Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS
Episode Summary
You’re watching the grumblings start. Banks are getting twitchy. Your peers are quietly nervous. And the plan most owners have for the next downturn is the same plan they had for the last one: turtle up and pray. Jonathan Slain has a different read, and he earned it the hard way (he borrowed a quarter of a million dollars from his mother-in-law, $20,000 at a time, to make payroll in the last recession). His co-author Paul Belair sat on the other side of that same recession and grew an HVAC business from a $1M management buyout to a $70M+ exit in 63 months by pivoting from installation to service before the crash hit. Jonathan and I got into the four gears of their recession playbook (assess, tune-up, race, accelerate), why now is the window to renegotiate your personal guarantees with the bank, the five-to-ten percent equity test that tells you whether you’re ready to play offense or defense, and the uncomfortable truth most owners avoid: your CPA, your lawyer, and your wealth manager probably aren’t built for the company you’re trying to become. For baby boomer owners staring at burnout and a wobbly economy, this is the conversation about timing the door.
Watch on YouTube
## Top 10 Takeaways- The plan most owners have for a recession is to turtle up and survive. That’s the boring plan. Build the one that lets you buy your competitors instead.
- Your next 12 months of projected revenue should have 5-10% sitting as liquid equity on your balance sheet before you can play offense.
- Equity on the balance sheet means cash you can touch in 30-90 days. Not normalized add-backs. Real money.
- Now is the window to call your bank and ask them to cap or release your personal guarantees. In a downturn, that conversation becomes “we’re considering calling your loan.”
- If you’re a $5M company, you’re in the top 3% nationally. Stop using the CPA, lawyer, and wealth manager you hired when you were a startup.
- A players don’t work with C players for long. Complacency in a 10-year expansion is why your team is heavier than it should be.
- Start by freeing the dog that runs fast enough to keep up but never pulls weight. Your A players already see it.
- Write your emergency brake plan now in four tiers (discretionary cuts, perks, headcount, pay reductions) so you cut once and cut deep instead of bleeding out three Fridays in a row.
- Build your acquisition target list and start friendly conversations today. You can’t court your competitor after CNN announces the recession.
- A players get poached during downturns, not booms. Have your wish list of hires ready before the uncertainty hits.
Sound Bites
“100% of the companies on the planet that I’ve ever met are underpriced. Meaning in some corner of the business, there’s something you could charge more for.” (@TBD) — Jonathan Slain
“I borrowed a quarter of a million dollars from my mother-in-law to survive. The worst part is that I didn’t borrow it all at one time. I borrowed it every two weeks as payroll was happening.” (@TBD) — Jonathan Slain
“We were tired of the plan being to always just turtle up and try to survive the recession. We find that to be pretty boring.” (@TBD) — Jonathan Slain
“If your lawyer, accountant, or financial planner don’t have a net worth that’s somewhat comparable to where I want to be, then why am I taking their advice?” (@TBD) — Jonathan Slain
“When the tide goes out and we can see that they’ve been swimming naked, that their balance sheet wasn’t very strong, then they might be a great tuck-in acquisition for you.” (@TBD) — Jonathan Slain
About This Episode
Jonathan Slain is the co-author of Rock the Recession: How Successful Leaders Prepare For, Thrive During, And Create Wealth After Downturns (with Paul Belair). He’s a UNC-Chapel Hill grad who left investment banking to open gyms, got caught flat-footed in 2008, and rebuilt as a full-time EOS Implementer and consultant. His co-author Paul Belair led a five-person management buyout of an HVAC business (Roth Brothers) going into the Great Recession and exited 63+ months later for over $70M by pivoting the company from 80% installation to 80% service. The book and accompanying workbook frame recession preparation as a four-gear model: assess, tune-up, race, and accelerate.
Resources Mentioned
- Rock the Recession by Jonathan Slain and Paul Belair — Available on Amazon
- Recession.com — Companion website with the free 20-question Recession Readiness Assessment, the workbook, and contact info — recession.com
- RecessionProof.com — Alternate URL to the same resource
- Scribe Media — Publishing partner for the book
- EOS (Entrepreneurial Operating System) — Jonathan is a full-time EOS Implementer
- Alex Chausovsky (Vistage) — Referenced as the Vistage economics speaker Ryan previously interviewed
Connections
Phase + Module:
- Module 1 — Ownership Goals — Recession prep starts with knowing what you actually want from ownership and on what timeline
- Module 4 — Sustainable Financials — Balance sheet liquidity, equity targets, and the cash discipline that lets you play offense
Milestones:
- Milestone 3 — Net Worth & Valuation Targets — The valuation number that tells you whether you should be prepping to sell or prepping to acquire
- Milestone 2 — Cash Flow Targets & Sources — Building the war chest before the downturn
- Milestone 13 — Strategic Plan — The backward-forward planning Paul used to map the exit from day one
Concepts referenced:
- Normalized EBITDA — Why the headline multiple isn’t the cash you walk away with
- Enterprise Value vs. Equity Value — Real liquid equity versus accounting equity on the balance sheet
- The Owner-Operator Trap™ — Why the chief cook and bottle washer never gets to the strategy session
- Capital Allocator — Wearing the owner hat to decide what to do with the cash flow the operation produces