Decision Vision Episode 36: How Do I Recession Proof My Business? – An Interview with Wes Gipe, Aileron

Michael Blake, Brady Ware & Company

Michael Blake is Host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.

Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.

Brady Ware & Company

Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.

Decision Vision Podcast Series

“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision maker for a small business, we’d love to hear from you. Contact us at decisionvision@bradyware.com and make sure to listen to every Thursday to the “Decision Vision” podcast. Past episodes of “Decision Vision” can be found here. “Decision Vision” is produced and broadcast by the North Fulton studio of Business RadioX®.

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Show Transcript

Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions, brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.

Michael Blake: [00:00:21] And welcome to Decision Vision, the podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic. Rather than making recommendations because everyone’s circumstances are different, we talk to subject matter experts about how they would recommend thinking about that decision.

Michael Blake: [00:00:38] My name is Mike Blake, and I’m your host for today’s podcast. I’m a director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia, which is where we are recording today. Brady Ware is sponsoring this podcast. If you like this podcast, please subscribe in your favorite podcast aggregator. And please, also, consider leaving a review of the podcast as well.

Michael Blake: [00:01:03] So, our topic today is how can I recession proof my business? And, you know, in one respect, recession proofing sounds like the holy grail. It sounds like something that’s so great that it can’t possibly be done. I think we’re going to dispel that myth fairly quickly today. But you know that as business owners and business leaders, we are so involved in the day to day granular nature of our operations. And if you happen to be a business owner or a leader that truly can take a big picture view as often as you would like, congratulations. Let me know. I’d like to have you on the podcast. You can tell the rest of us how you do it.

Michael Blake: [00:01:44] But for most of us, you know where we’re—you know, for most of us, a week ahead of our calendars, the other side of our lives. And the fact of the matter is that our economy is not recession proof. Now, I think the data would show that our periods of expansion appear to be getting longer. And it’s unclear yet as to whether or not that means that when our recessions do happen, there’ll be that much more severe or if ’08, ’09 was simply an aberration.

Michael Blake: [00:02:14] But we do know that just as in gravity, whatever goes up must come down. And so, having a business that is able to weather a downturn that may be somewhat prolonged is an important way to establish that company’s value. Because if it’ s only viable during good times, then by definition, you know that your runway is finite. So, I think everybody is going to find this a fascinating and useful topic.

Michael Blake: [00:02:39] And joining us today to talk about this by phone is Wes Gipe of Aileron, a management consulting firm at Tipp City, Ohio. Wes works with business owners and their teams of trusted facilitator, business advisor and coach. Known for his enthusiasm and high energy approach, Wes’ willingness to boldly approach tough issues and go the extra mile have gained him loyal clients who look to him for help with strategic planning, leadership, and culture development, and conflict resolution.

Michael Blake: [00:03:07] Wes started his journey as an Aileron client in 2008. So, I guess he’s like Victor Kiam. He liked the Razor so much; he bought the company. After applying Aileron’s professional management principles to build a self-managing company, he now spends much of his time helping other organizations, big and small, build a strategy that endures through. Through this work, he has logged over 9000 coaching hours as one in 500 individuals throughout North America and Europe. His work has been featured in Forbes as well as other national media outlets. Wes resides in Miami County, Ohio with his wife and three rambunctious boys. Wes, welcome to the program. And rambunctious and boys sounds kind of redundant, doesn’t it?

Wes Gipe: [00:03:47] It does. It’s a loud house.

Michael Blake: [00:03:48] Loud house and probably with with increasingly unbreakable things.

Wes Gipe: [00:03:57] Indeed. Indeed. We just—we’ll have nice things sometime in the future.

Michael Blake: [00:04:02] So let’s jump into it and let’s talk about, you know, when you talk about a recession proof business, what does that mean? What—and is any business truly recession proof?

Wes Gipe: [00:04:16] Well, you know, a mentor of mine said that there’s no normal environment, only the one that you’re in and the one that you should be preparing for. So, I think there’s no one who looks up and says, gosh, my business is just totally recession proof. And if you do, I would suggest you take stock of where you really are. But there are those who do a good job of recognizing that things will not always be as they are today, whether they’re experiencing good times or challenging ones. And there is still work to be done if they are to adequately prepare for that next environment. I don’t think it’s as much about a destination as it is a continual awareness of the weaknesses and the strengths of the businesses and a reaction to that.

Michael Blake: [00:05:00] So, when a business owner thinks about, let’s call it being recession ready.

Wes Gipe: [00:05:06] Yeah.

Michael Blake: [00:05:06] Does that mean for most business owners, surviving a recession, just sort of making it to the next expansion limiting the damage of a recession or maybe even in some cases thriving in a recession?

Wes Gipe: [00:05:19] Yeah, it’s a great question because—and I think the answer is somewhat subjective. I think it depends, which is, of course, any consultant’s best answer, it depends. There are certainly-

Michael Blake: [00:05:32] Talking about business code.

Wes Gipe: [00:05:33] Right, yeah. And so—but what the observation I’ll make is there are certainly kinds of businesses that take harder hits than others when the economy changes. I mean, for example, the automotive market responds very different than the healthcare market, but both respond at the end of the day.

Wes Gipe: [00:05:52] And the good news is in that reality that all of your competitors that are in the same space as you are experiencing the exact same thing. You can’t control it. What you do control, though, is what you do while you wait for those external factors to recover. I think there’s always opportunity in a recession because everything goes on sale. People go on sale. Property goes on sale. Equipment goes on sale. Services go on sale. Nearly everything can be had at a discount and sometimes a huge discount. So, the question becomes, you know, what should we and can’t—what can we and should we buy now? What should we invest in that would be difficult or expensive to buy during the recovery?

Michael Blake: [00:06:32] So why aren’t all businesses making those kinds of plans? I mean why doesn’t every business kind of have that mentality?

Wes Gipe: [00:06:42] Well, I think it’s interesting. Well, the first thing I might point out that comes to mind is that some businesses actually boom with a recession. You know, we don’t necessarily think that way, but quick service restaurants, for example, what we might call fast food, they generally will see revenue growth during a recession because people are re-prioritizing their dollars. They have less disposable income. That sort of thing. So, I think, it depends. In some cases, things are pretty good when things are going well and they’re great when things go south.

Wes Gipe: [00:07:20] But I think while there are certainly outliers like that, I think those who endure the greatest harm from recession are those who acted as if the good times would last forever. If you know what I mean. The killer in a recession is not necessarily revenue decline, but it’s a failure to build a cost structure that’s able to scale down as a revenue declines without compromising the core competency of the business. Cutting fat but not muscle, if you will. And that kind of planning, I would point out, is far easier to do and is done with far more clarity when the economy is strong. Those are way to plan that way until we start to see the turn and we have the stress of revenue decline. We have the stress of those difficult conversations with our people and with our customers are far more susceptible to emotional and therefore far more risky decision making.

Michael Blake: [00:08:15] You know, essentially, you bring up McDonald’s. You know that’s a classic example of an economist would call so-called inferior good, that when the economy is doing badly, that the customers switch from whatever higher end restaurants, which they used to dine, you know, to a fast food kind of place. And interestingly, I credited the ’08, ’09 recession with launching the electric vehicle market, because back then the notion that you could drive without having to fill your car with gas, that was extremely attractive. And as we’ve emerged from that recession, you know, environmental concerns, whether you believe or not, they’ve not changed. But what has changed is now you know I was concerned about filling up your Ford F-150 with 25 bucks of gas or 25 gallons of gas.

Wes Gipe: [00:09:03] Yeah, yeah, it is fascinating to me as well, because I think we all see—to some degree we’re programmed to see the downside to something that the media and economists would paint a really negative light. I would go so far as to say that economists exist so that weatherman can be proud of their profession. I don’t think that they know anything more about where our economy going—is going than a business owner that’s got his or her head—ear to the ground and head—looking out ahead.

Wes Gipe: [00:09:38] But there is some truth to that. There are opportunities created. The truth that is perhaps not as obvious when it’s happening but no less true is that there are real opportunities created during recessions. You know, I focused earlier on the cost control and investment in things when they go on sale. But the other reality is that the business opportunities are created. Interestingly enough, my own journey in 2008, when 2008 hit, I had a mentor that came to me and said, you know, what you need to do here is spend while others are scared. And it was sort of a different take on Warren Buffet’s perspective in his letter to the shareholders some years ago, where we would do well to be cautious when others are greedy and greedy when others are cautious or something to that effect.

Wes Gipe: [00:10:34] And you know, what was interesting is we took that advice. And fortunately, in my case, we had a number of outsiders that were committed to being part of a board of advisors. And so, they helped me to maintain a focus on investing wisely during that time. And what was fascinating is that customer account grew. Consistently, revenue shrunk. And so you start looking at those numbers and most of this with any sort of rational thinking ability would say this is a terrible situation. But what was also true is people were spending emotionally. And so, there was pent up demand that was being created, particularly in the businesses that I was in that had to be released eventually. And so, that wave of revenue came but it didn’t come for two years after we spent the money, the time, and the effort on capturing those customers while they were being ignored by our competitors.

Michael Blake: [00:11:32] Well, yes, because when your competitors retrench, right, they’re leaving a vacuum in the market. And you know, you’re right. If you have kind of that dry powder, there’s tremendous opportunity to capture market share, to capture mind share, frankly, and also attract great talent because not just the employment, unemployment being higher, but also, you know, don’t you want to work for the company that’s on offense? Playing defense stinks is why we admire teams that do it. Playing offense and scoring is always more fun. So, if you’re playing offense in a defensive environment, you know I think that tends to attract aggressive, more successful business people.

Wes Gipe: [00:12:12] Yeah, I think that’s true. I think it’s also true, though, that it is very difficult to endure two years of that and just trust that the wind is going to come. And I think that’s where I found the outside board to be tremendously helpful. People that weren’t emotionally attached to the decision making, people that were older, wiser, had seen a few more cycles like that than I had, I think that’s what gave me the confidence to continue on when it seemed like we had done this for a really long time and I’m just trusting that this is all going to work out. But in the end, it does, because you’re caring for customers in a way that maybe your competitors can’t.

Michael Blake: [00:12:53] So, you know, let’s talk about the good old recession. It’s hard for me to believe it’s been over 10 years now since Lehman Brothers collapse.

Wes Gipe: [00:13:01] I know right.

Michael Blake: [00:13:01] Seems like two days ago. But it sounds like you’re of the mind that you know companies can position themselves to be successful even in a recession that was pretty profound. Not just financially but I think from a psyche perspective.

Wes Gipe: [00:13:18] Yeah. Yeah. So, I think they can. I think they can. There are certainly—now, what I don’t want to discount is there are certainly industries that just got decimated with that recession and through no fault of their own. I mean, the best laid plans and there were industries that just got hit so hard that it was very, very difficult, if not impossible, to recover. But those really, if you step back and look at the full picture of the economy, those were really, in my opinion, the exception rather than the rule. Most of the folks—there was a prediction made here at Aileron, interestingly enough, when we were in the throes of like I’ll say early ’09. And that was that we believed that there would be more companies actually fail on the upswing or in the recovery than did in the recession itself.

Wes Gipe: [00:14:11] And the reason for that thinking was that most people cut bone. They cut too far out of fear and out of emotional decision making. Or perhaps they cut just a little further than they should, failed to cast a vision, and the real talent and the best customers get nervous and leave. And that is—we saw some version of that come true. I won’t say that was universally true but we did see some version of that come true that we saw a lot of people, if not fail outright, really suffer. And I’ll say grow in fits and spurts as a result of having to rebuild core infrastructure before they could even think about scaling the business to take advantage of the recovery. So, I do think all that to today, I do think there’s a tremendous opportunity when the chips are down to think rationally and in an intellectually honest way about the business and look for opportunities.

Michael Blake: [00:15:11] You know what? One industry that comes to mind that really took it on the chin and serves I think as a missing object lesson is the legal industry.

Wes Gipe: [00:15:21] Yeah.

Michael Blake: [00:15:21] You know. For the first time that anybody can remember, firms on mass are not just cutting staff. They were cutting partners and even equity partners.

Wes Gipe: [00:15:31] Yeah, right. Yeah, long time. Yeah.

Michael Blake: [00:15:31] They certainly (inaudible) bone. And what’s happened since then is the fundamental business of law has changed in that, you know, now there’s a recognition that every lawyer who’s an equity partner must be a revenue generator in a profit center. If you’re not, you’re just never going to be a partner that’s going to be cut the next recession in the first place. So what they’ve done is although they’ve de-emphasize a technician and that’s been a tough pill to swallow for the technician because that work is becoming commoditized, the business of law itself is probably more resilient to the next recession because their model now is able to scale up and down much more easily than it did 10 years ago.

Wes Gipe: [00:16:16] Yeah, yeah. Well, and I think—I mean that’s sort of what I was referring to when I said that—when I made the comment about the issue not being declining revenue but the inability to scale cost with that change in revenue. And, you know, I think in law firms, that’s a labor heavy model. It’s a model that needed innovating. And what’s interesting, I was just sitting here thinking, as you were talking about the law space, I was thinking about Thomas Friedman in The World is Flat. I think that book was written in roughly 2000, something like that.

Wes Gipe: [00:16:55] And it’s interesting to me that it’s only now becoming really, really true. You know, we’ve now seen real examples of what he was positing back in 2000 that, you know, if you’re the middle accountant that never has any contact with customers, you’re in real danger of finding yourself outsourced versus if you’re in the business of relationship management or something that’s much more difficult to outsource to a nameless, faceless entity somewhere else in the world, that your job is not only going to be secure, it’s going to actually grow in value. And I think that’s what we saw in that industry and we’ve seen it in a lot of industries otherwise as well.

Michael Blake: [00:17:37] So let’s start talking at a more micro level. You know, in your experience, what are typically—what are companies typically lacking that makes them more recession vulnerable? And why do they need help from somebody like you to help them remediate those issues?

Wes Gipe: [00:17:56] Well, I often say, you know, [indiscernible], here is a client. And what I got at Aileron that I was unable to get anywhere else was the truth. The objective, they’re hard, harsh truth. Someone to look me in the eye and really challenge my thinking, not—of course accountants are good for this. Attorneys are good for this. But there are limits to the truth that they’re going to give you. And candidly, there are limits to what the scope of the sort of issues that they’re going to typically approach.

Wes Gipe: [00:18:38] And so what I got here at Aileron was not a replacement for any of those things but really someone to look me in the eye and help me think about my business and the decisions that I was making in an intellectually honest way. And I think those who are lacking something that makes it difficult to recession proof themselves, most often what I see is they lack the ability to be intellectually honest. They lie. And that only comes in my experience with an outsider that only has your best interests at heart. And so that’s what I got here. I’ve had this distinct memory of leaning against a post in the cafe, downers, coffee and snacks. And my business adviser sort of looked me in the eye and he said, how much money are you willing to spend to prove that you’re right?

Michael Blake: [00:19:37] That’s a question. That certainly puts your cards on the table kind of question, isn’t it?

Wes Gipe: [00:19:43] Oh, wow. Right. And I remember thinking after I considered running out of the building, what—where else could I get that? You know, they’re one of the precious, precious things that you learn. One of the things that you learn is very precious as a leader is those few people whom you deeply respect that are willing to look you in the eye and challenge the best of, even the best of your ideas. And some do it. You know, sometimes some do it in a very direct way. They call the baby ugly. Other cases, I’ve had situations where people were really good at pointing out all the pretty babies around mine and by virtue of that, letting me draw my own conclusions.

Wes Gipe: [00:20:30] And—but the net of it is it’s the truth, right. And you look at someone like Blockbuster, right. Man, I mean I would love to have been a fly on the wall in that boardroom, in the conversations that must have unfolded as that whole model was changing around them and they just doubled down on what they had already done.

Michael Blake: [00:20:58] That quote or that conversation reminds me one of my favorite quotes from an economist, John Maynard Keynes, who’s one of the architects of modern economics and was also, in his own right, one of the fathers of modern investment management as well. And he said that the market can remain irrational longer than you can stay solvent.

Wes Gipe: [00:21:21] Oh, that’s profound.

Michael Blake: [00:21:22] Isn’t it though?

Wes Gipe: [00:21:23] That’s just profound, right. And in—the other thing that’s true about that, what I love about that is there is always margin. Regardless of the economic reality, there is always margin where there is mystery. Always.

Michael Blake: [00:21:43] Yes.

Wes Gipe: [00:21:43] And yet what we tend to do when things get uncertain is to control the things we can and just hunker down and make ourselves unique just like everybody else. And so that’s profound. I haven’t heard that quote before but I love it.

Michael Blake: [00:22:00] Well, I wish I had said it, but all I can do is parrot it too. But—so when we look at recession proofing or making companies recession resilient, in your experience, is that more often involve making maybe a small number of massive changes or maybe a larger number of smaller changes? Or is there some other way to kind of think about the scope and depth of change that needs to occur in order to achieve that recession resistant property?

Wes Gipe: [00:22:32] Yeah, yeah, I think it is, again, I’ll use my favorite answer, it depends. I think it is somewhat situational. But in more cases than not, the big changes are simply changes that should have happened in most cases a long time ago. And the only reason they’re evident now is because we’ve got no choice. You know, sales growth causes—it covers a multitude of sins. And you want to—and so when that stops, particularly high growth, when that revenue curve inverts or leveled off plateaus, since they weren’t visible before become visible very quickly.

Wes Gipe: [00:23:19] Businesses that we’re in that we have no business being in, lines of business or customer relationships that are just plain unprofitable. Some of those are really big decisions like we got to get out of the line of business. Some of those are—or even perhaps part ways with a large client that we thought was more profitable than they were. Many of them, though, are small decisions. So, I would say the majority, the big decisions are just decisions that I have to make and should have, you know, a year, five years or maybe even longer ago. And they’re only now visible.

Wes Gipe: [00:23:57] But the things—and those have to happen to stop the bleeding, to keep the company solvent, that sort of thing. The path to recovery, though, often is a series of very small, intentional, low risk experiments, all of which, if coordinated appropriately, add up to meaningful and sustainable change.

Michael Blake: [00:24:20] So, it sounds like that, you know, for the most part, the changes a company makes are not sort of one-time fixes, but there are things that need to be consistent. I guess the way to best describe it would be of a structural nature.

Wes Gipe: [00:24:35] Yeah.

Michael Blake: [00:24:36] That’s superficial and cosmetic, but they’re really fundamental to how the company does businesses or even makes decisions.

Wes Gipe: [00:24:43] Yes, certainly. And I think the, you know, because you’ll get a couple of big wins. I mean, with any recession, things will stand out. Revenue curve inverts, things will stand out that have never—that haven’t stood out in the face of revenue, you know, significant revenue growth. But the things that, you know, those come and go pretty quickly and you get the win. The things that keep on giving are the things that make a $500 a month difference here, and $100 a month difference there, and $70. I mean many times, it’s really a lot of really, really small things that add up to monumental differences.

Wes Gipe: [00:25:24] And I think that’s hard to—it’s hard to remain disciplined in looking for those things when the world around is crumbling. And that, again, is where I would just really encourage people to think about, well, how can I surround myself with people who are not as emotionally attached to this thing as I am?

Michael Blake: [00:25:45] So, it’s sort of seeing sort of a psycho-graphic profile sort of coalesce here that, you know, being able to be cold and calculating is kind of critical to making the right decision in a high stress environment. So, I guess, in retrospect, it makes sense. But like so many things, when you’re, kind of, in the weeds, you don’t necessarily see the entire picture.

Wes Gipe: [00:26:08] Yeah. Yeah.

Michael Blake: [00:26:09] So are there businesses and certain kinds of industries that are easier to make recession proof than others? You know, for example, I would imagine the companies that have high operating leverage really would struggle because like you said, they just can’t scale the way that, ultimately, you’d like to. They’re kind of built—they’re built entirely to capture upside.

Wes Gipe: [00:26:32] Yeah. You know, it’s interesting. But even in those scenarios, there is substantial opportunity if you’re willing to step back and think logically and rationally and think about all right, where’s the margin? Where’s the mystery? And therefore, there’s got to be margin there. And how can I leverage that margin? Even if it’s something I’d rather not do in the long term, how can I leverage that margin to cover that high fixed cost if you are high capital cost, depreciation cost?

Wes Gipe: [00:27:00] What do I got to do to make it work to get through the other side of this thing? So, an example I might give you is I worked for a number of years with one of the largest egg producers in the world, 15, 16 million chickens, which is hard to even get your head around to begin with. And every one of these things lays an egg every 26 hours. Things you don’t think about unless you’re in this business, right? And so that’s 15 million eggs a day that come whether you want them or not. And 90—or excuse me. I think it’s a high 70 percent, 80 percent of the cost of that egg is in feed but yet you’ve got animals. It is a very complex industry and it is a feast and famine industry. You know, you’ll make a killing one year and then you’ll just lose your shorts for a couple of years. It’s an industry that takes a tremendous amount of resilience to be in.

Wes Gipe: [00:27:58] And so if you’ll recall, some number of years ago, we had the avian influenza epidemic and so bird flu hits. I mean, it’s something it’s—totally beyond your control. You can’t cover every pan. If you get 15 million chickens, you can’t physically enclose them. And so, duck flies by, goose flies by with AI, with avian influenza, lands in a flock, infects that flock. That flock comes into contact with the other flock. And pretty soon, you can find yourself in a situation, in this case, they lost half of their production in a series of very short period, around a couple of months. So, we go from, all of a sudden, 15, 16 million chickens to 8, right. So, we got all this incredible capital overhead.

Wes Gipe: [00:28:50] Now, you don’t just run down to the true value and say, hey, I’d like to order eight million, you know, layers. That’s just not how that works, right. So, all of a sudden, now, we’ve got rid of what we got in a safe way. We’ve got to sanitize all these environments. Now we’ve got to think about where do we get eight million birds and very quickly, because the bills keep coming, regardless of whether we have eggs to pay for them or not. And very, very, very difficult time.

Wes Gipe: [00:29:21] Fascinating. This leader at one of the best I’ve come into contact with just refused to see that as anything other than an inconvenience. And as a result, for a period of time, they actually became a government contractor that went to their egg, cleaned up their own mess, you know, euthanize the birds, turned them into actually, you know, product, either fertilizers, some other product that was actually salable. And they did so for their competitors.

Wes Gipe: [00:29:53] So while their competitors were freaking out over what are we going to do, they had pivoted. And was it pretty? No. Was it difficult? Absolutely. Was it stressful? It was ridiculously stressful. But you know what? They didn’t lay anybody off. And so, after they got over the hump, gotten, you know, they contracted with somebody to raise eight million more birds and got things cleaned up, they were back at it before their competitors were. So, they saw—again, they just refused to look at that as anything other than an inconvenience. It’s a factor. It’s not an excuse. And I think it’s that mindset, you know, that makes someone recession proof or recession resilient rather than any one thing that you can do.

Michael Blake: [00:30:40] So, you know, this segues nicely to the next question then, which is, I’m curious if you have a view, what’s harder about addressing or confronting a recession, knowing what to do or actually carrying it out?

Wes Gipe: [00:30:54] Yeah. Gosh. Yogi Bear, I love, gosh, I love that guy. If there’s somebody I could go back in history and beat, it would be—there’s a couple of people. I think him, Mark Twain, some other folks. But he famously quipped, you know, if you don’t know where you’re going, you’ll end up somewhere else. And so, I think they’re both hard. But if you don’t know what to do, chances are you’ll do something else. And the best time to decide what to do is not after the economy shift, it’s now. But I got to say, I think—I like to poke fun at economists, but I think there’s a fair consistency in the belief that the recession is not going to happen in the next three months.

Wes Gipe: [00:31:43] And I don’t think anybody believes it’s going to be on the order, the magnitude of 2008 barring some major world event or something to that effect. So, we’ve got some time. That’s the good news. And so, my incursion, we do something with that time. Don’t just sit here and think about it. You know, I think about even people like, oh, remember Captain Sully Sullenberger?

Michael Blake: [00:32:11] Sure.

Wes Gipe: [00:32:11] That guy saved 155 lives when he successfully landed a disabled plane on the Hudson. And I’ll guarantee you that he did not wait until that bird strike to start planning for the emergency. He already knew what to do. It’s just a matter of remaining calm and executing a plan. He had practiced that over and over and over and over. What are the chances that you lose two jet engines with some of the most reliable machines in the world that have ever been invented? You lose two of them that soon after takeoff, but nonetheless, remain disciplined. All right. No normal environment, there’s one I’m in, there’s one I should be preparing for. And he knew in that phase of flight that he should be preparing for that reality. So, he knew what to do. It’s just a matter of remaining calm executing the plan. And in keeping with that analogy, the best possible scenario if people listen to this podcast and don’t need it, right, they know what to do and they never even have to do it.

Michael Blake: [00:33:09] So, you know, I’m glad you brought up kind of this time because there’s a growing belief that a recession is likely between now and the end of next year. And so, you know, if that’s the case and let’s say I’m listening to this podcast and I’m convinced that A, recession proof is feasible and B, it’s something I should do. Is there enough time to do things and execute them for most businesses that, you know, can make a difference? Or do they kind of have to wait until the recession after that to really gain benefit?

Wes Gipe: [00:33:38] Oh, I absolutely think there’s plenty of time. And again, barring, you know, something major happening, some world event, or something that just wasn’t on the radar. I think there’s more than enough time, you know. And if you want to start to think that way, just take some real disciplined time, time that we would probably argue in this employment environment and just how hard it is to operate right now that we don’t have and model a scenario where you lose 20, 30, 40 percent of your revenue in a short time.

Wes Gipe: [00:34:10] Model that avian influenza, you know, your version of that avian influenza plan, could you survive? Would you still make money? If not, why not? And those questions are a great place to start, both to identify, as we were talking about earlier, you know, the big one hit things that might be really painful but, gosh, they provide a lot of, you know, a lot of benefit as well as you have a list of prioritized items that we would do. Again, all of which we might not enjoy, but build on those plans. Now, I think if you just model some sort of revenue correction that will reveal, start to reveal where you should start, I don’t think it has to be any more complicated than that.

Wes Gipe: [00:34:54] Because I will say—I’ll go there for just a second. I see people that get fixated and driven by fear. And I would just offer that that’s counterproductive. There’s these plans that I’m talking about, you know, as you build plans for what you might do in the case of emergency are, you know, a matter of a page or two or three maybe. We’re not talking about some, you know, a full execution manual or anything to that effect just because the reality around us is changing all the time. And so, if you try to make this too precise, chances are, you know, it will just end in frustration.

Michael Blake: [00:35:44] So let me ask this, just one or two more questions and we’ll let you get back to what you’re doing.

Wes Gipe: [00:35:50] Sure.

Michael Blake: [00:35:50] But can recessions offer kind of an—I guess we kind of talked about this a little bit, but I want to hit upon it because that fear that you talked about, I think is really important to master because I’ve read that people’s decision making, their effective IQ, decreases by as much as 30 percent when they’re in a state of fear, right, as they react to crisis. I don’t know if you read anything similar to that, but the benefit of having some sort of recession proofing is I think that it puts you in a place where more intelligent decision making can take place because your fear is kind of amped out a little bit. Does that make any sense to you or am I all whacked?

Wes Gipe: [00:36:33] No. No. I think I’ve read similar things. I hadn’t read that specific statistic, but it makes total sense given, you know, how I’ve seen some of the clients here. They don’t even respond to what I refer to as industry specific recessions that I’ve seen the last five or six years. And it is really interesting. The ability to think rationally is severely hampered by stress, uncertainty, fear, uncertainty, doubt.

Wes Gipe: [00:37:04] And that’s why I think there’s always opportunity. Shoot. We’ve got the bank coming at us. I happen to still remain a partner in the company that I founded back in 1997 and the bank recently said we’d like you to borrow some money and buy a business. And I said, you’ve got to be out of your mind. I mean, why on earth what—there are people demanding multiples as high as 50, 60, 70 percent higher than is even rational right now and you want me to borrow money from you likely based upon some sort of revenue model that makes absolutely no sense. Yes, you’re crazy.

Michael Blake: [00:37:50] What I’d rather do is—what conversations do we have—need to be having now so that when our financials don’t look as strong, when the outlook doesn’t look as rosy this year, as willing then to give me the money as you are now, what sort of indicators do you need to have from me to show you that we’re being responsible while we do have capital and access to capital so that you’ll trust that we’ll be as responsible or more so when the real opportunity exists?

Wes Gipe: [00:38:23] And so there are people around us making noise and all kinds of very candidly unhelpful—pushing us in unhelpful directions. And I think it comes down to, again, outside influence, whether it’s a board of advisors, whether it’s people that you rely on. And it can be people like your accountant—that aren’t—I mean, don’t discount that. You know, people that you may already be in conversations with. It’s just a matter of slowing down and asking them for real feedback, real and honest feedback, because that’s the intellectual honesty that will ultimately reveal the opportunities that exist.

Michael Blake: [00:39:05] Well, Wes, this has been great. And I realize that I’m probably one of your last to do things of the week here so I want to wrap up. But I do want to give some direction or some opportunity for our listeners to maybe follow up. If someone wants to talk to you about maybe making their business a bit more recession proof and have that conversation, what’s the best way for them to reach out to you?

Wes Gipe: [00:39:27] Yes. So, our website is www.aileron. That’s A-I-L-E-R-O-N.org, aileron.org. And if you just search discover session, we—actually business advisors or team members from our staff will actually sit down with a business owner and help explore where they are. And we’re not a fit for everyone but that’s the goal of that initial meeting. It’s just to sit down, ask a bunch of questions, learn about where they are, and connect them with anything here that they might find helpful. So, it’s been a delight and a pleasure to be a part of the program today. Thank you very much.

Michael Blake: [00:40:07] Well, thank you for coming on. And that’s going to wrap it up for today’s program. I’d like to thank Wes Gipe so much for joining us and sharing his expertise with us today. We’ll be exploring a new topic each week. So, please tune in so that when you’re faced with your next business decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review of your favorite podcast aggregator. It helps people find us so that we can help them. Once again, this is Mike Blake. Our sponsor is Brady Ware & company. And this has been the Decision Vision podcast.