Among the list of things that a business should always ready itself for the possibility of happening, preparing for a recession is an item that’s often taken for granted. The thing is, this would be a huge mistake because the reality is that recessions are big opportunities for your business to actually thrive, as long as you’ve put in the right amount of preparation. Jonathan Slain is a sought-after consultant with experience in investment banking and entrepreneurship. He joins Jen Du Plessis to talk about what preparing for a recession entails, and how you can make said recession work in your favor. Don’t wait until the last minute because by then, it’ll already be far too late.
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Getting Yourself Recession-Proof With Jonathan Slain
I am having the opportunity to speak with a colleague and a friend of mine, Jonathan Slain who is the author of the book, Rock the Recession. He’s going to share with us the Five by Five by Five strategy that all of us need to be doing while we’re at home to ensure that we rock the recession.
Thank you so much for taking the time out to join us and be with us. I’m excited about this particular topic because it is a hot topic in the market, specifically. I think that you’re going to love learning about the pending recession. Let me take this opportunity to introduce our guest speaker here. Jonathan Slain, who is the Founder of Recession.com. He provides entrepreneurs with a free tool to assess the recession readiness of their company. He spent the Great Recession huddled in a fetal position on the floor. Having survived it, he wasn’t scared in the next recession to hit and he’s invested over $1 million to purchase his business. In the last many years, he has sold over $70 million in his services. He’s achieved the American dream exit by using the Recession Gearbox model. He’s also the coauthor of the book Rock the Recession. Welcome to the show. I’m so happy to have you.
Thanks for having me on, Jen. Let’s rock.
I know we talked about the recession. We were talking a little bit about this, most of the time, people think the recession is a bad word. It can be if you’re not prepared. Tell us about your take on the word recession and the perception that people have about it.
With recessions, what we were looking to do with the book is to have something original that contributes to the conversation. The book on recessions is typically you need to turtle up, you need to survive, you need to cut expenses and fire people and try to make it through the recession. The take that we have is that recessions are big opportunities. If you’re prepared, then you can look forward to the next recession. They typically come around once every 7 to 10 years in the US. We haven’t had one in over a decade so the idea is, how can we all look forward to it?
I think that’s super important. I want to start with the definition of what is a recession from a statistical standpoint?
The technical definition is when the country has two successive quarters of our GDP dropping, our Gross Domestic Product. In the US, we report our gross domestic product a quarter in arrears, which is a fancy way of saying, “We’ll know how we did in the last quarter, the next quarter.” We’re still growing. We’re putting this together at the beginning of 2020, but we haven’t had a drop in GDP yet, although a lot of economic indicators are starting to point us towards that. It’s the perfect time for the audience to start getting ready so that they can pounce on the next recession instead of trying to survive it.
I love that you say the true definition of it. What’s sad about it is that we don’t know that we’re in a recession until we’re through it a lot of times. Sometimes it’s a quick recession. There are small recessions. What is your feeling about what’s happening in the stock market and what kind of impact is the stock market going to have if you have any knowledge around that piece of it? What do you think is going to happen there? Do you have any sense of what the feds are saying about that?
There are a lot of parts to that, Jen. A couple of pieces are that first, the stock market is one in a basket of many indicators that I want to determine. How do we feel about a recession? I think that things like unemployment are bigger drivers and consumer confidence but I know that a lot of the audience are investors and that the stock market when it moves, it wreaks havoc. One thing I’ll say though is that the Federal Reserve, the bank that controls monetary policy in our country, doesn’t have as many arrows in its quiver as it has going into past recessions. Interest rates are low that there’s not a lot of room for the fed to lower interest rates, which would typically help us to recover out of a recession. We’re already going into the next downturn without the fed having that lever to pull and the other big lever that the fed has is something fancy called quantitative easing.
The feds already moved its balance sheet in such a way that there’s not a whole lot more than the fed can do going into our next downturn. I do think once we hit a recession, it’s going to be a lot harder for our country to recover than what we’ve experienced in past recessions. That’s the other piece, but for the audience, part of it for me is that we’re talking about economic recessions. Most of us, for business owners and entrepreneurs, if we’re lenders, wherever we are in the space. There are also non-economic recessions. If you lose some of your biggest clients, you’re going to be in a recession agnostic of what’s going on in the economy. If you have a brokerage business and 3 or 4 of your best brokers go across the street and start a competing business, you’re in a recession. If you find out that somebody embezzled money from your company, that’ll put you into a recession. All of those scenarios that I outlined, it’s the same advice. We would walk through the same Recession Gearbox for you to take advantage of those circumstances to recover from them more quickly.Recessions are big opportunities, and if you're prepared, can be something to look forward to. Click To Tweet
The first question I want to ask you is what’s the best place for people to start planning for a recession? All of us are going to have different triggers. Let’s talk about the negative parts of the recession. I know that for lenders, specifically, rates are going to drop and values are going to increase for realtors. All that is wonderful, but in a recession, there are also loss of jobs. While the rates are great and we expect and say, “Where are all the buyers? The rates are great and things are good.” They may not be buying because they lost their job or they’ve been downsized. What are some things that we can be doing specifically in that market to start preparing as part of your Gearbox?
The first step is always to assess your situation. That’s the first gear. We’ve got a twenty-question quiz on Recession.com and that is my website. On the quiz, the twenty questions takes 5 to 10 minutes and it’s free. You get a score from 0 to 100. If you’re scoring a zero, you’re going to have a rough ride in the next recession and probably looking at bankruptcy. If your score is 100, then you’re looking forward to the next recession. You can’t wait for it. Where I would start is see where you are and then you’ll get some feedback on those twenty individual questions. You can start to tune up your business and your personal life to prepare for the next recession. That’s our second gear.
Could you share with us maybe a couple of those questions? What are some of the things that you’re going to be asking? How close are we to our partners? Do we have cash saved? What are some of the questions that determine whether or not we’re going to be ready?
One of them is do you have cash? The way that we phrase it is, “Do you have cash available, whether it’s cash in the bank or whether it’s credit available to you or debt so that you can pounce in a recession?” I think a lot of the audience knows that lenders are still willing to lend and banks need our business. The credit is available, whether it’s a signature line loan, a home equity line of credit or a business loan. We know that when we’re in a downturn when you see on Fox News, CNN and CNBC that we’re in a recession, that’s exactly when the banks start to tighten up and don’t want to lend. It is the perfect time since the economy is booming to make sure that you have that credit and debt available to you, and that you’re saving something extra so that you’ve got a war chest to be able to be a buyer in the next recession or if things aren’t going well for you to be able to cover your operating costs or expenses.
Those are great questions. I can’t wait to take this assessment. I’m excited. The first thing is to know where you are so that you know where you can go. If we are talking about gears, we’re talking about driving a car. We’re shifting gears. Now, I know where I want to go, what’s step two?
Step two is you’re tuning yourself up. You’re assessing all the different areas where you’re deficient. One of my favorite questions here relates to personal guarantees. If you have personal guarantees or if your buyers have personal guarantees on business or when it comes to property looking at how those deals are structured, now is a great time to try to get those personal guarantees capped, limited, or extinguished because banks are hungry to do deals. Maybe you can’t get a personal guarantee eliminated from your deal but maybe it’s possible to have it be limited in scope so that if a deal goes sideways if a property is going underwater, you don’t lose everything that you have. I don’t think a lot of people are thinking about that because it’s been so long since we’ve had a downturn that we’re getting complacent.
I think we’re spoiled in all kinds of different ways. I know where I sit and I’m going to get my ducks in a row and the execution of that. Also, applying for more credit, assessing all these pieces, saving more money. All the things that you’re going to suggest to us, these twenty different things. What is the next step that we do?
The third gear is that we’re going to race. Here’s where we’re going to spend the time, making sure that we streamline all of our processes, making sure that we get the business prepared for growth and scale. It’s a great time to start figuring out things like productivity. Is there a way that we can be more productive? What are the metrics that we’re going to measure ourselves by? All of the things that are very difficult to do in a downturn, because when things are crashing around you when they’re cratering, it’s not the best time to try to take a step back. Also, look at the big picture and how you can improve productivity? How you could improve the culture of your business or your client relationships? You want to do that in the call rational light of day instead of in the emotional heat of the night.
I think that’s important too because if you are an entrepreneur where you’re having to do some downsizing, it’s better to have those people creating the systems that they work within and have them available and done. Hopefully, businesses already have them. It’s an opportunity for you to be able to make sure that you’re right at the forefront of any modifications that were made to those systems, to ensure that you know exactly how the systems work. If you do have to let someone go, you know where to pluck from the other areas to bring people in to have the cog not stopping. The wheel is not spinning with fewer people. Now, we’re off to the races and we’ve set up our systems. What are we going to do to ensure that business comes through?
The fourth gear is we’re going to accelerate. This is where we’re in a recession and you can stomp on the gas. You’ve done all these things to prepare. You’re in a great position. You’ve got a war chest. You’ve made sure that your business is optimized. The three big ones accelerate and what I get excited about is our ability to acquire assets. To acquire great people, or maybe even to acquire somebody else’s business that wasn’t wise enough to listen to us that needs to sell their business or get out. Those three opportunities just aren’t available in the same way when we’re not in a recession. For example, with assets, a lot of us know that in a recession, foreclosures go up. Banks own more properties and need to somehow get out of them because banks don’t want to be in the foreclosure business. They don’t want to hold that real estate on their balance sheets. There are awesome opportunities to be able to get great deals. I was thinking about preparing specifically for your audience. It’s taking the time to set up relationships with bankers so that when the recession hits and we’re in a downturn, they know to call you because you’re interested in buying distressed assets and have cash available to be able to close deals quickly.
That was huge in the credit crunch. When we had our Great Recession, a huge aspect is having those personal relationships with banks. I know that a lot of people say, “How do you have a personal relationship with a bank?” You can with the asset department and the recovery department to have those relationships because that’s where you get the best deals if you’re accumulating property. For realtors that are reading, this is great for you to have those relationships to help your clients find more properties, the clients who are out there seeking these types of deals and it increases your valuable position.
Jen, the tactical point here is that you need to do this before we’re actually in a downturn. When we’re in a downturn, the volume of calls are going to the recovery officers. They’re going to smell the desperation through the phone and they’re not going to return the calls. When they do have a piece of a distressed asset that they want to get rid of, they’ve got a shortlist. If you’re that person that has been contacting them once a month to stay in touch, maybe having coffee once a quarter to know them, then you’re going to be on the shortlist to get those phone calls and be able to pass them to your clients or to be able to take advantage of them yourself. If we are in a recession already, it’s too late.
We’re not talking about a recession where we find out the last two quarters of GDP, we were down and we’re going back up again. We’re talking about an extended one, and this recession is going to be quite extended, in my opinion. I was talking to my son who does options trading. He’s got his pulse on what’s going on. It was ironic, not because I knew we were going to be talking about this, but because this is something that has been on. I got back from Orlando speaking with Barry Habib, which everybody knows, he predicts that the stock market is going to drop 36% in value. He said, “For God’s sake, people, look at your 401(k)s. Look at where you have your assets.” Remember the day when we had the Great Recession. Before that, it was dot.com bill and we all had this growing 401(k) and we couldn’t wait to open up that statement.
When the Great Recession came, we throw it away because we didn’t want to see it. We want to make sure that we’re in a position where we do want to watch it and we do want to manage it. We don’t want to be in a position where we lose so much value. My son is very smart. He’s one of the top people in options trading in that industry and very well known. He said, “Mom, I think we’re going to have a 52% drop in the stock market.” It’s half of your savings. It could potentially be gone if you don’t have them in the right places before this recession. Once the recession comes, it’s too late to try to sell out of those positions. It is time to be looking at those assets. I appreciate that you brought up that particular thing. How long do you think this recession is going to last?
I do think it will be a longer recession. Typically, 7 to 9 months are on average, how long past recessions since World War II have lasted. I also think that going into the election, that’s probably going to lead us to a downturn. Generally, what happens is that if consumers lose confidence or if businesses are unsure about the future, they’ll start to pull back. When consumers and businesses stop spending, that in itself puts us into a recession. I think that because of the uncertainty surrounding the historic election that we’re going to have, regardless of what your political views are, we’re probably going to see a downturn. It’s going to take a longer time to recover because the feds don’t have any, as many bolts in their gun, as they have to go into past recessions.
It’s going to be even harder to recover. Many potential black swan events could also tip us into a recession. We’re worried about China and we’re potentially at war with Iran. Who knows what will spark the next geopolitical issue. What I know is that I want to be prepared for it. I want to be in a position to be able to take advantage of it, leverage it and to have massive opportunities because these things don’t happen that often. That’s why I get pumped about it. It’s a once every ten-year phenomenon.
I know you’re saying winter as in a recession, but we are in winter and that’s part of it too. For those of us who live in areas where we have winter, we have these little mini recessions all the time because the landscapers don’t landscape. They are experiencing these recessions on a regular basis.
That’s a great point that I want to talk about for the realtors reading. The whole country doesn’t experience a recession when we have a recession. What I mean by that is there are still great markets in a recession. It’s possible that you’re planning for the next recession to look forward to it, could be that you have to relocate. Maybe you move to an area that’s still booming. I don’t know when the last time is that you landed in Phoenix, but every time I fly a Phoenix, I count the tower cranes. Their buildings are crazy there. It may be that if you’re in a market that’s getting crushed in the next recession or going to get crushed, that you have to relocate or you have to do some business in another hot market. That’s entirely possible and could be a very good plan B. It’s a question of you need to start setting that up so that you already have some relationships. Once we’re in a downturn, it is hard to pick up and move to a new place and establish relationships. You’re going to be too late.
Another area in Vancouver. There are more of those things than there are buildings.You need to build relationships and brace yourself before the economy is actually in a downturn. Click To Tweet
The real estate is $1,000 a foot. It’s crazy.
Vancouver is one of those places too. We’re finishing up here and talking about this, I want to ask you, what haven’t we discussed that you want to discuss as it relates to recession?
The last piece is the emergency brake. If you’ve been reading along here, you’ve got the first gear, which is to assess where you’re at. The second gear is to tune yourself up. The third gear is to race and fourth gear is to hit the accelerator. If all that stuff is not working for you and you’re like, “I’m in a recession of my own. I don’t need to hit the gas. I need to help and to survive.” That’s where the emergency brake comes in. It’s typical if you’re a broker and you see your income dropped to 80% of what it usually is, what’s your plan? What expenses will you cut? How are you going to change your life so that you don’t go into massive debt? If you saw your income go to 70% to 60% to 50% as a household, how are you going to address that? I want you to have something written down on paper with your spouse or your partner so that if you get into that situation, you can pull it out. You can break the glass and then execute it. I don’t want you to be under your desk like I was wasting time in the last recession.
Thankfully, a lot of people are much wiser from having gone through that period. At least a handful of people are. The longer this takes to take place, the fewer people are going to be wise to what it felt like because we are so spoiled in so many areas. I love the analogy that you have with the car because I use that in a lot of things that I teach on about shifts in business and recognizing shifts. That’s what we’re doing is recognizing a potential shift that’s about ready to happen. We don’t want to blow the clutch. That’s what it is to keep jumping onto that little theme there. You have a couple of great gifts for our clients, the people that are reading. Tell us about what we can expect. We already know we can go and get the assessment and that’s exciting. I can’t wait to do that. All of you should be doing it as soon as you possibly can.
After they do the assessment, that’s twenty questions, for 5 to 10 minutes and it’s free, then they’ll have the opportunity to buy a customized report. That gives you insight into however you answered the twenty questions. There are a million different ways to do that, but however you answered it, we’ve got specific counsel on what you’ll want to do next in each of those twenty areas. From there, you may want to invest in the workbook that we have, Rock the Recession. We’re going to give the audience coupon and give him 25% off the cost of that workbook. If you’ve done the assessment, you’ve looked at your report and you want to take some action, you can get the workbook and use the coupon that Jen beat me up for. From there, we’ve got a few other items on the website that you can check out for making sure that you have a recession plan and you’re ready to rock the next recession.
It’s all about the outlook that you have in life. One of the things that we used to do a long time ago, if someone said, “How’s the business going?” “It isn’t going well,” instead of saying, “It’s awful.” We used to say, “It’s unbelievable,” because it can be unbelievably good or unbelievably bad. That’s what I love about this. We’re going to rock this recession. This recession is coming and it’s going to be great because rates are going to be low and values are going to go up. You have to remember that people are going to have a loss and there’s going to be lost all over the place. It means that there’s a smaller pool of people that will be coming to buy homes or maybe a bigger pool of people who are prepared or investors who’ve been waiting for this. Let’s make sure that we are rocking it. I love that you can do the assessment.
If you want to get the workbook and go a little deeper with it and have a clarity of understanding, I highly recommend that you get that. It’s less than a couple of hundred dollars. It’s inexpensive and it’s worth every bit of it to be able to save you in the long run. The other thing I want to say for everybody is to think about the clients that you have that own their businesses. We don’t always have clients that work for a company, but we have clients that own their businesses. What a great opportunity for you to pool them together and perhaps have Jonathan come on in a Zoom meeting or talk to him about coming and speaking at your company and putting this event on so that he can share all of this with them. What a great value you’re giving to your clients as well. Do this together with your realtor partners as well.
That’s the angle I take on this is, “How do I share this with other business owners?” If you’re a BNI, what a great way for you to share this. Buy his book and share it with them. Have a Mastermind and share it and talk through it together, help each other, and support each other. There are many ways and avenues that you can go to this other than taking care of yourself. Let’s take care of ourselves. Put our mask on first so that we can help others, which is why you want to get this workbook as well. Not just the assessment, but the workbook. As we leave, share with us something fun about you.
I am huge into Lionel Trains. I don’t know if that’s necessarily fun, but it is for me. If you all want one fun fact, you’ll often see me tinkering in the basement, making sure that we’re keeping the train on the tracks.
My husband’s father did that and my husband has all of the pieces, but they’re nowhere except in a box. His dad was into that as well. I think that’s cool.
I also know you have something interesting that you’ve swum with sharks. We’re not talking about sharks on TV on the Shark Tank.
I’m a big scuba diver. That was an awesome opportunity in The Bahamas. I loved it, but my wife did not.
Scuba dive is something I don’t like doing at all. I love snorkeling. I like being on the surface.
We thought it would be more maybe 1 or 2 sharks swimming off in the distance. We didn’t know that 30 to 40 were brushing up.
How big are they?
They were bigger than us.
Was your guide freaking out or is your guide going, “This is cool, don’t worry. We’ve been down this road before.”Many potential black swan events could tip us into a recession. You never know what the next big geopolitical issue could be. Click To Tweet
Our guide was chumming the waters feeding them so that they would come over close to us.
They were all hungry.
Luckily, they were only hungry for the fish.
I was going to ask you if do you have any bumps or anything.
We do not.
Thank you for sharing that. One last question, do you have a quote or a book that you’re reading that is making a difference in your life?
My book is Deep Work by Cal Newport. It talks through how in society, we’re all busy and I know that for your audience, a lot of us are knowledge workers and we’re busy doing shallow work. A lot of logistics, scheduling, showings, meetings or logistics with title companies and banks. When do we take the time to do deep work? When do we set aside some hours? It’s very hard to shift back and forth between shallow work and deep work. I found it fascinating. I’m already starting to implement some deep work planning into my life.
One of my coaches does that for us. We were talking about that. It happens to be an implementation day for me or a deep work day for me and my clients. From 9:00 to 5:00, we are on Zoom. We’re working on our business instead of in our business for the entire day. It’s part of my coaching program to ensure that everyone gets things done. I’ll be back live with everybody and we’re doing deep work together. I think that’s fantastic. I think it’s important. It’s funny because one of the girls is on the call and she said, “That sounds good. I’ll make a note to do that later.” I go, “No, that’s execution. We are implementing it. We’re doing this and we don’t put it on the list to do it later.” That’s why we have an implementation. She’s like, “I get it.”
Jen, I think that’s brilliant for them to have you as a coach. That’s one of the points in the Deep Work is that you need somebody to help hold you accountable so that somebody that’s going to force you to get away from your phone, to get away from your emails, and focus on you where you want to take your business. I highly recommend that everyone has a coach like you to help hold them accountable.
I love them. They’re long days for me, but it’s cool because we do get a lot of work done and we are getting work done and it’s great. I am excited about what’s coming up for us in the recession. I’m excited to release this episode so that others can make a change in their lives and ensure that this next recession doesn’t sound or look like the other one and everyone would be successful. I don’t want to use your phrase. Thank you so much for gracing us with your expertise. We sure appreciate it.
Thanks for having me on, Jen.
Take this opportunity and I know you’re reading on your iPhone. Scroll down to the bottom and make sure that you click on the link for the assessment. Once you’re there if you want to get more information, pick up that workbook. Make sure that you get that workbook to dig deeper, then spread it around with the rest of the world. Share this with everybody else and make sure you click on the links that we have here to get in touch with Jonathan. If you’d like to have him do a Zoom presentation at a BNI meeting or something that you’re putting on or in your own company that you want to have him come and work with you to ensure that you are recession-proof, please take care and do that. As I always say, stop talking, take action and get results and we will catch you next time.
- Rock the Recession
- Free tool – Recession Readiness Assessment
- Barry Habib – Previous episode
- Autobahn Consultants
- Deep Work
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About Jonathan Slain
Jonathan Slain spent the Great Recession huddled in the fetal position on the floor of his office. He borrowed $250,000 from his mother-in-law to survive. Jonathan paid his mother-in-law back and is now a highly sought-after consultant (and, yes, he’s still married!). Jonathan leverages his experience in investment banking and as an entrepreneur on the keynote speaking circuit because he doesn’t want anyone else to have to borrow money from their mother-in-law in the next recession.