explored the foundational mindset needed to make strategic decisions
while others panic. We discussed how winning business owners start
with clarity about their personal goals, understanding exactly why their
business exists and what it is to provide them and
their families. This personal clarity drives better business decisions, especially
(47:53):
during turbulent times. We also emphasize the importance of maintaining
a visionary mindset rather than succumbing to scarcity thinking. Academic
downturns don't create or destroy opportunity, they merely transfer it
from the unprepared to the prepared. By focusing on long
term impact rather than short term fear, your position your
(48:14):
business to capture opportunities that others miss. I know that's
I know that's difficult, but really got to focus on that. Second,
we covert the critical financial tools that provide clarity when
uncertainty is highest. The business and cash flow forecast gives
you the ability to test decisions before you make them,
(48:34):
while scenario planning preparesship to the multiple what IFFs. We
stress the importance of knowing your vital five numbers sales,
gross profit, gross profit percent, net profit, and your current
cash balance. We also discussed rigorous cash management systems, modint
protection strategies, and discipline capital allocation, all of which become
(48:58):
exponentially more important during economic contractions. And third, we explored
specific strategy business strategies that successful companies implement during downturns,
from creating or adapting your position of market dominance to
address to address changing customer concerns to creating compelling offers
(49:20):
that overcome heightened risk aversion. We covered strategic cost management
that focuses resources on customer impacting activities while reducing non
essential expenses, and we also discuss how downturns create unique
opportunities to upgrade your talent and form strategic partnerships that
(49:41):
allow you to maintain or even expand your market presence
while sharing costs. Remember, successful navigation of economic downturns isn't
about luck. It's about preparation, clarity, and strategic action. By
implementing the strategies we discussed today, you can position your
business not just to survive, but to thrive when others
(50:04):
are struggling. Keep thinking differently and act boldly. You know
today we're all facing the call to adapt and to
make decisions based on the numbers. Those who do will
make business a lot less terrifying. Those who do will
achieve their number one goal. Those who do will thrive
(50:24):
in economic downturns. There are more millionaires and billionaires minted
during economic downturns than any other time period in history.
The only question is are you prepared to be the
next one. To get a copy of the book Powerful
(50:45):
Business Strategy simply go to our website www dot next
STEPSCFO dot net. It's totally complementary. And until next Monday
at noon Eastern time for Tricky Obio, my name is
Michael bob Rita. And remember, don't keep doing what your
competition is doing.
Speaker 2 (51:04):
You have been listening to powerful business strategies finding out
that everything you ever learned about growing your business is wrong.
Tune in next week and every week at noon Eastern
time on W four CY Radio with your host Michael
Barbarita of NeXTSTEP CFO and moderator chugy Ovio
The topics and opinions expressed in the following show are
solely those of the hosts and their guests and not
those of W FOURCY Radio. It's employees are affiliates. We
make no recommendations or endorsements for radio show programs, services,
or products mentioned on air or on our web. No
liability explicitor implies shall be extended to W FOURCY Radio
or its employees are affiliates. Any questions or comments should
be directed to those show hosts. Thank you for choosing
(00:20):
W FOURCY Radio.
Speaker 2 (00:27):
Welcome to Powerful Business Strategies, where you will find out
that everything you have ever learned about growing your business
is wrong. Finally, a show where you'll learn the right
way to grow your business by learning business and financial
strategies that your competition isn't doing. And now here is
your host, President of NeXTSTEP CFO, Michael Barbarita, and joining
(00:52):
Michael for today's show as an executive moderator is Chooky Obia.
Speaker 3 (01:01):
Welcome to Powerful Business Strategies. And by the way, today
is Saint Patrick's day. I am wearing green, so I've
got that COVID. But the reason why you don't hear
the more invigorating voice of Chucky Obio. Welcoming you to
the show is because Chukey and his wife recently had
their first baby. It was the daughter and they welcomed
(01:23):
Chelsea to the world. So congratulations to Chukey and his wife.
He will be on leave for a little while, so
in the meantime, my name is Michael Baberta. I'm president
of Next Step CFO, and next Step CFO is a
fractional CFO and strategic implementation firm. Business owners hire us
to double and triple their profit using business and financial
strategies that their competition isn't doing. Our vision is to
(01:47):
ensure overwhelmed business owners achieve the time, freedom, and consistent
profits to build a legacy and the life that they desire.
Our mission is dedicated to guiding small business owners to
leveraging their time, floating their profits, and building a meaningful legacy.
The show Powerful Business Strategies in our book of the
same name, is a step toward accomplishing that vision and mission,
(02:11):
and Chuky and I are both affiliated with a number
of different organizations. Chocky currently serves as a managing director
of business development for Better Price, which they global business
focused law firm, and in addition to that, Chucky and
I collaborate to moderate business roundtables around the country and
around the world and document those insights as part of
(02:32):
our book, Powerful Business Strategies. But please don't that the
views expressed on this show are personal views based on
our own successful experiences, and this is something that i'd
like to share that I've announced the last few weeks.
If you have a business problem that you'd like us
to answer, or a business question or a strategy that
you'd like to ask us about, please email us at
(02:54):
ask at NEXTSTEPCFO dot net. That's ask at NeXTSTEP CFO.
Doesn't matter what the business problem is or what the
question is, and we'll just answer it for you. But
there are a couple of things that we do ask
Number one, please state whether it's something we can answer
on the ear or if it's confidential, let us know,
(03:15):
and of course if it's confidential, we won't put it
on the air. And number two, please provide your phone
number because business problems can be complex and we might
need more context or clarity. That email address, again is
ask at NeXTSTEP CFO dot net. And they also want
to point out that we've had we've had questions, but
they have requested confidentiality, which, of course we will always
(03:39):
always honor. You know, throughout history, the most extraordinary success
stories weren't written during times of ease and abundance. They
were forged in the crucible of challenge and uncertainty when
the wins of economic change blow fiercely. Remember this truth.
(04:01):
Diamonds are created under pressure, steel is strengthened by fire,
And the most resilient innovative businesses are often those that
navigated through economic storms, not those that sailed only in
fair weather. Right now, somewhere in your market, a business
owner is looking at the same economic landscape you are.
(04:23):
But while others see only threat, the exceptional few recognize
disguised opportunity. They understand that economic contractions don't just test businesses,
they reveal which ones are built on solid foundations. You know,
during the Great Depression, IBM expanded. During the two thousand
(04:46):
and eight recession, Netflix grew its subscriber based by twenty percent.
These weren't accidents. They were the result of leaders who
refused to retreat what others did. Today, a challengeuld be
that exceptional busines, this owner, the one who sees possibility
where others see problems. Because when this economic cycle inevitably turns,
(05:09):
as all cycles do, it won't be the business that
simply survived that thrives. It'll be the one that use
this moment to innovate, that use this moment to strengthen foundations,
and that use this moment to capture market share while
all others pull back. Remember that tough times don't last.
(05:35):
Tough business owners do. There's what I'm having this show
today is because some of my clients are telling me
that their customers are pulling back, that they're postponing large projects,
they're ordering less, they're more price conscious, or downsizing what
they used to do at the moment. It's not all clients,
and it's not all industries, but it is fascinating to
(05:57):
note that the ones who are not feeling the effects,
I'm doing some of the things that I will talk
about today. You know, when storm clouds gather on the horizon,
most captains head for the harbor. They seek safety, battening
down the hatches, hoping merely to survive the coming tempest.
But throughout history, the successful navigators have done something different.
(06:21):
They prepared their vessels to sail boldly, into the storm.
The same is true in business. Economic downturns don't create
or destroy opportunity, They merely transfer it from the unprepared
to the prepared. Although there's retreat, the visionary business owner
understands that the greatest opportunities often emerge during the most
(06:46):
challenging times. And remember, more millionaires and billionaires have been
created during economic contractions than any other time period in history.
Why is that Well, because downturns separate those who build
businesses on solid foundations from those who have separate those
who prepared from who are prepared, from those who simply
(07:11):
hope for the best. Today, I want to challenge you
to be among the prepared, to be the business owner
who not only weathers the storm, but harnesses its power
to propel your business forward. Because the question isn't whether
you can afford to prepare for an economic downturn, it's
whether you can afford not to. So today we're diving
(07:37):
deeper into a topic that's on many business owners' minds
these days, how to prepare for and thrive during an
economic downturn. You know, business is terrifying, and it's terrifying
because we're responsible for so many other people's lives. And
the scariest thing about business is that when you wake
(07:58):
up in the morning, we really never know what to expect.
And this uncertainty is amplified during economic downturns. What traditional
wisdom says to cut back, preserve cash, and essentially go
into survival mode. But today our objective is to give
you something different financial and business strategies that your competition
(08:20):
isn't doing that will help you thrive during economic downturns,
reducing the terror and uncertainty of business. So let me
be clear from the outset, you can never really be
ready for an economic downturn, but you can be prepared,
and our job as business owners is to be prepared
to adapt. This means to be flexible to change. You know,
(08:44):
what I find is is that many are resistant to
change and therefore don't adapt. And that's why. So if
you thrive during economic downturns, and as we all know,
business is always changing. And this is June now more
than ever. Just a short time ago, interest rates were
low and many industries were having record years. But with
(09:05):
interest rates, you know, staying relatively high, higher than we're
accustomed to, credit card delinquencies rising personal savings and decline,
and now tariff's being introduced, many industries are now facing
some significant uncertainty. And as a fractional CFO and profit
growth strategist, I see this uncertainty every day, and so
(09:26):
business owners ask me three critical questions. Number one, why
are some companies winning while others are struggling? Secondly, what
are the winning companies doing differently? And third how can
I win during an economic downturn? So today we're going
to answer these questions comprehensively and we'll explore proven strategies
(09:48):
that have helped businesses not just survive, but thrive during
previous recessions and economic contractions. So in our first segment
will this the foundational mindset and preparation needed to prosper
during downturns, starting with laser focused on your personal goals
(10:10):
and a leveraging and leveraging a visionary mindset rather than
falling into survible thinking. And our second segment will dive
deep into financial clarity, understanding your numbers and using tools
like the Business Account Flow Forecast to make data driven
decisions when others are guessing. Finally, in our third segment
(10:34):
will explore specific business strategies that successful company companies implement
during downturns, from strategic pricing approaches to smart cost management
that actually fuels growth. And what's particularly exciting about today's
show is that most of your competitors will be doing
exactly the wrong things during an economic downturn. While they're
(10:57):
cutting in discriminately and retreating on the market, You'll be
strategically positioned to capture market share, attract top talent, and
build a foundation for exponential growth when the economy recovers.
So grab that pen and paper because you're about to
discover how economic downturns can become your greatest business opportunity.
(11:20):
And remember, if you're driving, don't grab that pen and
paper and listen to the replay at Powerful Business Strategies
dot com up. So let's dive into that first critical
component of thriving during an economic downturn, having the right
foundation and mindset to make strategic decisions while others panic.
(11:42):
So winning business owners during economic downturns have a laser
focus on their number one goal. But here is the
key distinction. I'm not talking about their number one business goal.
I'm talking about their number one personal goal for themselves.
And their families, because this is the not only the why,
but this would be their greatest motivation to adapt and
(12:05):
to be flexible to change. You know, great CEOs always
stopped by understanding their personal goals and motivations and understanding
what's really important to you and your family. I don't
know about you, but it's important to me that my
business serves me, not the other way around. And that's
(12:26):
really the basis of this show. You know, I don't
want you to feel like a slave to your business,
especially during these challenging economic times that may becoming because
the pressure increases exponentially, as you all know. Now, before
you can start to do tactical things, you must strategically
understand why am I doing this, where am I headed,
(12:51):
and what does success look like for me? And by
the way, this is not in your business, this is
in your life because I've seen this stake happened over
and over again, and a lot of you are in
the position right now where you get so excited to
make your impact in the world that you jump out
there and your creative business and now all of a sudden,
you're fitting your life around this business thing that you creative.
(13:16):
So the way it should work is that you create
the life you want and let the asset, which is
the business, serve you allow you to get to that life.
I hope that makes sense because that's a critical start
to any handling of an economic downturn. So we must
start by setting our personal goals first, then moving to
(13:37):
our business goals. And with respect to our business goals,
it's net profit goals first, then revenue goals. Revenue goals
without net profit goals are useless during a downturn. Want
more take on pay you need more profit. You want
to pay down debt. What do you need? You need
more profit? Want to hire somebody like a manager or
(13:58):
an administrative person, You certainly need more profit. This focus
on profitability rather than just top line revenue, becomes even
more critical during economic trans contractions. I got a question
from a listener. Many business owners get caught up in
survival mode during downturns. I agree, How can they maintain
(14:22):
this focus on personal goals when everything seems to be
just keeping the business afloat? Well, that's a great question.
So the key is to create what I call prior
priorities pyramid. At the top of your pyramid is personal.
The why the specific lifestyle, the freedom, the time, freedom
(14:44):
or impact that your business that you want to create
for your business that you want your business to create,
I should say, and during turbulent times, start each week
by reviewing this personal vision. Then work backward identifying the
specific business actions that's supporting. This keeps you from getting
(15:04):
lost in reactive mode. For example, if family time is
a core personal goal, you might prioritize business strategies that
increase profitability through systems rather than through your personal time investment.
This approach ensures that you'll even are that even your
survival strategies aligned with your deeper personal objectives. Next, winning
(15:28):
business owners and economic times have a visionary mindset. I'm sorry.
In economic downturns, they have a visionary mindset. It's easy
to get sucked into the doom and gloom of a downturn.
It's easy to go into scarcity mode. Don't do that. Yes,
the economy is changing, but the world isn't ending. We
(15:50):
need to adapt, not shut down. Avoid scarcity based decisions
and make visionary decisions. Think about the impact of your
decisions next quarter, next year, five years from now. Make
decisions that will serve you well in the long run.
Don't just think about those short term implications with the
economic downturn, Because when we think about the vision of
(16:11):
our companies that inspires us. This inspiration is crucial fuel
during challenging times. Remember, your mindset isn't just about positive positivity.
It directly impacts the strategic choices that you make. Let
me give you a concrete example of how this works.
So during the nine recession, I worked with two similar
(16:34):
companies in the same industry. Company A went into defense mode,
cutting marketing, laying off talent, doing terrible margin business just
to keep people busy, and essentially trying to weight out
the reception. Versus Company B, who took a different approach.
They maintained their marketing while optimizing about while optimizing it
(16:55):
for a better return on investment, They retain their top performers,
and they actually invested in new product development. By twenty eleven,
Company A had survived but was struggling to regain momentum
that they had lost market share share, their staff was demoralized,
and they had no innovation pipeline. Company B emerged from
(17:17):
the recession with increased market share, a motivated team, and
new offerings that position them for explosive growth during the recovery.
The difference wasn't their circumstances, it was their mindset and
the strategic decisions that flowed from it. So this visionary
mindset must be paired with solid financial clarity. Now, this
(17:39):
pot might freak out some of you, because I know
a lot of you aren't doing it, and we've you know,
we have assessed over one hundred business owners and when
we asked three basic financial questions, the vast majority of
these business owners just don't know the answers. So winning
business owners make the right decisions in economic downturns because
(18:00):
they make decisions based on the numbers and the data.
What times are good, you can buy? Yeah, yeah, you
can buy. Not looking at this stuff not effective still,
but you'll get by. But to win an economic downturn,
you must make decisions based on the numbers. And to
start with, I'm trying to do the best I could
(18:24):
to isolate the vital five numbers that you need to
know and that should be with you at all times.
And just by knowing these five numbers, this isn't a
big lift here, guys and girls. Just by knowing these
five numbers, you'll be able to make better business decisions
by understanding what your sales are, what your gross profit
(18:47):
is in terms of the absolute dollars, what your gross
profit percentage is, what your net profit is, and your
current cash balance. You got these five numbers down, you
will make better decisions than you make today. And you also,
of course have to understand what each of those categories are.
(19:08):
And that's a great question for the ask at next
step cf NET. By the way, the next winning business
owners understand what their financial statements are telling them. So
the three key financial statements are the p and L
profit and law statement, the balance sheet, and the cash
flow statement. And when I'm in a room of small
business owners and i ask how many people look at
(19:30):
the P and L at least once a month, I
can be guaranteed that less than half raise their hand.
And when I ask how many people look at their
balance sheet once a month, forget that less than ten
percent of the room raises their hand. And when I
ask how many people look at their cash flow statement,
what's a month where cash is canting and cash is
the lifelood of a business, I might get one person
(19:51):
to raise their hand. It's being you know, cash is
the lifeblood of a business that is being totally neglected.
So the good news is you don't have to know
how to read financial statements, but you do need to
understand the story behind them and how those financials will
guide you to make the best decisions. And if you
need help understanding your financial statements, give us a call.
(20:15):
We are strategic chief financial officers, and go get that
help that you need before this entown turn intensifies. So
let me share a story that illustrates the power of
financial clarity during difficult economic times. I worked with a
manufacturing company during the twenty twenty pandemic shutdown, and while
(20:37):
their competitors were making panic based decisions, we had a
clear understanding of their cash runway, their break even point,
and their most profitable product lines. But a great start
by the way just to get that clarity, and this
clarity allowed them to make strategic choices temporarily suspending their
(20:58):
least profitable lines while doubling down on the highest madch
of products. They negotiated with suppliers for a position of
knowledge rather than fear. They restructured rather than simply cutting
the result. While their industry contracted by thirty percent, they
experienced a fifteen percent revenue dip, but maintain their profitability.
(21:19):
So it's not necessarily that you're going to throw You
don't have during to be bad economy that your sales
are necessarily going to go up. You're just going to
manage the revenue that you get better and it's not
going to go down as much as it would have
if you didn't take some of the positions that we're
talking about today. And by the time the economic recovery,
(21:40):
by the time the economy began recovering, they had actually
gained market share. So here it's a question I'm just
getting out from a listener. You mentioned the importance of
knowing your numbers, but many business owners find financial statements overwhelming.
I agree with that. What's a simple first step that
they can take to gain financial clarity. Well, first of all,
(22:03):
you know know your vital five and then then block
out two hours with your bookkeeper or CFO or accountant
with a specific goal of understanding just three three of
those numbers, your gross profit margin, your monthly break even point,
and your current cash runway. Now, gross profit margin tells
(22:27):
you how much of each sale is available to cover
overhead and generate profit. Got to understand that it's one
of the vital five. Your break even point tells you
exactly how much revenue you need each month to cover
all expenses. So I'm going a little deeper here beyond
the vital five. But it's important to understand your break
even and your cash runway shows you how long you
(22:49):
could survive if revenue drops significantly. So that's the reason
why I want you to know your current cash balance,
but I also want to want you to know your runway.
So just understanding these three numbers plus your vital five
put you ahead of eighty percent of business owners and
provide the foundation for making confident decisions rather than fear
(23:11):
based decisions during a downturn. It's another question for business
owners who want to maintain a visionary mindset despite despite
economic headwinds. What practical habits have you seen work best well.
I recommend implementing what I call it dual focus system.
(23:35):
So each week, dedicate specific time to both defensive and
offensive planning. Maybe Monday mornings for reviewing cash flow and
managing costs those are the defensive elements, and Thursday afternoons
for innovative and growth strategies. The offensive elements. And so
this structure, the structured approach, ensures that you don't get
(23:58):
consumed by either mindset. Also create visionary council. A visionary council,
so this is a small group of forward thinking business
owners who meet monthly to share opportunities that they're seeing.
I fully recommend that that is a real that's a
great idea. And during downturns, we tend to isolate, which
(24:20):
reinforces negative thinking and damages our mindset. Intentional connection with
growth minded peers counteracts this tendency and keeps your thinking
expansive even when the economy is contracting. I call that
optimizing your environment. By the way, and so before I
continue this discussion, we're going to take a ninety second break. Hey,
(24:42):
their business owners, let me ask you something. Are you
tied of blending in with your competitors, frustrated with slow
growth and slim margins? Well, I've got news for you.
Everything you've ever learned about growing your business is wrong.
Don't worry. I'm here to let you in on a
secret weapon. Your position of market dominance. It's what sets
(25:03):
you apart, makes you irreplaceable, and has customers lining up
at your door. My name is Michael Barberrita from Next
Step CFO. I know what you're thinking. Sounds great, Michael,
How do I find my position of market dominance? Well,
that's exactly why we've created our game changing impleitation program
called Next Step to Market Dominance. In just ninety days,
(25:26):
we'll guide you step by step to a position of
market dominance by uncovering your unique strengths that competitors can't touch.
By crafting a message that resonates deeply with your ideal customer,
by building a strategy that turns you into the go
to expert in your field. Now this is in theory.
These are battle tests strategies that have helped businesses like
yours double triple and quadruple their revenue. Don't let another
(25:51):
quarter go by struggling to standout. It's time to dominate
your market period. Go to NEXTSTEPCFO dot net forward slash contact.
Fill out the form and in the message section put
the word dominate or call us at seven eight one
three two six three A two two. That's next step
CFO dot net forward slash Contact or call us at
(26:14):
seven eight one three two six three A two two.
Welcome back and remember you can catch all the recordings
at Powerful business Strategies dot com. So now let's dive
into that second critical component of thriving during economic downturns,
using powerful financials tools to make data driven decisions while
your competition is guessing. The single most powerful tool for
(26:39):
navigating economic uncertainty is a business and cash flow forecast.
Why because this forecast helps you understand the outcome and
remif and ramifications of your decisions before you make them.
For example, how many have ever been surprised by income
(26:59):
to Well, if you have a business and cash flow forecast,
you will never be surprised by tax liabilities again because
you'll always know what your projecting net profit looks like
and you'll always have an idea of what your cash
flow situation is. And CEOs of the best companies are
never surprised by taxes or anything else for that matter,
(27:23):
because they all have a business and cash flow forecast.
The bottom line is, if you want to thrive in
academic downturns, the number one tool of winning business owners
is the business and cash flow forecast. There's a reason.
Speaker 4 (27:37):
Why all venture capitalists and all boards of directors demand
business and cash flow forecast and let me explain what
a business cashflow forecast includes.
Speaker 3 (27:49):
It's not just a simple revenue projection. A comprehensive forecast
includes projected monthly income statement you know, second, a projected
balance sheet. You know you have. It's a professional forecast.
It's not a professional forecast if there's no projected monthly
(28:10):
balance sheet. Why Well, one of the thing, one of
the items that are listed on the balance sheet is
cash and as you know, that's one of the vital five. So,
and it will also show you how your assets and
liabilities evolve. And then of course you need a projected
cash flow statement and then a scenario analysis. So what
(28:33):
is that? Well, you want to know things like, well,
what happens if your sales are up ten percent, what
happens if they're down twenty percent? What does cash flow
look like if I make this decision? What does my
business model look like? So the power of this forecast
is that it allows you to test decisions before making them.
(28:54):
Want to know if you can afford to maintain your
marketing spend during a downturn, rd it to the forecast,
whether to invest in new equipment. The forecast will show
you the impact. Wondering how long you can survive if
revenue drop thirty percent. Forecast will answer that. Here's a
question that I'm getting there. Yep, there's a question from
a listener, Michael. Creating a business and forecast sounds complicated.
(29:18):
Is this something that small business owners can do themselves
or they need professional help? Well, while there are tech
plates in software available, I really you know this is
a bias, but I strongly recommend getting professional help to
set up your forecast. You know, the structure and assumptions
are critical because it's one of those things like with computers,
(29:39):
it's garbage and garbage out type of thing. And so
I can't overstate the importance of scenario planning during economic downturns.
Most businesses operate with a single set of projections, which
creates a false sense of certainty. Smart businesses develop at
least three scenarios. Best case, if the downturn is milder
(30:02):
than expected or your business is minimally affected. Expected case
and that's your most likely scenario based on current information,
and then worst case, a severe scenario that tests your
business resilience. You know, in my experience with working with
business owners as their CFO, they always like to see
(30:23):
the worst case, and because anything better than that, they
know they can survive. If they can survive the worst case,
they can survive the expected in best case. So for
each scenario, identify the trigger points, specific metrics that would
indicate you're moving from one scenario to another, and predetermined
actions you'll take when those triggers are hit. For example,
one of my clients in the retail business created these
(30:47):
clear trigger points. If sales decline less than ten percent,
maintain all operations but optimized marketing spend. If sales decline
ten to twenty percent, reduce operating and you renegotiate bend
of terms. If sales decline more than twenty percent, close
under the performing locations and restructure debt. You know, having
(31:10):
these decisions mapped out in advance allowed them to act
decisively rather than emotionally when conditions change. That's so important.
Any of your forward thinking relative to these economic downturns,
while while it's not raining, is just excellent, excellent strategy.
(31:32):
Beyond the business and cash flow of forecasts, winning business
owners implement rigorous cash management during downturns, and this includes
a thirteen week rolling cash flow, which is a detailed
week by week projection of all inflows and outflows updated weekly.
A cash cash acceleration strategies for systematic approaches to convert
(31:54):
sales to cash faster. Think about that. You want to
reduce itnumber of days in your cash conversion cycle from
start to finish, from the start of your process to
the end. What are the average number of days it
takes you from the start of your process to the
end of the process where the customer finally pays you.
(32:16):
Cash conversion protocols that defined guidelines for managing outflows cash
trigger points. These are specific cash levels that trigger predetermined action.
As I mentioned earlier, I worked through the service business
that implemented these systems just before the twenty twenty pandemic hit.
But while their competitors were frantic trying to figure out
(32:36):
their cash position, my client had clear visibility into their
cash flow and it already activated their conservation protocols, and
this allowed them to make calm, strategic decisions rather than
panicked reactions. Let's also talk about the importance of margin
(32:56):
management during economic downturns. You know, when revenue was at
the pressure, understanding of protecting your profit marches becomes even
more critical. See many business owners make the fatal mistake
of cutting prices to maintain volume during downturns. While this
might temporarily maintain revenue or maybe even increase in a bit,
it can devastate the profitability and cash flow. Instead, winning
(33:20):
business owners focus on value based pricing. We've mentioned that
a lot before, emphasizing the unique value that they provide. Rather,
they're competing on price, second product, service mix optimization, focusing
on high margen art Rooks. We talked about that a
little earlier. Strategic discounting. If discounts are necessary, applying them
(33:42):
strategically then versus across the board, just in certain spots.
Cost structure alignment, ensuring cost flex appropriately with revenue changes.
One manufacturing client implemented a margin management system that required
any proposed price reduction to be accompanied by a corresponding
(34:04):
cost reduction plan. This was brilliant. This simple rule prevented
the knee discounting that had eroded their profitability during previous downturns.
Another critical financial strategy for downturns is capital allocation discipline.
When resources are constrained, way do you invest those resources
(34:27):
to become exponentially more important? So, winning business owners developed
clear capital allocation frameworks that prioritize investments based on return
on investment, strategic alignment, risk profile, and payback period. They
also regularly review all things all areas of the business
(34:48):
using zero based thinking. Knowing what I know now, would
I still make this investment or hire this person or
offer this product? Question from the listener. You've emphasized cash
management during downturns. What are some specific cash acceleration strategies
(35:09):
that businesses can implement quickly? Well, there are several. First,
implement upfront deposits or payment terms for new customers during downturns,
customers are more willing to accept these terms to secure
reliable vendors. Second, offer early payment discounts, for example two
(35:30):
percent off if paid within ten days. Third, you can
streamline your invoicing process. You know many businesses are surprisingly
slow to invoice. That always baffles me, But they are,
and that delays cash flow and unnecessarily or segment your
collections approach. Use different strategies for different types of customers
(35:51):
rather than a one size fit all approach. And then
finally consider factoring receivables. If you have credit worthy customers
need the cash sooner. I've seen businesses improve cashflow by
fifteen to twenty percent in sixty days with these strategies,
which can be the difference between struggling and thriving during
(36:13):
a downturn. Another question, what about businesses that are already
facing cash flow challenges as they enter the economic downturn?
Is it too late for them to implement these strategies now?
It's never too late, but the approach needs to be
more intensive. But businesses already experiencing cashflow pressure, I recommend
(36:37):
what I call cashflow CPR. This is a three step
emergency protocol. First, control the bleeding. Immediately identify the largest
cash drains. Secondly, prioritize ruthlessly. Create a tiered system for
all expenses and payments, separating the must pays from the
can weights because there's always a can eight list. Third,
(37:02):
restructure quickly. Proactively reach out to vendors, landlords, and lenders
to negotiate terms before missing before missing payments. That's important.
The key is transparency and communication. Stakeholders respond much better
to proactive restructure than to surprises. I've seen this. I've
seen businesses on the brink of insolvency turn around in
(37:24):
ninety days using this approach, but it requires immediate, immediate
action and complete financial transparency. So before I continue this discussion,
we're going to take a ninety second break. Hey, their
business owners, let me ask you something. Are you tied
of blending in with your competitors? Frustrated with slow growth
and slim margins? Well, I've gotten news for you. Everything
(37:48):
you've ever learned about growing your business is wrong. Don't worry.
I'm here to let you in on a secret weapon,
your position of market dominance. It's what sets you apart,
make sure irreplaceable, and has customers lining up at your door.
My name is Michael Barberrita from Next Step CFO. I
know what you're thinking. Sounds great, Michael, How do I
(38:11):
find my position of market dominance? Well, that's exactly why
we've created our game changing impleitation program called Next Step
to Market Dominance. In just ninety days, we'll guide you
step by step to a position of market dominance by
uncovering your unique strengths that competitors can't touch. By crafting
a message that resonates deeply with your ideal customer, by
(38:32):
building a strategy that turns you into the go to
expert in your field. Now this is in theory. These
are battle tests and strategies that have helped businesses like
you as double, triple, and quadruple their revenue. Don't let
another quarter go by struggling to standout. It's time to
dominate your market period. Go to NEXTSTEPCFO dot net forward
(38:54):
slash contact. Fill out the form and in the message
section put the word dominate or call us at seven
eight one three two six three A two two. That's
NEXTSTEPCFO dot net forward slash contact or call us at
seven eight one three two six three A two two.
(39:15):
Welcome back. Now, let's explore the third critical component of
thriving during economic downturns, and that's implementing the right business
strategies that your competition isn't doing. Did you know that
ninety five percent of business and financial strategies use today
are identical identical to competitors. They don't work, particularly, they
(39:37):
don't work even in good times, so you can just
imagine how they're going to work in bad economic times.
So during economic downturns, the problem becomes even more pronounced
as businesses retreat to conventional wisdom, cutting across the board,
halting innovation and essentially trying to weigh out the sort. Instead,
winning business owners implement strategic approach is that position them
(40:00):
the capture market share while others retreat, and let's explore
those strategies. Every business should have a position of market
dominance that becomes even more powerful during economic downturns. This
isn't branding. It's a clear articulation of how you solve
critical problems that your market faces in a way that
(40:21):
no one else does. And there's ways to create that.
If we've heard our commercials. During downturns, customer problems and
pain points often shift, and smart business owners quickly adapt
that position of market dominance to address these changing concerns.
For example, during the two thousand and eight financial crisis,
a luxury retailer shifted their position from exclusive designer collections
(40:46):
to investment pieces that retain their value, directly addressing their
customers' new financial concerns. Similar to that during the early pandemic,
a restaurant rapidly pivoted from positioning as a premium dining
experience to restaurant quality faily meals that are safely delivered,
(41:06):
responding directly to their customer's new priorities. Around safety at home,
CET and living. I'm getting an early question on this
in this segment. Repositioning sounds good in theory, but many
business owners worry about confusing their market or diluting their brand.
How can they adapt their positioning without losing their identity? Well,
(41:29):
that's very insightful question. The key is to evolve your
positioning rather than completely reinventing it. Think of it as
highlighting a different facet of your existing value proposition rather
than creating a brand new one. The core of who
you are should remain consistent, but what aspects that you
(41:49):
emphasize should shift to align your customer's changing priorities. For example,
we'll give you this example. A high end fitness studio
had always focused on transformation the results, but during economic concertainty,
they emphasize the stress reduction and the mental health benefits
of their approach. Same service, same values, but a different
emphasis that resonated with their members' current needs. So it's
(42:13):
just a shift in the thinking of the same product. Second,
winning business owners implement a compelling offer strategy that addresses
the specific concerns customers have during economic downturns. See during
uncertain times, customers become more risk averse and scrutinize their
spending more carefully. Your offer needs to overcome these height objections,
(42:36):
so effective downturn office strategies include risk reversal, which is
where the seller and the transaction takes most or all
the risk. Value based bundles, packaging your core offer with
additional valuable components at slightly higher price but delivering substantially
more value. Member. If value is higher than price, they'll
(42:57):
buy segmental offerings. That's creating good, better best options that
allow customers to select based on their current financial situation.
By the way, these are all strategies that we've covered
in previous shows. Recurring revenue models shifting from large one
time purchases to smaller recurring payments that feel more manageable
(43:19):
during uncertain times. It's all great. Third winning business owners
implement strategic cost management rather than obitrary cost cutting. The
general mindset of business owners and economic downturns is to
cut everything, but you can't cut your way to success.
Use this formula for cutting expenses. You cut the expense
(43:41):
if the expense doesn't help you acquire a customer, if
it doesn't help you retain a customer, if the expense
doesn't increase the long term valuable customer, and if the
expense doesn't help deliver your product or service to a customer.
And after you apply these rules to expensive expenses, look
for investments in the three a's assets that produce revenue,
(44:05):
amazing people to help you scale, and automation to lever's time.
Success in economic downturns is not defined by those who
spend less, is defined by those who spend smart. And
let me give you an example. During the two thousand
and eight recession, A manufacturers facing significant pressure to cut costs,
(44:27):
and rather than implementing across the board reductions, he categorized
all expenses using the framework I just shared. This revealed
that they were actually under spending in areas that directly
impacted customer acquisition and retention, while overspending on internal system
that didn't touch directly touch the customer. By really allocating,
(44:50):
not just reducing, but by reallocating their spending, they were
able to reduce costs by fourteen percent while actually increasing
their marketing impact, act and customer service capabilities. The result
was that they emerged from the recession with higher market
share and stronger customer loyalty than they had going in
(45:12):
for economic downturns create unique opportunities to upgrade your talent pool.
While most businesses implement hiring freezers or layoffs during downturns,
visionary companies selectively hire exceptional talent that suddenly becomes available
as other companies can track. I've seen businesses completely change
(45:34):
that their capabilities by strategically adding just one or two
key people during downturns, people they could have never attracted
during stronger economic times. And this might be an experienced
salesperson from a larger competitor, or an operations leader who
can really drive efficiency. And the key is being selective
and focusing on roles that directly drive either revenue growth
(45:57):
or margin improvement, and positions that more than pay for
themselves even in these challenging times. Fifth downturns offer unprecedented
opportunities to ford strategic partnerships and alliances. As businesses look
for ways to maintain their market, for instance, with reduced resources,
(46:21):
partnerships become increasingly attractive. Here's one question from a listener.
Your shared several strategies for driving driving during downturns. If
a business owner could only implement one or two of
these immediately. What would you recommend our prioritizing, Well, if
(46:42):
I had dorek down, let's say that just two strategies,
I'd recommend focusing on financial clarity and cash management, specifically
implementing the thirteen week host glow and forecast that we
talked about. This gives you visibility and confidence to make
strategic decisions rather than reactive ones. And secondly, I would
(47:03):
prioritize your position and market dominance and your compelling offer
to align with your customers changing priorities during the downturn.
So as we wrap up today's discussion on thriving during
economic downturns, let's summarize the key strategies that we've covered
(47:25):
for turning challenging economic times into your greatest opportunity. First,
we explored the foundational mindset needed to make strategic decisions
while others panic. We discussed how winning business owners start
with clarity about their personal goals, understanding exactly why their
business exists and what it is to provide them and
their families. This personal clarity drives better business decisions, especially
(47:53):
during turbulent times. We also emphasize the importance of maintaining
a visionary mindset rather than succumbing to scarcity thinking. Academic
downturns don't create or destroy opportunity, they merely transfer it
from the unprepared to the prepared. By focusing on long
term impact rather than short term fear, your position your
(48:14):
business to capture opportunities that others miss. I know that's
I know that's difficult, but really got to focus on that. Second,
we covert the critical financial tools that provide clarity when
uncertainty is highest. The business and cash flow forecast gives
you the ability to test decisions before you make them,
(48:34):
while scenario planning preparesship to the multiple what IFFs. We
stress the importance of knowing your vital five numbers sales,
gross profit, gross profit percent, net profit, and your current
cash balance. We also discussed rigorous cash management systems, modint
protection strategies, and discipline capital allocation, all of which become
(48:58):
exponentially more important during economic contractions. And third, we explored
specific strategy business strategies that successful companies implement during downturns,
from creating or adapting your position of market dominance to
address to address changing customer concerns to creating compelling offers
(49:20):
that overcome heightened risk aversion. We covered strategic cost management
that focuses resources on customer impacting activities while reducing non
essential expenses, and we also discuss how downturns create unique
opportunities to upgrade your talent and form strategic partnerships that
(49:41):
allow you to maintain or even expand your market presence
while sharing costs. Remember, successful navigation of economic downturns isn't
about luck. It's about preparation, clarity, and strategic action. By
implementing the strategies we discussed today, you can position your
business not just to survive, but to thrive when others
(50:04):
are struggling. Keep thinking differently and act boldly. You know
today we're all facing the call to adapt and to
make decisions based on the numbers. Those who do will
make business a lot less terrifying. Those who do will
achieve their number one goal. Those who do will thrive
(50:24):
in economic downturns. There are more millionaires and billionaires minted
during economic downturns than any other time period in history.
The only question is are you prepared to be the
next one. To get a copy of the book Powerful
(50:45):
Business Strategy simply go to our website www dot next
STEPSCFO dot net. It's totally complementary. And until next Monday
at noon Eastern time for Tricky Obio, my name is
Michael bob Rita. And remember, don't keep doing what your
competition is doing.
Speaker 2 (51:04):
You have been listening to powerful business strategies finding out
that everything you ever learned about growing your business is wrong.
Tune in next week and every week at noon Eastern
time on W four CY Radio with your host Michael
Barbarita of NeXTSTEP CFO and moderator chugy Ovio
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