← Build with Leila Hormozi
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During the last recession of 2008, 1.8 million small businesses went out of business for good. So today, what I want to share with you is how to prepare for the recession that's coming or many may say is already here. Whatever. I'm not an expert. Regardless, I don't say this to scare you. I say this to inform you. Because if you're informed of the situation, then you can properly prepare for it and you're much more likely to succeed given the circumstances that are to come, than if you're not to think about it, you're to avoid it. You're to think, I'm going to think about that later. So for full transparency, I have not been through a recession myself. I'm not really old enough that the last one didn't really affect me. I think I was in high school. And so it wasn't really relevant. But what I have gone through is I've gone through recessionary like environment, which was Covid. And so I'm going to share that story here in a couple of minutes to give you a little bit of insight as to how a recession affects businesses, here's a couple of the ways that it does. One is that unemployment goes up. What does that mean? That means that a lot of people lose jobs. What you see right now is that a lot of employees have the upper hand in terms of what they're asking to be paid paid. And the fact that there's less of them to source from what it changes to is typically there are fewer of them in demand. There's less jobs available, and you can pay less for the talent. The second thing that happens is that purchasing power goes down. You can already see that in a few articles that have come out. About 75% of Americans are saying that they're reducing their spending in preparation for a recession. And so what that means is that most people, they stop spending money on things that aren't necessary. Someone installing a pool, for example, probably not going to do that during a recession. It's not necessary and it's a large capital expenditure. The third thing that happens that typically manufacturing declines. The reason for that is because there's less people working, because businesses are cutting down. And so their ability to produce goods actually tends to go down. And ironically, sometimes then the prices also go up because they have less manufacturing, they have less people, so they're charging more to recoup their costs. So though I've never been through a recession, I can tell you about the time that I went through Covid. A lot of People ask Layla, how was Covid when you owned a gym launch? And I was like, it was fantastic. We had brick and mortar gyms. It was great. No, it was absolutely freaking horrible. It was horrific. It was a bloodbath. Gym launch, brick and mortar gyms. That's who our clientele is. Prestige Labs services the clients of those brick and mortar gyms, so they sell those supplements through their physical locations. And then Allen, the software was built to help people get people to show up to in person appointments. So when Covid hit, it not only affected one business, it affected all three of our business drastically. Alex and I, I remember we're on a walk and it was about two days into Covid when we had heard Covid had hit and people were saying, there's a shutdown for like two weeks. And we were like, what do you think's gonn happen? We're like two weeks? Yeah. Probably be longer than two weeks. And so we were looking at the effect on our businesses and we knew that we couldn't sit around idle and just wait for things to turn around. And so we knew that we had to take action. We looked at each business and we made a plan as to what we were going to do if X, Y and Z happened. If our revenue drops below X, we do Y. If we're in the red, we do Y. And so we made basically a decision making framework for each of the businesses that was tied to our financials. Now, the second thing is that our team was terrified. Now, I don't think Alex and I were terrified because I look at it as an opportunity to get better. I'm lucky to have mentors who they always told me they were like, Layla, recessions are really good for the winners and they're really bad for the losers. And what they meant by that was winners are always going to take advantage of an opportunity like the recession. It's a chance for you to get better. It's a chance for you to also see where are your deficits, where can you improve and where can you get better? Because maybe you're not as strong as you thought in a certain area. That's okay though. You wouldn't know if you weren't tested. And so I look at this and I really think of our core tenant competitive greatness. And I think back to why we created that core tenant. And a huge reason was going through, you know, two and a half years of COVID in a gym business and in brick and mortar services. It was rough. But what I saw is that that period of Time made our company stronger than any good times could have made it. And that is why winners utilize times like the recession. So if you feel scared and you feel afraid, that's totally fine. But you also have to understand, like, there's such a huge opportunity here. This is an opportunity for you to strengthen yourself, to strengthen your team, and to strengthen your business. Camaraderie on a team isn't formed when you're winning. Camaraderie on a team is formed when you guys all have your back against the wall and you have to work together to drive out of that situation. That's really how we viewed Covid and how we went into it with that mentality. Now, what I knew is that my team doesn't necessarily see it like that. They don't know what's going on. And all they want is they want a leader to show up and lead the way for them. And so what we made sure to do during that time was show up for our team, have more communication than ever. So that meant I was sending weekly updates to our team via email Sunday night every week, every three to four weeks, hosting a full team meeting to talk about what was going on. And the biggest mindset shift that I gave to my team is I said, listen, guys, we've been in peace time since this company was born. We are now switching to wartime. Here's the things that are gonna change. One, we all work nights and weekends now. Why? This is a phrase that I got from Josh Graves, who was my boss when I worked at a gym seven, eight years ago. We all feed the business, and the business feeds us. And that's what I told my team. I said, we all feed this business. Me and Alex don't just feed this business. We all feed this business together. If we want to make this work in one of the worst and hardest hit industries, we need to work nights and weekends. We're not doing any of these virtual happy hours. We're getting rid of all this, like, birthday holiday celebrations. I know that sounds bad, but I'm saying for a short period of time, this is what we need to do. Because we need all of our energy focused on how do we prevent our clients from going out of business and ultimately present ourselves from going out of business. And so that's what we did. And I explained the mindset shift from peacetime to wartime. And I put it out on slides and I said, this is exactly the activities we're going to change. And the thing was that a lot of people don't want to ask that of their teams, our team, 1000% got behind it. Every single person stepped up to rose to the occasion because they all understood. They're like, we all feed this business. If one of us slacks off, we don't have room for that right now. That person shouldn't be on the bus if they're slacking off. Because the reality is, is it doesn't take a leader to get a business through a recessionary period. It takes an entire team to get through that recess periods. So not just the leaders have to change their mindset, but the whole team has to shift their mindset. So on the other end of this, there was our clients, right? So at that point in time, we had about a thousand high end clientele in our gym Launch program and 2,000 people selling our supplements on prestige labs. These are all brick and mortar gym owners. Alex and I jumped back in. We started hosting calls with our clients because what we felt like is they really needed to hear our voice during that time. And I think that a lot of people think, Layla, there's so much going on. I'm trying to save my business. I don't have time to take more calls with my clients and take more time with my team. You have to make time. Communication and messaging when times are hard is the number one job of a leader. And a lot of people look past that and they say, I'm too busy. I've got to go figure out how to drive more revenue, figure out how to do all these things. The reality is you kind of have to go psycho bunny mode and work overtime and do both. Here's the four things that I would do tactically if I were preparing for a recession. One is I would make my plan. Now. What a lot of people do is they wait to make a plan of how they're going to adjust their business until when the bad thing comes, all of a sudden your business isn't making money and you're like, shit, what do I do in that state? You're so emotional that you're not typically making good decisions. My CFO gave me this advice. She said, when you're thinking about preserving a business, you want to think about fat, muscle, bone. When your business drops to a certain amount of revenue, what revenue triggers that you would need to cut some of the fat? Maybe it's cutting fat like it's cutting positions because they're really just not needed because you don't have enough demand. The second level, once you get to this level where maybe you're breaking even, what are going to cut out of the muscle. What activities and maybe key roles are not going to make sense to have when you're at that muscle level? It's not something you necessarily want to do, but it's going to make sure that you can preserve the business so it can be around to preserve the rest of the bones. And then the last level below that, which this is typically when a business might be in the red or on the verge of losing money, the bone. What are the fundamental things that though they seem like they are necessary for the business, if I try to sustain them, I might put the rest of the business under. Listen, guys, I know that's not fun to think about, but you want to think about it now. So you make sound decisions rather than think thinking about it when you're in an emotional state. And then you probably make the wrong decision. The second thing is making the message about what is wartime and what is peace time. Now, if you want to reference this, Ben Horowitz has a great book called the Hard Thing about Hard Things where he talks about what a peacetime versus a wartime leader is. I would go in that book and I would read that section literally just so you could capture this. And then you can understand what you as a leader need to do in terms of shifting your behavior as well as what your team needs to do in terms of shifting your behavior. And I would make sure I was very transparent with my team about making those changes. I would do an entire presentation to them explaining what, what the shift is going to look like and what we're all going to do differently. Now the third thing I would do is I would actually adjust my marketing. A friend of mine, Dean Graziosi, he actually made most of his career during the recession because he was the only one that continued to market during that time. And what he did was he shifted his marketing message from building this insane empire and achieving your dreams to preserving, making sure that you can at least have something for your family. Switching from goal oriented marketing to preservation based marketing. Because when people are in a state of fear, they're not thinking about these crazy, walking, wild, audacious goals, right? They don't have the capacity. Instead they're thinking about, dude, I just need to make sure I make rent next month. So you need to speak to the audience and what they're feeling and that's how you would want to shift your marketing. And then the last thing is I would understand that the best founders act despite how they feel and they will win despite circumstance. There is always a way for you to win, despite what's happening around you. And what you have to understand is you can't blame the recession, you can't blame the economy. Instead, you need to look at it as your strategic advantage. How will I win when everybody else is losing? Anybody who owns a business in time is going to go through a recession. And so the number one thing that I want you to remember, and this should give you peace, this shouldn't make you feel bad, is that you're not special. You're not special. Everyone goes through these times. What's really isolating is we think I'm special. My situation is worse than everybody else's. That's just not true. And this is just an opportunity for you to get better, your team to get better, and yourself to get better.