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What If There Was A Recession — But You Didn”t Attend?
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What If There Was A Recession — But You Didn’t Attend?

For those who don’t know, Dan Kennedy is one of my personal mentors. He’s a multi-millionaire serial entrepreneur; author of 11 bestselling business books (including two new ones we’ll discuss here);
a popular speaker; and, through his newsletters and networks of consultants and coaches, directly influences over 1-million business owners a year. I have been relying on Dan for strategic business and marketing advice since 1998, and have been a Member of his most elite Platinum private client group for the past year. Recently, while at a Platinum meeting, I sat down with Dan to discuss the economy, business, money and even politics. He was gracious enough to let me record the conversation, and here’s the transcript . . . Please forgive me, up-front, for such a lengthy blog post. But given the timeliness of it, I think it’s well worth your read. By the way, today (July 1st) is “National Financial Freedom Day.” If you’re a business owner and you’d like to make steps towards financial freedom, send me a message and I’ll be glad to share some secrets and tips that will help you do so . . .

Anyway, on to the conversation!

(I’ve underlined some things Dan said that I think deserve emphasis.)

ME: Let’s start right out with the so-called elephant in the room — the economy and the dreaded “R” word. Economists are arguing over technicalities. The news media has had us deep in a recession for months. People do seem troubled by gas and grocery prices. What’s your take on it all?

DAN: First, you always have to temper what people say with objective reality. For example, if you listened to all their weeping and wailing about gas prices, you’d presume everybody had their cars up on blocks, huddled in their homes as if in caves. But the recent Memorial Day weekend had only a 1% reduction in people driving 50 miles or farther from home, according to AAA. There is no doubt that there are segments of the population severely affected….others slightly affected….some unaffected by this very specific inflation of gas and groceries. In big-ticket spending, the inevitable hitting of the wall with using appreciating home equity as an ATM has whacked big, dumb, slow-to-adapt companies like Home Depot and Lowes. Cities and businesses dependent on summer vacation dollars may be hurt this year. So I am not a “recession denier.” However, it’s also important to look at all this in full context. For example, as we speak, we’re in the 4th straight week of declines in jobless claims — less people each week filing for unemployment. The stock market still reflects a fairly optimistic analysis of the overall economy. Real estate is not, as media reports, in an across-the-board collapse. In the Cleveland area, where I have one of my homes, foreclosure numbers are roughly 25% to 30% higher than normal, putting the area in the top 5 markets in the U.S. for foreclosure problems. But luxury home sales are healthy, and even more telling, commercial real estate transactions were up in 2007 vs. 2006 and are apace to grow again in 2008, and there’s more new investment in significant development in and around the city than anytime in the past 7 years. In short, saying “recession” is a big, fat, over-broad, over-simplified generalization. There are plenty of consumers, plenty of investors and plenty of business owners spending plenty of money — and that’s one of the things I want to talk about, related to one of my new books. Further, there’s no profit in buying into this concept of a giant black cloud of doom descending over the entire land — and every business owner must constantly be asking himself “where’s the PROFIT in that ?” with regard to his own thinking, his own analysis and his own actions.

ME: Before we get to the practical cures, if you will, let’s talk a little more about this thought process. How should businesspeople manage their own thinking about the economy?

DAN: This is a presidential election year, during which well over a half-billion dollars has been spent, and between candidates, parties, and independent groups called 527-Cs — for which I write some ad and direct-mail copy — another billion dollars will be spent, most of it aimed at convincing voters that we are in crisis here, there and everywhere. One side cries “crisis and change.” The other side threatens “crisis requires steady, experienced hand.” Either way, everybody’s selling crisis. There’s also a profound media bias — even what I call “media mental illness” — a very unbalanced emphasis, excessively reporting bad news, nearly ignoring good news. On CNN, which I call the “Communist News Network”, you get good economic news only in the little type crawl across the bottom of the screen. You actually have to go to Fox Financial News or CNBC or the Wall Street Journal to get a fully balanced presentation and, of course, most people don’t. So the gloom ’n doom sales machine is cranked up on high. To quote one of the success authorities I studied very early, Earl Nightingale, “we become what we think about most.” So if you DON’T actually MANAGE your thinking about this….if you let yourself accept the mainstream media’s and politicians’ selling of crisis, if you think about it, regurgitate it in conversation with others, hang out with others regurgitating it to you….you’ll undoubtedly find yourself upside down in it, shit up to your ankles! It’s up to you to seek out better, more complete information. And, incidentally, to turn around and provide that information to your customers. You’d better be what I call a “good news merchant” yourself, influencing your customers’ thinking about this — yours may very well be the only such voice they hear. And being that lone voice of reason and encouragement can be very magnetic. I’m sure that you, Chris, have been telling your Clients this and in your newsletter and on your blog and in other ways, doing this for them. There’s a thing called the Consumer Confidence Index, a measurement of consumers’ attitudes that at least somewhat predicts their near future spending. Every business owner needs to be actively working at positively influencing his consumers’ confidence.

But beyond that, here’s how true entrepreneurs think about this: it is a set of circumstances, of changes in the marketplace, to have foreseen and prepared for, now to respond to, in which there is enormous opportunity – and REDUCED competition pursuing that opportunity diminished by fear, indecision, emotional paralysis, resentment toward the need to adapt, and in many cases, lack of agility. This is a good time to be grabbing market share, acquiring new customers, and marketing aggressively. There is always a “set of circumstances” and there are always winners and losers. A lot of business owners do well only in a generous economy. But a lot of other business owners get their traction, outpace their competition, and create their greatest wealth during economic times widely regarded by others as “poor.” To complain about there being circumstances or changing circumstances is to complain about there being weather.

As an investor, I don’t worry a lot over a company’s dip in stock price at a time like this, because that reflects the mass public’s foolish acceptance of recession as a universal reality, as a completely dark time. I look for companies where insiders are buying up more stock at bargain prices and the company is expanding, growing, launching new initiatives. In a recession, everything goes on sale. Stock in very good companies. Real estate in very good areas. “Eyeballs” for advertisers and marketers — less people sending out direct-mail means less clutter in my customers’ mailboxes means more space and better opportunity to gain their attention and interest for me. Less pages of advertising in the magazines or newspapers my customers read, lower rate negotiated and more attention for me. When others cower, you want to be bold, aggressive, opportunistic.

ME: Okay, let’s talk about being opportunistic. What are the big opportunities you are emphasizing for business owners right now?

DAN: There are two big topics I’m spending a lot of time talking about with my clients, coaching members, and readers right now, reflected in my two brand new books: NO B.S. GUIDE TO RUTHLESS MANAGEMENT OF PEOPLE AND PROFITS and NO B.S. GUIDE TO MARKETING TO THE AFFLUENT — as they say, available now at a bookstore near you or, and so on. One topic is using this sea-change from generous, indulgent economy to grumpy, demanding one as motivation and mandate to re-assess your business inside out, and get smarter and tougher and more diligent about managing for maximum profit. And it is my contention that most businesses — including those in your industry could suffer a 25% drop in gross sales or revenues but simultaneously enjoy a 25% improvement in net profits, employing the from a-to-z ruthless management strategies in my book. Also, most businesses could suffer a 25% drop in response to advertising and marketing, a 25% “drying up” if you will of prospective new customers coming their way but simultaneously create a 25% increase in conversions, in converting new prospects to customers. In fact, one of the chapters in my Management book is titled “How to Profit From The Age Of Mass Incompetence And Coming Monster Recession”. As you can see, this is a very timely new book. Second, is the grand and glorious, newly developing opportunity to re-direct a business to attracting, serving and securing more affluent customers (clients/patients) — the subject of my new MARKETING TO THE AFFLUENT book. So, the hot words are: re-assess, re-tool and re-direct.

ME: Sounds like a lot of unpleasant work — who wants to do all that re-assessing and re-tooling and re-directing?

DAN: Hardly anybody!!! – which is why there’s such abundant, exciting opportunity for the few who do. You know, I started in business myself during a real recession — that makes where we are now look like a light summer breeze in comparison to Katrina. Thanks to Jimmy Carter, we had the reality of double-digit base interest rates, unemployment rates and inflation….all more than double the current numbers, high gas prices and gas rationing, a credit crunch…and a widespread emotional malaise as well. It wasn’t pretty. For most. But I prospered. And I got to work with quite a few agile entrepreneurs who did. I have absolute understanding that the best time to speed up and gain position is when others are riding the brakes. But you’re 1000% right: most people long for the ability to get their business arranged a certain way and then never have to tinker with it again. But success in business doesn’t work that way. I’d love for that to happen with my houses too. One of our homes is just 6 or 7 years old. Re-paint the deck; next replace the deck. Carla wants to put a new floor in the kitchen. Paint this. Change that. Why, oh why, oh why, can’t it all just be left alone?
Well, even if you want to, you can’t. Style changes, tastes change, furnishings wear out, water tanks wear out, garage doors wear out.

Look, in business, the surest path to mediocrity, to disappointments in income and wealth short-term and long-term, to losing disinterested customers (client/patients) to others’ seductions is denial, is resentment or procrastination over the need for constant change. That’s why being a part of groups like yours, being coached, being in your MasterMind Groups, coming to brain-exchange events like your GKIC Local Chapter Meetings is so critically important at all times but terribly important in particularly challenging times. You have to see the need for change as exciting opportunity, not as burden. You have to be mentally agile. With full disclosure, some of the companies I invest in now: Disney, Landry’s Restaurants,, 1-800-Flowers begin_of_the_skype_highlighting              1-800-Flowers      end_of_the_skype_highlighting…all of which have been good to me and I expect them to be even better in the future….have creative, agile, innovative, opportunistic leadership and corporate culture. Nothing stays the same. If you are striving for same you’ll be slaughtered.
Especially now, but really at any time.

ME: Then let’s move on to: change. And let’s start with the second topic you raised, marketing to the affluent. Why should owners of small and mid-size businesses be eager to learn about and do this?

DAN: Without delving into the kind of statistical and in-depth detail that I’ve assembled and presented in the book, let me paint a broad strokes answer. Domestically, here in the U.S., all the real spending growth is toward the top. The middle class is shrinking, with 1/3rd moving down but 2/3rds moving up. That 2/3rds is literally a new class of “middle-class millionaires.” These mass-affluents’ buying behavior has also served to motivate more status spending by the affluent. Across the three groups — mass-affluent, affluent, ultra-affluent — there has never been more discretionary income and more spending on a broader and more diverse range of premium-priced goods and services, including newly-invented categories. Further, there is convergence and overlap with the biggest part of the boomer population hitting their peak discretionary and non-necessity spending years, spurred on by very different attitudes about both retirement and spending than the previous generation. Anyone who has the sense that money is tight, consumer spending restricted, prosperity not rampant is simply deluded; paying attention to the wrong information. Essentially, there’s a gigantic growth industry, an unprecedented boom underway, getting rich by selling to the rich, near-rich, soon-to-be-rich. Many business owners’ knee-jerk reaction to this is either to deny it because it is not their personal experience or to feel it is not what their business is about or that these exceptionally valuable customers are somehow beyond their reach. Well, ignorance is forgivable and fixable, but as comedian Ron White says: you can’t fix stupid. My NO B.S. MARKETING TO THE AFFLUENT book gets all that b.s. out of the way, so you can focus on opportunities instead of excuses. If that sounds harsh, it’s supposed to. Earlier I said that THE question is always: where’s the profit in that? There’s never profit in making the lists of why we can’t do something, why we can’t capitalize on emerging opportunities. Making such lists is low-grade, low-pay work. Any idiot can do it. If you want high pay — especially at times when a lot of business owners are taking pay cuts — you have to do more high pay work. And certainly, finding ways to follow the money, to appeal to and attract more affluent, willing-to-spend customers – is such work. Making excuses, sucking your thumb is not.

So, the basic facts: 22% of the U.S. households own 55% of the earned income. The spending power is concentrated with 1 out of 5. Chris, your small business clients have three basic choices: one, promote himself to anybody and everybody, taking whatever he gets….statistically insuring he’ll get more of the 4 out of 5’s than the 1 out of 5’s and risking getting none of the 1 out of 5’s. Dumb. Two, he can — out of ignorance, denial, fear, low self-esteem, sloth — actually focus on the 4 out of 5’s. Dumber. Incidentally, the overwhelming majority of the competition is at the bottom, broad base, not toward the top of the economic power pyramid. Wal-Mart does just fine there, and recently has had a renewal of growth, of same store year to year growth, and is undoubtedly helped by recession, so I bought Wal-Mart stock in the $40’s. And again in the low $50’s. And if I can, if it drops there anytime soon, I’ll buy more. But do you really want to be butting heads with Wal-Mart and every other large and small competitor vying for customers for whom price is a major factor in buying decisions? Only if you can offer and deliver THE lowest prices while making satisfactory profits. Otherwise, there’s no benefit in offering the almost-lowest prices. Or three, re-tooling any and every aspect of your business you must, in order to target market to, appeal to, attract, not just satisfy but thrill, and grow with more affluent customers….for whom price is a non-factor…and who are least and last affected by recession. My two new books, combined, in concert, can help you successfully act on the third option.

Under normal conditions, only 10% of consumers always buy by price, their decisions governed by price — because they have no option. This group is largely made up of “working poor”, low wage working people with more mouths to feed than they can afford food for. Nothing wrong with them as people. A lot to admire — except the choices they make that keep them poor. But no good reason to have them or, worse, seek them out as customers. Yet, strangely, most business owners focus 90% of their energy on price even while only 10% of the customers decide based on price. In recession, this percentage may jump as much as 3X, to 30%. However, there are 20% who make most buying decisions with little weight given to price or cheapest price and 5% who never consider price. In the middle, people who consider price in context and only buy by price in absence of other persuasive information. That top 5% is admittedly considerably more difficult to get to and satisfy, but infinitely and disproportionately more valuable. The 20% is a little more difficult to get but also considerably more valuable. So, picking up rocks from your driveway is easy and cheap to do but rocks have value only in giant bulk. Mining diamonds actually uses the same skills as picking up rocks applied differently, with admittedly the difficulties of traveling beyond your driveway, investing in mining equipment, etc., but each little diamond you find is worth more than ten tons of rocks. What’s important to face up to is that you choose the business you’re in. Rocks. Diamonds. Up to you. If you feel you’re working too hard to make a living, have no leverage, aren’t gaining and may even, now, be losing ground, I’ll safely wager you’re in the rocks business. Ultimately, all suffering and all prosperity, self-inflicted.


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