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Edition 337 – Don’t Panic

If you turn on the news at the moment, all the headlines are bad. Last year it was all COVID related. This year, it’s about economics including:

  1. Rising interest rates.
  2. Inflation out of control.
  3. House prices to fall by 20%
  4. Budget cuts.
  5. Falling real wages.

Every economic and business expert under the sun is asked their opinion as to where it’s all heading. Who really knows? Journalists pontificate, but often only from the viewpoint of continuing the negative slant to any story and even then, the supposed experts they call into an interview are often with each other.

I have two very distinct views about what’s happening in the world right now. Firstly, what we’re experiencing is an opportunity and not a threat. Here’s why:

  1. If you’re looking to invest, people are panicking and looking to bail out of assets, so you might pick up something at a good price.
  2. If you’re prudent with your numbers, you’ll be able to manage a higher interest rate bill in your business, which means the bank will continue to look on you favourably.
  3. There are deals to be had on vehicles, plant and equipment – not right now, but in time, simply because the last 14 years of low interest rates have given most business owners a false sense of what “normal” interest rates will be. Some will baulk at borrowing at higher rates, only looking at the cost of the purchase and not the return it provides to the business.
  4. As debt heavy businesses start to falter, employees will jump ship early, before the liquidator steps in. These are potentially the people you’ve been looking for in your business.

Secondly, right now is a perfect chance to stop and take a look at how you’re managing risk in business. So, to that end:

  1. Keep on top of clients in industries that are impacted by interest rate rises. For instance, if you work in construction, ensure your customers are operating inside your payment terms and that you’re chasing retentions when they fall due.
  2. If you’ve never undertaken credit checks for new clients, now is the time to start. It’s a good habit and at the least, will save you a bunch of time when you figure out whether a potential new client is worth the financial risk. I once personally saved a client more than $1 million by spending a bit of time doing some background research on a potential client of theirs.
  3. Go out of your way to listen to what’s being said about your customers. Read the financial news. Ask your colleagues and contacts what they know is happening in the world.

The economy is growing at better than 3%. Unemployment, at under 4%, is at the lowest levels in 50 years. I’m seeing small and family businesses generating the highest profits in their histories (and some of them are 30 plus years in existence) Those higher profits are lifting business valuations, thus increasing the wealth of the families in those businesses.

If you take too much notice of all this pessimism, you’ll convince yourself that times are bad and belt tightening needs to happen.

If you turn away from the news, and take a moment to ponder your own place in the world, you may well find that times are good….and about to get better.

This Week’s Tip

” Stand out from the crowd – don’t follow the herd. “