Welcome to the recession.
For us’ns in the IT services industry, it sure doesn’t feel like a recession. Everybody’s busy. Projects continue to stream in. With hardware in short supply (and prices going up across the board), many are rushing to those upgrades now…and for the first quarter of this year, most of my members experienced a surge in revenue largely due to market demand.
But for me, it feels like we’re slowly riding UP in a roller-coaster car, steadily climbing higher and higher, knowing that this climb is going to crest at some point – we’ll hit the top of the crest and this easy, comfortable ride is going to turn into a scary-as-hell plummet on the other side. I truly hope I’m wrong, but my confidence is waning a bit…
Officially, we are in a recession by definition
Many are reluctant to admit it, stating that the strong labor market will prevent it from hitting too hard. Perhaps they’re right for the second half of this year. Perhaps it will just be mild in Q3 and Q4. Next year? I’m not so sure.
The Fed is continuing to raise rates in an effort to restrain out-of-control inflation, and I’m fairly confident they will continue to rise. If you look at the 40-year interest rate average, we’re still on the low side of rates. The government has pumped TRILLIONS of dollars into the economy, printing money, but the only people who got rich over the pandemic were the wealthiest individuals in our country (go search “2020 wealth transfer” and you’ll see what I mean).
The war between Russia and Ukraine, and the sanctions issued, are continuing to create problems, INCLUDING an uptick in cyber warfare and supply chain problems for many of you trying to get laptops, routers and other devices. Putin will retaliate – that you can bet on – and candidly, that is very concerning.
The housing market is also slowing, and lenders are being stingier with loans, making it tougher for people to get a mortgage. Venture capital money has been slowing down for months, and there’s a drag in both valuations and exits for late-stage deals, which is an early indication that there is trouble ahead.
But what’s scary as hell is that there’s a record-breaking $16 TRILLION CONSUMER DEBT BOMB waiting to go “BOOM!!” that is continuing to rise. According to Forbes, 75% of Fortune 500 CEOs said they are “bracing for a recession.” The banks are predicting it. VCs are tightening up their spend. All of this indicates hard times are coming.
I’m not saying everything will go to hell in a handbasket. What I am saying is that you need to anticipate and prepare for a very difficult time coming.
The question is, how bad will it be, and how hard will it impact the IT services industry, which remains strong?
All successful leaders know you cannot just look at where things are today. You must be able to forecast the future and look around corners. All great generals, coaches of winning sports teams, savvy investors and seasoned entrepreneurs can do this. We ALL anticipate and prepare. You don’t buy a life insurance policy because you’re going to die tomorrow. We don’t maintain a strong military because we’re going to war tomorrow, or wear a seat belt because we’re going to get into a head-on crash in that trip. It’s because these things MIGHT happen. We anticipate and prepare…and there are warning signs of a great crash coming that you would be foolish to ignore and not at least prepare for.
There are some people reading this who have not experienced a significant recession – they started their business after the Great Recession back in 2007 to 2010 – or a real collapse of the housing market…or a market crash. They have no idea how to operate a business in a real, lasting recession and are in for a very rude awaking, as I was back in 2007 when I first experienced it running my own business.
There is some good news…
As a business owner, you have far more control over your income than 90% of the people walking around. YOU can make choices that can strengthen profits and increase the financial strength of your organization. YOU can implement sales and marketing that will bring you more sales, better clients and more recurring revenue, starting today. YOU can wake up tomorrow and give yourself a raise – a raise that will become effective the minute YOU do (thank you, Zig). And if you know there are weaknesses in your business – lack of sales process and marketing systems, low profit margins, debt, an overburdened staff with no pipeline of candidates, too many “ones” – you need to get serious about fixing those things NOW. (3 Key Decisions To Beat The Recession And Get Customers Spending Now )
You can accuse me of fearmongering and hyping all this up if you like. A little clickbait-ish. But smoke and mirrors? Not a chance. Yes, I’m trying to be interesting and compelling. I am trying to capture your attention and get you to WAKE UP and notice what’s happening around you. To stimulate your thoughts and encourage ACTION.
And if I’m wrong? Then everything you did to prepare and strengthen your business will just make you stronger. It certainly won’t hurt you – but staying in an antiquated business model with thin margins, no retained earnings, no recurring revenue and burdened by a low-profit client base is a surefire way to be in a world of hurt if a hard recession hits.
This year at the Roadshow, my focus is on helping MSPs hit the RESET button on your business model, target market and marketing strategy. To go UPSTREAM NOW for better, higher-paying clients and differentiate yourself from not only the ankle biters in your market area but also the larger, more well-funded MSPs and the more aggressive “Super MSPs” who are gunning for your BEST clients…as well as going upstream to sell co-managed, raising your rates and being able to compete for and WIN big contracts by delivering advanced cyber security protections and compliance-as-a-service. There’s much work to do. If this is important to you, then join us: www.ITmarketingRoadshow.com.
If you disagree that all of this is “much ado about nothing” and no changes are necessary, I’d like to hear your argument as to why it’s smarter to keep doing what you’ve always done, just more of the same right now.