Ep. 197 — Alex Chausovsky: Forecasting When Nobody Knows What's Next

6 min read

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Episode Summary

You’re staring at a forecast you can’t build. Revenue is down by some unknowable percentage. Your CPA can’t help. Your banker can’t help. And the noise on cable news and LinkedIn is contradicting itself every six hours. That’s where most owners were sitting when I brought Alex Chausovsky back from ITR Economics in the middle of 2020. Alex is the director of speaking at ITR, one of the most respected economic forecasting firms in the country, and the last time we talked was a year and a half earlier, before the two black swans (COVID and the Saudi-Russia oil collapse) hit at the same time. We got into what the rate of change tells you that the volume number can’t, why a V-shaped recovery on the chart still feels like a shallow U in your shop, what the $6T+ in government stimulus actually does to the timeline, why their 2030 Great Depression thesis hasn’t really moved, and the medium-term cash flow projection (six to nine months out) that almost nobody is actually doing right now. Real numbers, real timeline, and the honest version of what the next 18 months looks like.

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## Top 10 Takeaways
  1. Your rate of change can bounce V-shape while your actual revenue volume crawls a shallow U for two years.
  2. Medium-term cash flow projections, six to nine months out, are where almost every owner is currently blind.
  3. The faith in debt repayment is the only thing holding the system together. Watch that, not the dollar number.
  4. Supply chain resiliency now beats supply chain cost. Five percent more expensive with a two-week lead time wins.
  5. Your customers and suppliers can fail before you do. Look upstream and downstream at every balance sheet you depend on.
  6. Project forward when you can’t see forward. The companies that survive don’t wait for clarity to act.
  7. Government stimulus takes six to nine months to work through the system. Don’t run your plan on it arriving sooner.
  8. Your employees are the resource you forget to use. They have ideas you’ll never hear unless you ask.
  9. Higher inflation, higher taxes, and resource scarcity are the back half of this decade. Build for it now.
  10. Cash flow sustainability is what makes any exit option real. Without it, family, ESOP, and sale all fail equally.

Sound Bites

“Any amount of debt, whatever the dollar figure associated with it, is all based upon this focal point of where are you most likely to place your faith.” (@TBD) — Alex Chausovsky

“That V-shaped recovery in the rate of change does not translate into a V-shaped recovery in actual volume of activity… you won’t feel as a business like you’re getting back into what is traditionally normal operations for you until essentially two years from now.” (@TBD) — Alex Chausovsky

“We tend as human beings to project the current environment forward. It’s very difficult for us to imagine things being drastically different, even a very short period of time from now.” (@TBD) — Alex Chausovsky

“We know that we’re maybe five to 10% more expensive than our competitor, but our supply chain is entirely in North America, we have lead times of two weeks versus three months for anything being brought over from China. That’s the kind of communication that is going to win you orders today, even at a slightly higher price point.” (@TBD) — Alex Chausovsky

“You hired those people because they were smart and capable. Get their opinions, get their buy-in, get them to bring you ideas… that’s going to be the separation between people that are able to go through this successfully and the people that will succumb.” (@TBD) — Alex Chausovsky

About This Episode

Alex Chausovsky is the director of speaking services at ITR Economics, one of the most respected independent economic forecasting firms in the country. ITR publishes the monthly Trends Report covering 40+ vertical markets and works one-on-one with companies to forecast their sales and unit shipments three years out. Alex has an MBA and a background in market research and consulting, and he delivers around 75 keynotes a year to peer groups like Vistage, Allied Executives, and trade associations. This is his second appearance on the show. The first was a year and a half earlier, before the COVID shutdowns and the Saudi-Russia oil price collapse, and this conversation is a recalibration of ITR’s outlook given the two black swans hitting simultaneously.

Resources Mentioned

  • ITR Economics — Independent economic forecasting and consulting firm. — itreconomics.com
  • ITR Trends Report — Monthly publication with forecasts across 40+ vertical markets. 90-day free trial offered at the time of recording.
  • DataCast — ITR tool that takes your company data, identifies your leading indicators, and plots your business cycle against thousands of economic data series.
  • Ray Dalio — Referenced for long-term debt cycle work and his publications.
  • The Infinite Game by Simon Sinek — Referenced on long-term thinking and capitalism.
  • Conscious Capitalism — Referenced on treating employees as the asset, not the cost.
  • Intentional Growth Digital Course (Arkona) — 36 videos and 5+ hours on valuations, value growth, and exit options.
  • Mastering Your Cashflow Course (Arkona) — 3+ hours on the 13-week cash flow statement, annual budget, and revised forecast.

Connections

Phase + Module:

Milestones:

Concepts referenced:

  • Three-Statement Model — The closed loop you need before any of this forecasting matters
  • Rolling Forecast — The medium-term cash flow projection Alex says almost no owner is actually building
  • Free Cash Flow — The number that determines whether any exit option (family, ESOP, sale) is even real
  • The Multiple & WACC — What gets reset when leveraged buyout assumptions stop working

Graph View