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- [00:06]
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If it feels like everything in your business has gotten more expensive, well, you're right, it has. Right now, 77% of small and mid sized businesses are experiencing higher costs. Almost everyone's feeling it, even us. And yes, that's a problem. But what's the bigger problem? Well, most business owners are dealing with it the wrong way. They're not leading, they're reacting. They're making hasty decisions, emotional decisions, fear based decision. And when you let fear run your business, here's what happens. You take a problem like higher costs and you turn it into a full blown crisis. That's why here at Ramsey Solutions, we don't make decisions based on fear. In fact, fear not is one of the core values we plastered all over the place. Because wise leaders don't panic, they pivot. You don't want to be like most leaders. You want to be a wise one. Today, Entre Leadership's head coach, John Felkins is going to show you how to handle the problem of rising cost the right way. You'll learn three things you should stop doing and start doing to weather the storm and keep your business on track.
- [01:14]
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Thanks, Dave. Okay, let's start by facing some obvious but brutal facts. You're running a business in an economy where everything costs more. Your cost of goods, your utilities, your materials, your fuel, insurance, everything is more expensive than it used to be. I mean, how many people had war with Iran on their bingo card for this year? Meanwhile, your customers are getting squeezed too. So now you're running a business that costs more to run and customers who are scared to spend. And this isn't just a financial problem. It turns into an emotional problem. You've got a team of people counting on you. They have families, they have mouths to feed. Almost every business owner I talk with is asking themselves tough questions like what if I can't make payroll? Or what if I let my team down? What if I let my family down? People have even told me they're so overwhelmed that going out of business could actually feel like a relief. And I get that. But if you're like us, business is your calling. This is something from deep down inside of you. So don't give up. Don't quit. You owe it to yourself to push through this challenge. And if you can relate to any of that, I want you to hear this. You're not alone. You're not helpless. I know you didn't cause the costs to go up. This isn't a mistake that you made. But how you respond next could determine whether or not this storm Takes you out or you ride it out. So first, let's talk about what not to do. There are three big mistakes most business owners are at risk of making. And they all might feel like the right thing to do in the moment, but they actually do more harm than good. The first thing you shouldn't do is panic. I know. That's easier said than done. After all, you're literally watching invoices skyrocket and your profits are shrinking in real time. I'm not telling you to bury your head in the sand, but panicking will cause you to do one of two things. Either jump to the worst possible conclusion or start playing the blame game. Jumping to the worst possible conclusion will paralyze you as a leader and absolutely freak your team out. And if you start playing the blame game, it might make you feel better in the moment, but it doesn't solve the freaking problem. So blaming the economy or the government or tariffs of the Middle east won't help. You can shake your fist at the sky all day long, but that ain't gonna make the problem go away. And the longer you avoid facing it head on, the worse it's going to get. Like I said, your team is watching you. If you panic, they'll panic. Morale's gonna go one place. That's the toilet. Worst of all, they'll start to lose faith in you as a leader. It's very natural in a crisis either to fight, freeze, or take flight. And that's what leads to the next two mistakes. When costs go up, most business owners think there's one solution. They'll grab a hatchet and start cutting. And the first victim on the chopping block? Your team. And I get why your payroll is one of the biggest expenses you've got. And while layoffs might feel like the fastest, easiest way to make an impact on the bottom line, I'm telling you, don't immediately jump to layoffs. If you do this without a lot of thought and intentionality, you might cut the people you actually need to dig your way out of this thing. This reminds me of the old story of two guys sitting in front of the gas station watching a road crew come by. First guy, he'd just dig a hole, and then the second guy, he'd fill the hole back up. And after a while, they couldn't take it anymore. And they said, what are you guys doing? And they said, well, we're the tree planting crew. They said, you're just digging a hole and filling a hole. This doesn't make any sense. And they said, well, we used to be a three man crew, but because of budget cuts, we had to trim the tree planter. So when you start cutting people willy nilly, you don't solve the problem. You shoot yourself in the foot. The team members you have left could get overloaded and burned out, and your customers will feel it too. Projects get delayed, quality suffers, and frustrated customers are bad for business. During COVID our team made the decision that layoffs were an absolute last resort. It forced us to get creative with our problem solving, but we stuck with it. And out of a thousand people, we didn't have to let anyone go. But if you're thinking, well, something's got to get cut, then here's my next warning. Don't cut your prices blindly. You can't cut your way to growth. But that's what a lot of business owners are trying to do right now. They're slashing prices, hoping to attract more customers. But that's just a race to the bottom. Or worse, they're cutting corners on materials to get work done cheaper and faster. When you start sacrificing quality for savings, you're playing a risky game. It's kind of like you're playing chicken with a Mack truck. You might survive for a little bit, but you will destroy your brand in the end. Imagine you're in construction. You decide to use low grade lumber and cheap hardware to save on materials. At first glance, the job might look pretty good. But a year later, the wood's warped, the structure's unstable, and the customers are pissed at you. They don't remember tariffs, they just remember their house that looks like crap. And you know who they're going to tell? Everybody. And believe me, losing trust with customers will cost you way more in the long term than a few dollars that you save in the short term. Cutting your team and cutting quality, that's leading out of fear. When you start to lead out of fear, you end up causing way more damage to your reputation. There's nothing more important than protecting your reputation. So those are all the things that you should avoid. But let's start talking about the stuff you should do. The first thing that you need to do is look for fat to cut from your business, okay? Right now you might think falcons. You just told us not to be cutting. No, I didn't say that. I said don't panic and don't cut without any kind of plan. You need to slow down. Think intentionally about this. Look at your processes, look at your systems. Look at your tools and other expenses, even your personal ones. Take Healthcare, for example. For most entrepreneurs, healthcare is one of the most unpredictable line items in their personal budget. That's why I want you to check out Christian Healthcare Ministries. Listen, CHM is not health insurance. It's a health cost sharing ministry. Members share each other's medical expenses for a more predictable, affordable monthly cost. There's no networks and CHM programs start at just $115 a month. Those lower monthly costs can free up capital to build margin or weather a storm of higher costs like we're talking about. And as the Christian alternative to health insurance, CHM aligns with Christian business owners who want their health care dollars handled in a way that reflects their values. CHM even offers a groups program for small businesses that want to provide a healthcare sharing option to their teams. And right now, CHM is offering new members a 50% credit towards their first month of membership. So go to chministries.orgentre.com use promo code entree that's chministries.org entree and promo code entree okay, your healthcare is just one way to save money. But when it comes to your business, I guarantee it's carrying some extra weight around the middle and it's time for a little liposuction. Stop any spending that isn't totally necessary to get the work done. No more travel or hiring. No bougie coffee in the break room. If your company does any kind of profit sharing program, pause that and communicate why to your team. That's because you need to keep the lights on, keep taking care of your customers and keep people paid. Everything else can wait. Now if all this talk about finances and cutting costs is overwhelming, we made the Entree Leaders Guide to Business Finances. It's a free guide and it'll walk you through the key principles and practices and to help you make wise financial decisions. Everything from making a budget to the basics of accounting. With all the templates and checklists you need, we'll drop a link in the description below. Now, cutting the fat will only get you so far. That's why your next move needs to be finding creative ways to make more money. I'm not just talking about making more sales calls or booking more jobs and working your fingers to the bone every hour of the day. Even though some of that might be what you need to do. I'm talking about thinking outside the box. How could you serve your customers differently? What other problems could you solve for them? What other services could you provide them? If you run a landscaping crew, maybe that crew could plow snow or hang Christmas lights in the off season. If you do residential painting, why not throw in pressure washing? If you're in the home cleaning business, you could add home organizing. There are probably dozens of revenue generating ideas that you could add. Take some time to brainstorm and then whittle the list down to a handful of ideas that are feasible. With the team that you have, you'll offset some costs and you may even discover a new way to grow your business and stand out from the competition. Okay, you've trimmed the fat from your business, you've found some new ways to generate revenue. But none of that matters unless you become a long term thinker. This is tough for a lot of business owners and after all, there's a job that needs to be done today and paychecks that have to clear on Friday. But short term thinkers only react. They get clobbered anytime the wind changes in the economy, and short term fixes almost always lead to long term problems. But long term thinkers are calm under pressure. They pivot instead of panic. They play the long game and that's what makes their business thrive. So before you make any decisions, ask yourself what will happen if I do this? What are the consequences? If I cut prices, how will that affect the future revenue? If I lay off three people from my crew, who's picking up the slack? If I change suppliers to save money, are they really going to be reliable? When you force yourself to slow down and make better decisions, you're going to save yourself a lot of headaches. And when you lead this way, your business won't just survive the season of higher costs, it'll thrive while other businesses falter. Most importantly, you will prove to yourself that you are the confident, stable leader your business needs you to be. Okay, now I want to hear from you. What are some of the creative ways you're handling higher costs? Let us know in the comments.
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If you follow the things John just taught you, these higher costs will just be a bump in the road for your business, not a crisis that puts you in the ditch. But this isn't the last time something will come out of nowhere. Technology changes, disasters happen, the economy takes a hit. You can't control any of that, but you can control how you lead through it. So if you want to build a business that will withstand anything, watch this next video where we'll show you how to weatherproof your business so you're always prepared. If you enjoyed this episode, be sure to like, share and subscribe for more real world leadership content. I'm your host Dave Ramsey and this is entree leadership.