Most business leaders coast through strong economic times, never braking to create a plan for the next downturn. What they don’t realize is that recessions are unpredictable.
If your biggest customer leaves or your best employees start a competing firm across the street, you are in a recession! The savvy entrepreneurs are the ones making plans now, so they can be buyers when opportunity knocks. They’re looking forward to purchasing failing companies and hiring top talent when others are caught unprepared by a recession.
Jonathan Slain and Paul Belair took two totally different paths during the Great Recession of 2008. Jonathan spent the Great Recession huddled in the fetal position on the floor of his office and had to borrow $250,000 from his mother-in-law to survive. Paul, on the other hand, wasn’t scared when the Great Recession hit. He invested $1 million to purchase a business and just five years later sold it for over $70 million dollars. Together, they founded Recession.com to give entrepreneurs the tools they need to assess their recession readiness.
Their new book Rock the Recession: How Successful Leaders Prepare for, Thrive During, and Create Wealth After Downturnsgrew out of their efforts to prepare clients for the next recession. I caught up with the pair to find out what led them to write a book, their favorite ideas in Rock the Recession, and how they applied those ideas to their own lives and business.
What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?
Jonathan: Paul is a CEO coach and I am a strategic planning consultant. Both of us work with a lot of contractors, companies that build buildings, and everyone knows that these companies were hurt badly in the last recession during the housing bubble. About two years ago, Paul and I started developing exercises to do with our clients to help them prepare for a recession.
These exercises included thinking through what they could do to prevent another crisis, like the Great Recession of 2008, in their businesses. We also asked them to think about how they could leverage a recession if they knew it was coming. What could they do to prepare on the defensive front and what could they do to prepare if they were going to use it as an opportunity to go on offense? Over the course of a year, Paul and I amassed a ton of exercises and material and put together a recession workbook to use with our clients.
There wasn’t a moment where we decided to write a book. I know that would be convenient as part of our story, but really the project started as a need from our clients and grew from there. When our clients used the workbook, created their own recession plans, and asked us for more ideas, that’s when we knew we might have something that needed to be shared with the world.
So, we started researching to find out if there were other workbooks out there to help companies to prepare for a recession. We couldn’t find any! Not one! We then expanded our search to books on the recession and found a few, but most were geared towards individuals preparing for a recession, not companies. That’s when we thought that it made sense to write the “book book” (not just the workbook) on how leaders can prepare for recessions. And, most importantly to us, the idea we wanted to get out to the world is that recession prep isn’t all about defense. It’s not all about how to hunker down when a recession hits and survive, but how can you prepare for a recession so that you are LOOKING FORWARD to it. So that you are prepared to pounce when one comes and leverage the opportunity that a recession brings to grow your company 10X.
What’s your favorite specific, actionable idea from the book?
Paul: Companies should take the time now to eliminate their personal guarantees. A strong economic environment is almost always the best time to ask for reductions in your personal guarantee. Ask your bank if they’ll reduce them, waive them altogether, or put a cap on them. Usually, the only way you get out of a personal guarantee is to switch banks.
If you’re in a recovery mode in the economy, like we are right now, there will be banks that want your business. Nobody thinks of this when times are good, but you’ll be glad you eliminated, reduced, or capped your guarantee when hard times come — and they always come.
Jonathan: Practice your recession plan. Being a leadership team is like being on a football team. Great communication and practice will defeat stronger opponents every day of the week, but so many of the teams that I work with don’t take the time to make plans or practice.
And, those two things are free! You don’t want to try to figure out what you’re going to say to your team and how you’re going to say it when you’re already in a recession. I like the idea that you get your team together now and practice. It’s hard to talk about making layoffs. It’s hard to make large investments to buy other companies when the world is melting down.
If you’ve practiced these conversations and run these plays in practice to build muscle memory, then when the time comes, you can just act. You don’t want the first time you practice a two point conversion to be when it’s needed to win at the Super Bowl. Why do we treat our businesses any differently? Why do we think our leadership team will be able to step up when the pressure is on and deliver without any practice? It’s crazy to think that way!
What’s a story of how you’ve applied this lesson in your own life? What has this lesson done for you?
Paul: I worked to eliminate my personal guarantees before the last recession and I counsel all of my clients to do so. You have to treat your banking services like you treat material purchasing. Just like you would negotiate a lower price on your lumber order, you can negotiate a better rate (price) on your banking products, ask for concessions like eliminating personal guarantees.
Jonathan: I like to role play difficult conversations with my mentors before I have them in real life. This practice is often embarrassing (I don’t like role playing), but lets me work out kinks in a safe environment before it’s live. I’d rather not practice on real situations and opportunities.
For more advice on getting ready to pounce when the next recession comes, check out Rock the Recession on Amazon.