Most businesses are battling high costs, so we’re looking at the economy on today’s Small Business Show. We’re pleased to welcome back columnist, best-selling author, keynote speaker, and small business expert Gene Marks.
The economic state
According to Gene, “We live in a country with 350 million people.” To illustrate, the economies of Texas and California are as large as the UK and Canada. He adds, “What I hear from my clients is that their economic corners depend on their location and industry.” For instance, during COVID, establishments in the restaurant and service industries failed, while the company Gene is currently working for flourished thanks to its packing services. Therefore, when asking Gene the primary concerns, he emphasizes, “The answer varies upon the market.”
“It really depends on the industry.”
The pandemic disrupted the global economy as it was a once-in-a-century occurrence that we all went through. Gene argues, “You can’t recover from that in six months.” In contrast, Gene says that despite the slowdown, “We thought consumers would pull back, but they haven’t.” for everything to return to normal, a lot needs to occur.
Meanwhile, most successful business personnel advise not looking at the current economy as an indicator of starting a business. Gene clarifies, “Where I understand you can start a business at any time, I’m a certified public accountant, CPA, and a pessimistic guy, so I’m not saying it’s a horrible time to start a business. But, it does rely on the idea and model you select.” He adds, “I don’t want to discourage anyone from starting a business. Especially since the cost to open is historically low, but understand that in 2023, it will come with more challenges than the last few years.”
Over the last six months, small business bankruptcies have risen significantly. Gene mentions, “Even though most startups have begun during COVID and with incentives, the most important criterion you need to start a business is capital.” In 2023, the financial department has gotten stricter. Gene highlights, “Yes, money is available, but the prime rate is 8%.” Adding, “Even the technology companies are drying up.”
It’s essential to emphasize that having capital is not just saying your business is open but that your company has enough money for a year to six months to stay afloat and pay the bills. Gene uses Silicon Valley as an example, “Silicon Valley failed due to poor management.” Poor management is why numerous small businesses fail. Gene advises, “We are telling our clients that you have excess funds above the FDIC rule, then you should be diversifying that with other banks, buying other CDs, or even putting those funds into the treasury.
“Most don’t know treasuries are safe investments that will give you four to five back in returns,” declares Gene. However, these investments are not liquid, and “somehow Silicon Valley forgot that.” Therefore, you want to ensure you’re diversifying your funds in today’s environment.