It’s time to plan for next year and set goals. As you think and plan through your next year and set your business goals, it is wise to look at the market for what it is, look and see what is most likely to happen, and plan accordingly. When you look out at next year, ONE MUST ASSUME YOUR SALES AND BUSINESS WILL SLOW. Please don’t make the mistake of thinking that your business is impervious to the economic tailwinds we will face. Is there a recession coming? Just gain market share.
In May, I was interviewing a residential real estate agent in Atlanta. He boldly proclaimed that there was so little supply and so much demand because people were still moving to the Southeast in droves that the business might slow down some but would still be very strong for years to come. They had the facts, and it seemed like they were right. 6 months later, they were looking for a job and wondering how they would feed their family. Please don’t think you are immune, but also don’t be scared.
Look, it’s a global economy – China is in a free fall because of psychotic government lockdowns, and Europe is in recession already. We won’t be unscathed. And inflation is going to continue, and the Federal Reserve will NOT get it under control. They will slow down the economy with their tightening, which will slow down many businesses, but they can not control the true drivers of inflation-scarcity and De-Globalization. Let me explain real quick with examples. I get a new 6-foot Christmas tree each year, usually at Home Depot, which cost $55 last year. This year it was $130. That is a 230% INCREASE…not the 8% inflation number posted in the press-why? Because tree farms in the west got destroyed by fire, and THAT affected the cost of my tree in GA-that’s called scarcity. The Fed can NOT control forest fires, hurricanes, supply disruptions, or lockdowns in China. Hence, these price pressures will continue.
The other impact is Deglobalization, which is not being talked about much but is just as great. Our country has enjoyed 40 years of low rates and low inflation because of globalization. Starting in the early 80s, we began to outsource manufacturing to China. 2.3 million enslaved people in China make less than 50 cents a day. Nike could take the manufacturing of their sneaker, and instead of paying Americans $15 an hour, they could make it in China for 50 cents an hour. That kept a lid on costs and helped Nike stay profitable. In the ’70s, nothing was made in China; today, everything is. But China is on lockdown, and supply disruptions are causing companies to pull back manufacturing here in the US. This is good on the one hand. We’re building new factories, and companies are hiring-THAT is why the job market is so tight; we are bringing manufacturing back. But this country has no manufacturing job for less than $20 an hour. So now, the cost of making the Nike shoe, the chips that go into everything, or whatever widget you need are exploding. The Nike shoe you bought for $200 this Christmas, next Christmas will be $500.
These things are not going away. Hence, when we plan for next year, we must assume HIGHER costs, SLOWER demand, and a SLOWING economy. But, we CAN still make money and feed our families if we gain market share. Let me explain my business at Commercial Capital Limited. I close 100 commercial deals a year. And let’s say 100,000 commercial deals close a year in this country (it is probably more but for an easy example, let’s stick with 100K), then I have 1/10th of 1% market share. Now my business has not slowed this year the way residential lending has. In fact, my final numbers should be up over 2021. But I would be foolish to assume that will continue. I MUST assume my business will slow-you “can’t fight the Fed,” as they say. So let’s say my industry falls 50% to 50,000 commercial closings a year. That is a HUGE correction, a worst-case scenario, most likely, nearly a crash. All I need to do to maintain my 100 closings a month is double my market share from a measly 1/10th of 1% to 2/10ths of 1%. I would still not even be 1% of the market! So how do you gain market share? That will be a discussion for next week, for it is too much to share here. But KNOW this, you CAN gain market share, and it is not as hard as it may appear once you apply a few basic principles, which I will go over next week. Until then, understand that being realistic about what’s to come does NOT have to make you fearful. My industry WILL slow next year, but we are excited to apply my game plan to gain market share, and I am beginning that plan even this week. I look forward to sharing these things with you!
The Fed raising rates has EXPLODED the interest rate on SBA 7A loans this year. If you are a business or know anyone with a 7A loan on their property, their rates have increased 4% this year, from the 5’s to the 9’s. But we can REFINANCE THEM from a 7A loan into a conventional or SBA 504 loan with rates around 6%. A 3% drop in rates on a million-dollar loan is HUGE. It could be the difference between surviving or thriving as you build market share.
For more info or to run the numbers for free to see if refinancing makes sense, e-mail Commercial Capital Limited at Commercialcapital@newtomedia.com. Offset rising variable interest rates with a lower fixed rate and save thousands!