7 Actions for Successful Business Owners in Economic Downturns

0:00 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, explicit or implied shall be extended to W FOURCY Radio or it's employees are affiliates. Any questions or comments should be directed to those show hosts. Thank you for choosing W FOURCY Radio. 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 Michael for today's show as an executive moderator is chooky obio.

1:00 Yes, this is chookey, and I believe that gratitude is undefeated and growth is about the next step. It is an honor for me to moderate today's discussion with my good friend Michael. Michael how the heck are you excellent? Zucky? And I am Michael Barber reata from Next Step CFO. And Next Step CFO is a fractional CFO and strategic implementation firm. And our vision is when sure overwhelmed business owners achieve the time, freedom and consistent profits to build a legacy and the life they desire. And our mission is simple. It's dedicated to guiding small business owners to leveraging their time, exploding their profits and build a meaningful legacy.

1:44 And this show powerful business strategies and our book of the same name is a step toward accomplishing that vision and mission. And so with that, I'd like to hand it back to my co author and moderator Choky Obio. Michael, Look, I'm really energized about today's discussion, but just a quick disclaim before we get started. So, so Michael's point about just legacy. Look, Michael and I are both affiliated with a number of different organizations and I currently serve as the managing director of Business Developments for Veta Price, a global business focused law firm. In addition to that, I collaborate strategically with Michael to moderate a number of business roundtables really nationally, and we document those best practices from our conversations with successful business owners. But look, the views expressed today's show are our own views based on our successful experiences, and my mission as the Fearless moderator is to ask the right questions and to help you and me candidly learn the best business strategies that the competition isn't doing. So Michael Ala toss it back over to you.

2:58 Thank you, Juki, and today you know our topic is about seven action items to take an economic downturn, to which I promised to get to. But I want to tell you something that I feel compelled to say because there could be many business owners out there that are deciding on whether or not to pursue their dream and it can be a very difficult and risky decision when it comes to implementing a new idea. Absolutely, so I just want to offer a little short insight about it. Back in two thousand and two, I put together a complete written business plan to create virtual trade shows on the internet. It was called trade showsothnet dot com. And these virtual trade shows that I was I was creating would help small companies who can't afford to attend or exhibit at trade shows an opportunity to attend them over the internet. Now, I never wrote a complete business plan with financial projections and all that I never implemented except for this one.

4:06 Wow. Yeah, I even bought the domain trade shows on thenet dot com. And as I kind of reflect back on why I didn't pursue my business plan, I remember I was fraught with fear of making any kind of change and self doubt that I could do it, Fear and self doubt that I couldn't raise the money for example, fear and self doubt that I couldn't find the technical expertise, fear and self doubt that the whole idea was just way before its time, or maybe it wasn't ever going to be in its time. I couldn't hit enter, but I hit the lead. A year later, in two thousand and three, I received an email from a company called on twenty four who, among other things, creates and builds virtual trade shows. They had three venture firms on their board.

4:59 They were doing extreme well and they're still in business today. And I saw pieces of their virtual trade shows and it was exactly what I envisioned. And I even had even more bells and whistles than they did. But evidently the founder of On twenty four, Sharat Scharan, he had no fear and no self doubt about raising money, he had no fear and no self doubt about finding the technical expertise, and he had no fear and no self doubt about the timing of the project. And if he had that fear boom, he overcame it. He didn't hit the lead, he hit enter.

5:41 Remarkable. So wouldn't it be a shame to do what I did and let fear of making a change and self doubt prevent you from serving the world. Michael, Look, I am so inspired by that, and we'll get in some really nice comments from the folks that are on. We've got quite a few, quite a number of business owners that are on, and I think there's some headnots to that. So fear and self doubt, Michael, give us a sense how does that connect to our topic today? Because I think there's a great connection with this idea of overcoming fear and self doubt and then managing a successful business in economically uncertain times.

6:24 Yeah, so that's exactly what happens to you in an economic downturn. There there is you know, there's fear of making a change because the ability, as we'll get into, the ability to adapt is a critical skill for a business owner. And then what happens is is when you're thinking about adapting, you have this self doubt that that creeps in about the change because you're not used to change or you fear change. And so it is related for sure. And I'm not saying that this story made it easier for someone to make this kind of a decision, but I wanted to share this personal story of regret because that's what it is. It's a personal story of regret.

7:16 And if anybody out there is thinking about you know, they have uh the groundwork for an idea. Most most of the time, it's better to hit enter than it is to hit the lead. It's just a remarkable visions to plants in the mind of business owners. And Michael, look, business ownership and leadership is really hard. Agreed. Yep, Absolutely, it's hard. Yeah, it is. And the ability to adapt is high. Absolutely, And what I love about the ability to adapt, And Michael, I'll pivot us. So the focus for today's show is on the seven actions that successful business owners take to deal with an economic downturn. Now, Michael, you and I have had a number of strategic conversations about this.

8:14 Now I know just from experience and practice that that number one action is the ability to adopt. So did you want to maybe give us a little bit of an outline and then we could get into Yeah, let me. Let me give it. Yeah, let me give a little context to all of it. Uh. You know, So, how do we business owners prepare for an economic downturn? Because here's the thing. Business is terrifying, Yes, and it's terrifying because we business owners are responsible for so many other people's lives. And the scariest thing about business is that when you wake up in the morning, boy, you just never know what to expect. Me too, And the world is so fast. Things are getting done at the speed of light and it's hard to keep up. So our objective in this show is to give you ideas. We want to present financial and business strategies that your competition isn't doing and by virtue of that, help you thrive in an economic downturn, reducing the terror and uncertainty of business.

9:21 But no, this, I understand this, this part. You can never really be ready for an economic downturn, but you can be prepared and that's what we're going to go over today. Seven items to prepare you for an economic downturn. And our job as business owners, as we were just saying, is to be prepared to adapt. That means to be flexible to change. And the thing about it is is many are resistant to change and therefore don't adapt. And that's why. So if you thrive in an economic downturn and businesses, it's always changing and yeah, god, it's unbelievable.

10:02 And this is true now more than ever, and that's why Chukey and I will keep writing additional additions to our book and get feedback and we hope to get feedback and forums like this as well. And just a short time ago, in twenty twenty two, interest rates were low and many industries were having record years. Twenty twenty three was tougher and with interest rates staying high, credit card delinquencies also rising, personal savings in decline, and an uncertain political climate. You know, for many industries, the next year is very, very uncertain. And as a fractional CFO strategic implementation strategist, I see this uncertainty every day, so I get asked I mean, I'm always asked why are some companies winning while others are struggling? What are the winning companies doing differently? And how can I win in an economic downturn? So let me try to answer those questions with these seven action items that I believe are necessary to prepare for an economic downturn. So adaptation is one, but winning business owners have a need to have a laser focus on their number one goal, not the number one business goal, but the number one goal for themselves

11:33 and their families. Michael, is interesting. So we just got a nice question just really quickly on that. Yeah. Sure. So an example of a personal goal that's different from a business goal at a high level. Well, an easy one is time freedom to be able to spend more time with my family. That is a personal goal. You want to spend more quality time with your family, you want to create memories with them. That that is a that is a first personal goal versus a business goal being I'm looking to achieve three million dollars in revenue. Great clarification, Michael, Yep, We'll get in some thank yous on that.

12:16 I'll continue on. Thank you excellent, No problem now achieving their number one personal goal, or focusing on their number one personal goal is not only their why. It's not only their why. It's their why, but it's not only their why, it's they're also their motivation to adapt and to be flexible to change. So if they are really focused on their number one personal goal, they're going to that's not only their why, but it's going to give them the motivation to adapt and to be flexible to change, which is a critical component of winning in an economic downturn.

12:59 And that that's why I say that great CEOs always start by understanding their personal goals and motivations. What's really important to you and your family? I mean, but from my perspective, it's important to me that my business serves me, not the other way around. I don't know, feel like a slave to my business. And that's, you know, another reason for this show. We're trying to overwhelm business owners. We're trying to get them out of that out of that hamster wheel mode. And so we have to start by setting our personal goals first and then moving to our business goals. So now with respect to our business goals, the way you should the way one needs to look at at those business goals is net profit goals first, then revenue goals. You know, it's really true that revenue goals without net profit goals are useless because it's net profit that that is going to be able to drive all your decisions. You know, for example, if you want more take home pay, you need more profit. You should have a profit goal, not a revenue goal. You know you want to you want to pay down debt. You know, guess what, you need more profit. You want to hire additional people, whether it be a manager or even a general manager, to run things. You need more profit. So we all we always talk about revenue goals, many of many of us business owners, but it's really net profit

14:32 goals and then revenue goals. It's not like you ignore the revenue goal, but you certainly focus on the net profit goal first and the next. Winning business owners in an economic downturn have a visionary mindset. It's so easy to get sucked into the doom and gloom of an economic downturn. It's just so easy, and you go into scarcity mode, negativity mode. Don't do that. Wow, And certainly the world is changing, but it's not ending. We need to adapt, not shut down. So when you make decisions.

15:16 You need to adapt to the to the to the situation that's in front of you. And I see so many times that business owners feel so much pain in an economic downturn that they make hasty decisions. They don't adapt to the conditions and really take the time with a calmdemeanor and strategically work their way to winning again strategically. And you know, maybe it takes utilizing the conversion formula that we talked about in previous shows, or an understanding of the customer problem. Maybe it make it takes making a compelling offer that we discussed I think it was last week. Maybe it creates up cells, cross sells and down cells. Maybe it takes rejuvenating former customers. You know, maybe it requires an understanding of what happens if business is twenty percent off and how that affects cash flow.

16:15 You know, maybe it means you have to cut costs. Maybe it requires strategic alliances and joint ventures with other companies. All of these we will discuss in future shows. But one of the beautiful things about being in business is that are always options, and you know, it's it's just about understanding and knowing what those options are. Absolutely so Michael, A really good question from a business owner. What is a conversion model? So it's the conversion formula that we've explored in past at right, So did we want to just quickly touch on that?

16:56 Sure, I will quickly touch on it. So the conversion formula is a formula to convert prospects into customers, and there's four parts to it and it needs to be done in that exact order as I as I'm going to state, otherwise it doesn't work. So let me go through those steps. It starts with the captivate. To captivate is actually identifying the problem that the customer has it doesn't want. You must identify that problem if you're going to convert a prospect. Now, it's not easy necessarily to find that problem, and that's why we have a thirteen week program to do just that, identifying the problem and your unique solution, which is to fascinate. So it's captivate the problem the customer has it doesn't want, and fascinate the solution that they're looking for that they can't find.

17:56 Those are the first two components of the conversion formula and we call that those two first two components the position of market dominance. So that's that's step one and two, step three and by the way, you never get to step three if you don't have a good position of market dominance. Captivate and fascinate good step Yeah, Step three is educate. So now that you've interrupted, if you will uh through the through the captivate uh and engage the prospect through the fascinate, it's now time to educate them a little bit more. You've got their attention now because you hit a hot button that problem that they have that they don't want, and you offer a solution that they want that you can't that they can't find. So now you have a little bit more time to educate them.

18:49 And you know one of the problems I see, uh chokey, is they that most business owners start with the educate Yes, you know, they line less services, multiple services in the hope that they won't forget somebody. Well, are you telling me there are a bunch of websites where business owners are saying they've got the largest selection, they've got the lowest prices. That's right, that hope, so I hope so marketing largest selection, lowest price is best service, honesty, high quality, most professional, fastest largest in the state. All that that is all jogging.

19:30 It's not meat and potatoes. What the customer care really cares about? Correct? And then finally you have to hit the hit the customer with a compelling offer. And so it's it's captivate, fascinate, educate an offer. That's the conversion formula. And now there's five components to a compelling offer. Okay, the first one is scarcity an urgency. Correct, So scarcity, there's only three left. Urgency that this price, this this offer ends Friday. Yep, the scarcity and urgency. And by the way, it's important to note that you can combine these these components of a compelling offer. You just correct, You just don't have to have one. You could combine them, which makes the offer even more compelling for sure. The second component of a compelling offer is what's called a risk reversal, where the seller in the transaction takes most or all of the risk. Now, an example of that is when I was in the ski business, we had what we called a ski guarantee. Now, the customer's problem in the ski business is when they were sold a pair of skis, they really didn't know if it was the right ski for them until they get it up on the mountain. So we put together what we called a ski guarantee. Ski the ski through times you don't

21:00 like it, bring it back for a brand new pair, and keep bringing it back until we get it right. And you know what, many people think thought that the customer would take full advantage of that and bring back multiple pairs of skis multiple times. But that did never happened because we solve their problem by getting the right ski for them. Correct. The third component of a compelling offer is adding more value to a product of service. So always be thinking about how you could create more value at a low cost. And now remember, if you create more value, you can increase the price. It's a good point, right, So you add more value at a low cost and then increase the price to reflect that added value or even some of that added value, and you could still make a very profitable scenario. And that's compelling.

21:56 When you add more value to a product, that is compelling. And then the fourth component of a compelling offer is packaging and bundling. Yes, there isn't There is a perception out there with the customer that if you package things together, there's a value there's more value there, there's more perception of value. So when I was in the ski business, for example, everybody, every one of my competitors packaged skis, boots, and bindings. But we also packaged clothing, which separated us, which was doing something that our competition wasn't doing by packaging a hat with a bib, a parker and a sweater and they flew out the door and it was it was a very effective strategy. So you know, when we combined the ski guarantee with packaging clothing, it it was a great combination. And it is utilizing more than one component of a compelling offer. And then the fifth the fifth compelling offer is simply being indifferent to the outcome.

23:11 Many times business owners pressed to make a sale, Yeah, and they and the and the customer can figure that out. They figure it out that that you have your interests that are more of a priority than theirs. And by being indifferent to the outcome, you know, by by by explaining it, by telling them that you know, we're doing this for you, You're getting on the same side, we're locking arms, You're getting on the same side of the table. That is compelling. Great and Michael I'll interject here out we'll give just a quick compliments to Pete's Plumbing and Heating company. Okay, And they propose that question, by the way, on the conversion formula. And Michael, I think you broke that down really well. So just as a quick recap, it's a first step captivating, second step fascinate, third step educate, and then fourth step to make the offer and then there are five ways to make an offer compelling. And Michael, again, you did a really great job of just breaking that down.

24:18 Scarcity and urgency is a first, second, risk reversal, third adding more value, forth packaging and bundling. And then this fifth one, which is really good, this indifference to the outcome and picking up on that last point in difference to the outcome. And Michael, how do you think this connects back to some of the successful actions that business owners can take, particularly with the visionary mindset. Well, I think you know, once again, it's being more concerned about the prospects problem and really showing that, you know what, one of the things that we do is we focus on what their number one goal is. And it's different for all industries, but we focus on what the number one goal of that business owner is and then because what it does is it gets into a real deep discussion with the business owner that we're really concerned about helping them achieving that number one goal. And it hit and you know, and you know, there's an emotional core that gets hit there and and and it's that's where the indifference comes in. Bye, by really digging deep into that customer problem and solving it. It's just it's just it's just it just helps tremendously with the conversion to a sale.

25:38 Michael Man. That's such a great point. And the conversion equation can be executed online and offline, is that right? That's correct, It could be. The conversion formula can be used for any communication to a client, any communication at all up to a prospect, I should say, any communication. Uh, we have had positions of market dominance to captivate and fascinate on incoming voicemail messages. Wow, you know, on the greeting greeting in a voicemail. So any type of communication to a prospect is where the conversion formula can be very effective.

26:21 Really important. So yeah, we're getting some nice gratitude notes just in the way that you detailed that response. There's some folks that are saying that was very practical and actually a nice little comment here. I've got to redo my whole website. We got that, So, Michael, just a really really good stuff just as a point of recap to these seven actions. And Michael, look, I was taking some good notes here. These seven actions. You've covered Action one, which is having the ability to adapt, action to defining a business owner's number one personal goal, Action three documenting those business goals, particularly net profit goals first, and then for adopting a visionary mindset. So I want to just make sure, Michael, I'm taking really good notes here, any additional thoughts or comments related to those first four actions before we move on.

27:20 Yeah, we'd like on the visionary mindset, you know, we want to avoid scarcity based decisions and make those visionary decisions. You got to think about the impact of your decision. I don't care what time you're in, whether you could be in a really difficult economic situation, but you got to think about your decisions and how they're going to be impacted next quarter, next year, five years, for now. You have to make decisions that will serve you in the long run and what this means is that when we make decisions in an economic downturn, it can't be a decision just to ease the pain for a little while. It has to be the right decision for the long term. And give you an example to key, I have had fifty two kidney stones over the last forty three years.

28:07 Wow and yeah, and with each and every stone, the doctors and nurses focused on reducing my pain through numbing drugs, but not removing the cause of the pain, which was the actual stone. Now, eventually they did that, or believe me, I wouldn't be here today. But that was not their first order of business. When our businesses are in pain, we have to we feel that need to relieve the pain. Okay, and instead of taking out the stone, finding the root cause of the pain and solving that. And a simple example of what business owners do immediately is they discount prices. Yeah, you know that All that does is relieve the pain.

28:59 It doesn't address the cause of the pain by not having enough value, that's the cause. Interesting, that's really interesting. I'm also uh, I'm also thinking you might be superman. I mean, how many of the remarkable Yeah, yeah, yeah, we've got to get your healthcare secrets. Yeah, yeah, mean yeah, but the problem is, uh, it's it's just the recovery of it is is just amazing. And then you know you have to deal with all the pain that's involved. It's it's quite a process. That's all I could say. Otherwise I'm just gonna get both, you know, get gross gross out everybody. And so this next part, in terms of handling and being prepared for an economic downturn, it's going to probably freak out a lot of people because we know a lot of people aren't doing this. And we know that because we've taken eighty small business owners over eighty to an individual business assessment, and in that assessment, we ask three basic financial questions.

30:15 And those financial questions I number one, what is your annual revenue? Two what's your gross profit percent? And three what's your net profit percent? Just those three questions, and eighty percent of these business owners didn't know the answers. Wow. Yeah, And it's a real problem. And winning business owners make the right decisions in an economic downturn because they make decisions based on the numbers. Now, when times are good, no problem, you'll get by. You'll get by not looking at numbers. It's not effective, it's not even close to being effective. But you'll get by. But to in in an economic downturn, you must make decisions based on the numbers.

31:07 And what numbers you might ask, well, CHOOKI I have a name for them. I call them the vital five. You see, these five numbers should be with you at all times, and they should burn in your memory because you will improve decision making immediately by just understanding these five data points, because every decision you make is involved usually involves these five data points. And these five data points, the vital what I call the vital five is sales, gross profit dollars, gross profit percent, your net profit, and your current cash balance. By understanding these numbers, you're going to improve your decision making. So and in future shows, for sure we'll go over what specifically these five items are and how and how they impact decision making. But it's if you have these five numbers in mind, you don't even have to really know the rest of your P and L or the rest of your balance sheet.

32:26 But without these five numbers, it's it's hard to make the right decisions. So the next thing is that and this is all the financial component. By the way, this next couple of next couple of components. So next is winning business owners understand what their financial statements are telling them. Now, the three key financial statements are the P and L, balance sheet and cash flow statement. And believe it or not, when I'm in a room of small business owners and I ask how many people look at their P and L at least once a month, less than ten percent I'm sorry, less than half raise their hand. And then when I ask how many people look at their balance sheet once a month, that's where less than ten percent raise their hand. And when I ask how many people look at their cash flow statement once a month, I might I might get one person to raise their hand, so you can imagine like that, that's cash flow. To me, that's the life bloit of a business being totally neglected.

33:37 And 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 financial statements will guide you to the best decisions. And if you need help understanding your financial statements, you've got to go out and get that help. It's crucial. Yeah, So the next thing that winning business owners have in an economic downturn. Is a business and cash flow forecast? Why is that? Well, the business and cash flow forecast helps you understand the outcome and ramifications of the decisions before you make them.

34:18 So it's basically a situation where we could give you the answers to the exam. With a business and cash flow forecast, you can get the answers to an exam before the exam. Well, yeall, Michael folks are saying, sign me up for that. Yeah, it just gives you that foresight. So for example, you know how many of the business owners out there have ever been surprised by a cash flow problem. Well, if you have a business and cash flow forecast, you'll never be surprised by a cash flow problem again because you'll always know what your projected cash position looks like today and in the future. Sure by month. I have many times been able to tell clients that they're headed for a cash flow problem. Let's say I was talking to them today in July. I could tell them many times that at the beginning of the year, in you know, January, February, and March, they're headed for a cash flow problem. What do we need to do today to prevent that and just that one thing we've been able to circumvent big trouble.

35:29 And as I've always pointed out, CEOs of the best companies are never surprised by cash flow or anything else for that matter, because they have a business and cash flow forecast. And what's interesting, Chooky, is there's a reason why Fortune five hundred companies, every single one has a business and cash flow forecast. There's a reason for that, and it could be and like I have done many times personally, we prepare business and cash flow forecasts for any type of business at all, Okay, how small you are, because it gives you that foresight and it also identifies the most effective business model you can have. And that's something that small business owners who are starting up with me, Yeah, they need to know that.

36:20 That point really, that point really resonates, absolutely resonates with me. I mean, small businesses are the lifeblood of our economy. You know that. I know that. And some of the reactions that we're getting here is you're saying there's Fortune five hundred level service that small business owners could get access to by just embracing this idea of a business and cash flow statement. Is that right? That's correct, yep, and yes, absolutely it it You know one other thing that it does. I promised I wouldn't get into this until we have our show on the business and cash Flow Forecast. But it answers the can I afford it? Question? Ah many times, I can't tell you how many times I get asked, can I afford a new truck? Can I afford a manager?

37:09 Can I afford a new location? Can I afford to add a product line? A new product line? That the can I afford it? Question? The beautiful thing about a cash flow basis a cash flow forecast is that you could you could create multiple what if scenarios? You know, what if business is off twenty percent, what if it's up twenty percent? What if we add a new location, what if we what if we add a manager, what if we add h Well, I said, a new look, a new a new product line. Correct. Yeah, that's remarkable. And Michael, look, I think just for the sake of all the goodness that we'll pack into that episode when we go through the business and cash Flow Forecast up, I'm gonna pull you back, Michael, I'm pulling you back, all right. Yeah, we've got some good questions off folks on that, so tune in so next.

38:07 Winning business owners in an economic downturn need the right business strategies. And this is the point about being strategic versus tactical. I mean, did you know that ninety five percent of business and financial strategies used today are identical to your competitors and they don't work. Your strategic plan needs to be made up of strategies that your competition isn't doing. And just to name a couple of strategies here, that every business should have a position of market dominance. And as you heard earlier in this show, we talked about the captivate problem the customer has it doesn't want and the fascinate them. The solution that they want that they can't find. That is the position of market dominance and every single business needs one. Every single business should have a compelling offer. Okay, we went over the five components of a compelling offer. And every single business should have joint venture partnerships that are working. Uh, there's a lot of joint venture partnerships out there that that really they're just they're not working. And one of the reasons why they're not working is that business owners having having these discussions with somebody that they'd like to strategically partner partner with. They dropped the ball, yeah, don't they. They They dropped the ball in a couple of ways. They

39:39 don't ask the other side what success looks like. Absolutely, And I know, Michael, just to interject with some of our experiences with the Business Roundtable, I mean this it really animates business owners, just this idea of how to create a successful strategic alliance and joint venture partnership. I have a number of questions for you related to this, and I imagine we could save this for one of the episodes. In fact, we'll maybe get a little bit deeper into joint ventures and strategic alliances. How does that sound? Yeah, No, that's great, brilliant, Yeah, that's absolutely spot on. Yeah, that was the intent here. We're going to cover that.

40:19 These are all we have. We have twenty two business strategies that we're going to cover in all these in all these broadcasts. So now, the general mindset of business owners in an economic downturn is to just cut everything. Yeah yeah, and you know you could cut absolutely, but you can't cut your way to success. And we have we actually have a formula to use to cut expenses. And this formula has worked very well over the years. Sometimes it requires a little, uh, somebody to bounce off ideas. Uh, sometimes it requires that. But here they are you cut the expense. If the expense doesn't help you acquire a customer, that's number one. If the expense doesn't help you retain a customer, that's number two. If the expense doesn't increase the long term value of a customer, that's number three.

41:28 And number four, if the expense doesn't help deliver your product or service to a customer. Yeah, those four now, that's those are our That is our formula for cutting expenses. Yes, And one of the keys is is that a lot of business owners don't know what long term value of a customer is. The long term value of a customer is the average number of dollars that you're going to get every time you get a new customer over over a certain amount of time. Some people use five years, some people use ten years, some people use lifetime. But understanding that metric is very important because like, for example, when I was in the frozen cookie dough business, I used to give an oven away with every opening order.

42:19 Now another a convection of it at the time cost about two hundred and fifty dollars something like that. We used to give good ones up and my opening order was probably sometimes as low as one hundred dollars okay, So I wasn't making money on the first order. I was bank I was banking on the fact that every time I get a customer, I would get fifteen thousand dollars worth of sales over a period of five years, and that two hundred and fifty dollars for that oven was pale in comparison to the fifteen thousand dollars I was going to get over the long term. So understanding what the long term value of a customer is is not only important metric to have in mind to do a program like I did when I was in the Cookie Approaches a cookie no business, but it's a metric to understand how you're going to advertise because understanding the long term value of a customer influences advertising decisions as well.

43:19 And so the fourth way, the fourth item that we use, you cut the expense at the expense doesn't help you deliver your product or service to the customer. So if it doesn't deliver it in any way, or it impacts the production of the product or service in any way, you don't cut it. Otherwise you cut it. And so those are the four critical rules that every business owner should use when it comes to cutting expenses. Yeah, Michael, a flood of questions related to just last point.

44:00 So are all of these rules created equal? Or if a business owner were thinking strategically, should they prioritize some of those cutting expense rules over others. No, they're equal, They're absolutely equal. Great, and they should and they should consider everyone when going through whether or not to kind an expense. Very helpful. Some feedback that we're getting here very helpful. Great. And so after you apply those rules to expenses, we look for investments. Now this is in an economic downturn. I'm using the word investment, okay, and we invest in what we call the three a's, assets that produce revenue, amazing people to help you scale, and automation to leverage time.

44:47 Hmmm. That automation component now with AI is very very important. One of the things that I'm doing from an automation standpoint is I'm training an AI to called Claude. I believe it's a it's an offshoot of chat gpt okay and with Claude. The unique thing about Claude is that you're able to train it about you and your business, and you're able to give it all types of content that you may have developed. You're also able to ask it questions like, Claude, what else you need to know about my business in order for you to effectively communicate with me? What else is it that you need to know about my business so that you can generate content for me? So that is incredibly invaluable. So automation, You've always got to look for automation to leverage time because not only does it leverage time, but it reduces cost.

45:51 And what we have to understand is that success in an economic downturn is not defined by those who spend less. It's defined by those who spend smarter. That's why Chicky, we say, we say cutting. You know, we want to give you guidance on how to cut costs, but we also want you to invest. Yes, whether it's in assets that produce revenue, amazing people to help you scale, or the automation to leverage time. Really well said, you know, rethink expenses, but increase investments, right. Right, And So let me review the seven action items to prepare for an econdrect downturns. Where as we're winding up here. So the seven action items is the action Number one is have the ability to adapt critical stotting point, great starting point, because without that everything else falls to pieces. Second, define your number one personal goal. Third, document your business goals.

46:55 First okay, I'm sorry, profit goals. I'm sorry your business calls profit goals first, then revenue then revenue goals. Number four is adopt a visionary mindset and make visionary decisions, not reactionary. Number five knowing your numbers. This includes three components. First and foremost, understanding your vital five okay, your sales grows, profit grows, profit percent and net profit in cash. Second, understand what your financial statements are telling you. Third, have a business and cash flow forecast. Next. Action number six is implement the right business strategies, be strategic not tactical.

47:44 And number seven rethink expenses and increase investments and chooky. 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 in an economic downturn. And get this, there are more millionaires and billionaires minted in economic downturns than any other event in business history. The only question is are you prepared to be the next one? Any closing comments took me before we sign off.

48:33 A number of thank yous. It's funny so that last question folks are saying yes and maybe sounds really good. Michael very Well said, Now, we did get a couple of comments around upcoming episodes, so folks are looking forward to the business and cash Flow Forecast episode. We preview that, and then the Joint Ventures and Strategic Alliance episode. We preview that, and then to Michael's point, there are twenty plus strategies based on tried and tested strategies that we plan to review us part of these shows. Really appreciate it, Michael, You anything else? Yes. To get a copy of the book Powerful Business Strategies, simply go to our website www dot NEXTSTEPCFO dot net.

49:18 It's totally complimentary and until next Monday at noon Eastern time for Chucky Obio. My name is Michael Barbarita, and remember, don't keep doing what your competition is doing. 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 Next Step CFO and moderator Chukey Obio