How to Address Inflation and Recession-Proof Your Small Business

According to the Bank of America 2022 Small Business Owner Report, 88% of business owners say inflation is currently impacting their business. Today on the Atlanta Small Business Show, America’s number one small business expert, Melinda Emerson, shares her tips for handling inflation and recession-proofing your small business. Emerson is the CEO of Quintessence Group, and best-selling author of Become Your Own Boss in 12 months.

Transcription:

Jim Fitzpatrick:
So, Melinda, thank you so much for joining us on today’s show.

Melinda Emerson:
Oh, I’m so happy to be back.

Jim Fitzpatrick:
Yep. It’s always great having you back. We always get so many emails and such, where it’s like, “That woman knows exactly what she’s talking about. So ask her about inflation.” Small business owners are dealing with this every day, and it’s concerning for many. There are some small businesses that are doing very well, they’re thriving, they’re doing great. But even those businesses are concerned about what might be lurking on the forefront of what’s about to possibly take shape here. So how is inflation affecting small businesses today through your vantage point? Because I know you work with hundreds, if not thousands of small business owners each month.

Melinda Emerson:
Well, I think inflation is hurting people on two sides, right? So it’s hurting people in their businesses, what they buy. Supply chains is still getting caught up in the inflation, so everything is costing more. It’s costing more to deliver things, to ship things, right? So you’ve got to figure out, you’ve got to raise your prices, right? You don’t really have a choice. Everybody is raising their prices on you, so you’ve got to pass the can down the line. So you’ve got to raise your prices.

Melinda Emerson:
The other thing you’ve got to do, too, is be strategic. I would be looking for new vendor relationships. Don’t feel like you have to keep this old relationship if it’s not working for you.

Jim Fitzpatrick:
That’s great.

Melinda Emerson:
So I don’t know about you, but I’ve got two people that do everything for me. I’ve got two plumbers. I’ve got two hairdresser. Look. I believe that every small business should have multiple resources in their business, because you might get a better deal over here than you get over here.

Jim Fitzpatrick:
That’s right. That’s right.

Melinda Emerson:
Right. The other thing you want to do is look at what you’re paying for. Right now would be a really good time to look at all your subscriptions, because all of us are paying for four things we don’t use anymore that we forgot we’re still pay for until it hits our card.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
Right? You want to make sure that all of the software and things you are paying for that you actually use, and if you don’t cut it. So that’s one definite way that you can manage inflation. And then, you know what? I’ve never been a coupon clipper, but listen, you want to look and find out if any of your vendors or any of the things that you buy, big ticket products, if people are offering deals. If you need a new vehicle for your business, now might be the right time because people are trying to move inventory, especially if you’re willing to take last year’s model. Right? So I think there’s a lot of different things you can do to sort of squeeze that nickel a little harder.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
But the other thing I want to tell you is, inflation is right before recession. Right? So what I know is that we’re probably already in a recession, so I kind of want to take the conversation from inflation and supply chain and gasoline prices, because we’ve been talking about that for a while, and I’d really love to get into how we’re going to help people recession-prove their businesses, because that is the thing that people really need to be focused on. I’ve been in business 23 years. I lived through the ’01 one.com bust. I lived through ’08, ’09, which by the way, I hope we don’t ever go back to again.

Jim Fitzpatrick:
I know. That was a tough one.

Melinda Emerson:
That was bad.

Jim Fitzpatrick:
Yeah.

Melinda Emerson:
And then the pandemic. So been there, done that, two t-shirts. So let’s get into it.

Jim Fitzpatrick:
Yeah, absolutely. So let’s unpack that. I think a lot of people agree with you that we may be in the middle of a recession right now, or at least in some areas it feels like it. So what do you recommend business owners do?

Melinda Emerson:
Well for one, now is the time to be talking to the bank, especially if you’re cash flow positive, if you’ve got some good size contracts, now is the time to go and negotiate a line of credit or a loan for your business. Now is the time to do it. You don’t want the whole country to turn to recession and then you need to go find money.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
No.

Jim Fitzpatrick:
That’s right. Because it dries up.

Melinda Emerson:
You’re going to be way too late.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
Way too late. So you want to be talking to your bank or your funder right now. The second thing you want to be thinking about is, you don’t want to get out here signing any long-term contracts. You want to pay as you go. You want to get on month-to-month with everybody if you can, because you don’t want to lock up resources that you may not have. And it’s almost like your personal household too, as you’re thinking about recession-proofing your life, well, you’ve got to recession proof your business, too. So do you have an emergency savings account for your business? Do you have cash reserves? We all learned from the pandemic-

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
That having only 60-90 days of cashflow is danger, danger, danger.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
So I want to encourage all small businesses to be thinking about, do they have six months of payroll in an account? Do they have 12 months of payroll in an account? If you don’t, get it.

Jim Fitzpatrick:
Right. Right.

Melinda Emerson:
Right? Because you really want to be making sure that you don’t get caught looking right when you should have been looking left. The other thing you want to do is operate within a budget. Don’t be out here… There’s so many ads that everyone sees every day, a Facebook, Instagram, no. You shouldn’t spend $2 that’s not in a budget. And if you do these things and you’re really fiscally responsible, we might even say fiscally tight, right? Then you will be able to weather the storm. We know storms are coming. We know every 10 years in America, there is a recession. Literally, you can go back and look at the data. So we know that regardless of everything else going on, a recession is coming.

Melinda Emerson:
The other thing you want to do is prioritize customer service. You need to talk to your customers, make sure that you’re satisfying their needs. And by the way, find out what their future needs are. Don’t just be trying to sell them something now, make sure you’re positioned to sell them what they’re going to need 12-18 months from now.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
If you do that, you’ll be all right.

Jim Fitzpatrick:
Boy, there’s no question about it. And as you know, for small business owners and big business owners, employees can be your greatest cost. It’s not the furniture they’re sitting at or the computer that they’re at or the office that they happen to be sitting. It’s that salary of that employee, right? So maybe take a good look at the employees that are working for you, and you know those employees that you go, “Well, they’re not really worth their salary, but they’re nice. And they’ve been with me for a while,” and so on and so forth. Now’s not the time to be Mr. Or Mrs. Nice Guy, right? Now’s the time to say either they hold their own or you’ve got to make the cut, and either replace them with somebody half the cost or find somebody that’s going to live up to what you’re currently paying them.

Jim Fitzpatrick:
The other thing I would add to that too, is every employee usually will have that company credit card available to them for those little subscriptions that they buy for their computer, or they’ve got to run up to Office Depot and they’ve got to get supplies and what have you. And before you know it, you’ve got 10 employees, you actually have 10 check writers running around town buying little things. And never is it one big bill, right? It’s not like, “Oh my gosh, they spent $5,000.” But when you have 10 employees, each spending $50 here, $100 there, all of a sudden, it is $5,000 and you go, “Did we need any of this stuff?”

Melinda Emerson:
Well, you need to control who has purchase authority, right?

Jim Fitzpatrick:
That’s right. That’s right.

Melinda Emerson:
You do need people that have purchase authority other than you, but it shouldn’t be everybody.

Jim Fitzpatrick:
I agree. I agree.

Melinda Emerson:
So unless it’s a salesperson that travels on behalf of the business, or let’s say your office manager or your virtual assistant, somebody that’s handling business for you, there really shouldn’t be too many other credit cards rolling around other than the one in your pocket. So you definitely want to manage that. And if you are using a credit card for your business, make sure it’s a card that’s also doing something for you. Check out what the rewards are. Make sure you’re getting cash back, travel points, whatever it is, but make sure that you are leveraging the card that you use the most for your business. And if it’s not, get a new one, because they’re happy to give out more credit cards, trust me.

Jim Fitzpatrick:
That’s right. That’s right. And let me say this, and see if you agree. But doing this, not necessarily downsizing, but just tightening up a little bit your expenses, this is a great practice for when you do make it through a recession and come out on the other side, and say, “Man, how come we didn’t do this during the good times? Look at all this extra money we picked up, and we brought down the overhead so much.” Because as you know, really good times out there will create poor habits, right? And poor times can create really good habits in the sense of saving and putting away.

Jim Fitzpatrick:
And I love your idea there about having at least three to six months of working capital or payroll in an account. You’re going to sleep a lot better at night. You’re not going to have to make those tough decisions very quick in a recession, because we also don’t know how long a recession might last. It might last 90 days, it might last nine months, it might last three years. But the good news, and so we’re not too negative on these small business owners and entrepreneurs listening to us today, is that you can still make a lot of money during a recession.

Melinda Emerson:
Oh, absolutely.

Jim Fitzpatrick:
You can still do great, right?

Melinda Emerson:
You want to make sure that you have enough resources to continue investing in marketing. The people that won during the pandemic were the people who were able to keep marketing, the people that were set up online.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
And ready to sell to their customers. They were using email. They were communicating. Those people won. So you want to make sure that you are not surviving during the recession, that you are thriving.

Jim Fitzpatrick:
That’s right.

Melinda Emerson:
And the way to do that is to keep investing in marketing.

Jim Fitzpatrick:
That’s right. No truer words have been spoken. Melinda Emerson, CEO of Quintessence Group, small business expert, best-selling author, as I mentioned, Become Your Own Boss in 12 months. This is a book that you have to pick up if you’re sitting there watching us today from your laptop or your phone or wherever it might be, it might even be Roku. This is the opportunity for you to say, “All right. I’m going to use this time wisely. And I’m going to pick up Melinda’s book before I spend the first dollar in getting into my own business.” I’m telling you, you’re going to do yourself an incredible favor. So Melinda, thank you so much for joining us on the show. We very much appreciate it. Our viewers get so much out of your visits, so thanks so much. And again, we’d love to have you come back in, do a follow-up, and see how things are moving along.

Melinda Emerson:
I’m always happy to come back.

Jim Fitzpatrick:
Great. Thanks so much.


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