Today's Guest

Barry Moltz helps small business owners get unstuck. He is a small business expert who helps entrepreneurs grow again by unlocking their long-forgotten potential. With decades of entrepreneurial experience and consulting with other entrepreneurs, Barry has discovered the formula to get stuck business owners unstuck and marching forward. Barry is a nationally recognized speaker on small business and has given hundreds of presentations to audiences ranging in size from 20 to 20,000. In this episode, Barry shares his top predictions for 2023 and what business owners can do to capitalize on the opportunities in the year ahead. 

Resources Shared

• BarryMoltz.com
• ChangeMasters by Barry Moltz
• The Small Business Radio Show
• Thryv
  

Episode Transcript

(Please excuse grammatical errors due to transcription)

Gordon Henry:

Hey, hey, this is Gordon Henry at Winning on Main Street and this week we're fortunate to spend some time with our friend Barry Moltz. Welcome back Barry.

Barry Moltz:

Thanks for having me Gordon.

Gordon Henry:

So Barry, as our regular listeners know, has founded and run small businesses with a great deal of success and failure by his own admission for more than 25 years. He's a small business expert. It helps companies get unstuck, which is why he's come to be known as the unstuck guy. Barry is a bestselling author, in demand keynote speaker and he hosts his own weekly radio program. He's been doing it for 12 years, the Small Business Radio Show on AM 820 WCPT in Chicago. And he writes regularly for the American Express Open Forum and other periodicals.

His latest book Change Masters is available on his website. You can find it right now at barrymoltz.com. That's B-A-R-R-Y-M-O-L-T-Z.com, barrymoltz.com. And what should listeners get out of this episode? Well, today's a little different. Barry's going to share with us his predictions on 2023 for small business and also how he did on his predictions for 2022. You don't always hear experts telling you what they got wrong, but Barry's going to share. Should be fun and get your wheels turning for what to look out for as the year unfolds. So welcome back Barry. And before we get into what's in store for '23, how'd you do on your '22 small business predictions?

Barry Moltz:

Well, I was better than 50%, so I guess that was good, Gordon. I got 60% right. I got three out of five. The biggest thing that I didn't predict was inflation. I thought it would slow to 4% and that's mainly because I couldn't really predict what was going to happen in Ukraine. So that was a big miss for me going on. And I also thought that the stock market would kind of steady out, but of course it dropped at that point by 20%. So those two things were bad, but I got the hits on Covid. I thought Covid would continue as well as that supply chain would still be a mess and prices would rise, but I really did not forecast eggs. Eggs are just out of sight, Gordon. $8 a dozen.

Gordon Henry:

Unbelievable. As you look back and you look at those trends from '22, how did it impact small business?

Barry Moltz:

Well, I think a couple of things. One is unemployment still stayed relatively low, so it continued to be hard to find people. Folks had a lot of choices, they had to pay them more. Definitely supply chain was still a mess, so it was hard to find inventory or if you could, you actually stock more of it, so that means you had to spend more cash. And lastly, prices were rising so you were really forced to raise your prices along with everybody else and I think a lot of those trends will continue into 2023.

Gordon Henry:

For sure. So as we've seen the economy start to slow down, and I'm sure you're going to tell us a lot about interest rates and the impact of interest rates as we feel the economy slowing down, is that making the labor shortage any less tight? Are companies able to find labor more easily as things slow down?

Barry Moltz:

It's interesting you mentioned that because the rates still show that unemployment is at a record low, but when I talk to a lot of the small business owners, they seem to tell me that it is getting a little bit easier to find people, that people are staying a little bit longer, I think because mostly some of the government aid has really dropped out as well as, I think, people who are employees working for companies are a little bit nervous about what's going to happen next year. So they want to make sure they still have a seat at the table to have a job if we really do go into recession.

Gordon Henry:

Yeah, for sure. I mean, even if you are not immediately impacted by layoffs, all these headlines about salesforce.com laying off and amazon.com laying off all these big names that people kind of know and respect, and it does tend to make you a little nervous, right?

Barry Moltz:

Absolutely does. I mean this is very different than two years ago where people were constantly job hopping. So I think it's a little bit better environment in 2023 for the small business owner. It's going to be a little easier to retain the people that we have.

Gordon Henry:

Yeah, exactly. Okay, that's 2022. It's behind us for better or worse. So what do you believe is in store for small business for 2023?

Barry Moltz:

Well, I called it cloudy with spots of thunderstorms. I always give kind of a weather prediction when I do my what's going to happen the following year. I really think that the stock market will rise this year about 5%. I still don't think it's going to be at the same height it was before the stock market went down because I still think there's downward pressure every single day. I think inflation is moderating, Gordon. Obviously the Fed's policies of raising interest rates, which are really historically pretty... Not historically, but from what we know from our adult lifetime, are pretty high. I keep remembering my parents. Their first mortgage was at like 16% and that would be outrageous these days. We're saying 5% and 6% are really pretty high. But I think the inflation will remain around 5%. But the same time is we have to continue to think about how small business owners are going to raise our prices.

Small business owners, Gordon, are statistically reticent to raise prices because they think if they do raise prices then they're going to lose customers, but now is the best possible time to raise your price because everybody is expecting it. I do believe, unfortunately, that we are headed for a recession, and I define it by two consecutive negative GDP, regardless of how the White House really defines it, because I think they're changing whatever the definition is, but I think we'll see a slight recession this year. And what does that mean for small business owners? We've got to watch our cash flow. What we really need to do is we need to prioritize cash flow profitability over whatever growth you want in your business. Too many small business owners want to grow at any cost. This really isn't a year to do it. This is the year to make sure you can grow profitably and make sure you can keep cash on your balance sheet in case you do lose customers or vendor prices go out of sight.

Gordon Henry:

Yeah, makes a lot of sense. I mean, borrowing money now, just generally borrowing money, is very tight. When you read about these companies that are struggling, especially the ones that got venture funding or private equity funding, all of that is drying up in a hurry. It's almost been a complete change from a couple years ago where money was almost like free and investors were throwing money at companies that had a good idea. Now it's really show me the profits, show me the cash flow. It takes a lot to get investors to part with investment money today, right?

Barry Moltz:

Yeah, it's much more difficult in some of the technology companies I've been selling over the last couple years. We were seeing somewhere between seven and 17 times sales as the selling price and now we're seeing somewhere between two and four times. So you're right on. It definitely has changed.

Gordon Henry:

Yeah. So that raises a different question. For those businesses that have been thinking about selling, what should the mindset be at a time like this?

Barry Moltz:

It's interesting because Main Street businesses are still holding their value at somewhere between three and five times cash flow. And what people are really interested is two things. One is what's the profitability of the business, and what's the growth rate of the business? Buyers are looking at... They want to see profitability over growth. So if you're going to grow, you got to grow profitably. That's really what's required for 2023.

Gordon Henry:

How much do you feel like these macro trends impact small businesses? I'll give you an example. So I know over the past couple years anyway, it seems like it's been very hard to get work done on your house if you wanted to remodel, if you wanted to re-roof, if you wanted to put in a pool, there was always this giant waiting list and the guy would say, "I'll get to it six months from now, 12 months from now", very long wait times. And maybe that was due to the supply chain issues or the labor shortage, but whatever. It seemed like the local small business that was working on your house was sort of in the driver's seat. You, as the customer, you were just whenever. With things changing now in the economy, do you feel like that's changing at the customer? The consumer is getting a little bit more leverage?

Barry Moltz:

Maybe a little bit more, but I still think that the Main Street businesses for 2023 still are going to be incredibly healthy. I was just talking with my plumber the other day. He said he's still extremely busy. Costs are still twice what they were two years ago. I remember in 2020 when I built my house in Phoenix, I was trying to negotiate a better price with the pool guy and I said, "This is the last pool you're ever going to build for the next three years." He goes, "You are crazy. I'll bet you lunch." And of course a year later I was taking him out to lunch. So I think 2023 is still going to be pretty strong for the Main Street business. It's not like technology or EdTech or some of these other companies. I think there's still a lot of backlog of work.

Gordon Henry:

Yeah. You didn't mention much about politics directly. We just had an election, obviously, and we've still got Democratic control of the Senate and obviously the White House and now Republican control, slim majority of House of Representatives. Does that impact this situation from your standpoint?

Barry Moltz:

Well, I mean the question is are they really going to be able to get anything done over the next two years? I think that the expectations among Americans is pretty low that they'll be able to do anything. Are they just going to be fighting among each other or launching all sorts of different investigations into each other? So I think that a lot of Americans kind of put that in the rear view mirror and ignored a little bit and said, "All right, we've got to do business at hand." It's interesting because I think that the regular small business, the macro things don't necessarily affect them that much, but I think psychologically it does. When the market is down, people feel like they have less money, so they do spend less. But I think a lot of small business owners take things in their own hand and don't worry about what's going on in Washington.

Gordon Henry:

So with all the uncertainty that still surround many of the things you talked about, the inflation is still here, the Ukraine war is still here, interest rates are so high, and a lot of the things that were plaguing us in '22 are still sticking around. What do you say to a small business to focus on in '23? What should they really be thinking about?

Barry Moltz:

Focus on retaining the customers you have and make sure that the work that you do, you're doing it profitably. I think too many small business owners just want to do sales at any cost. The question is, which of your customers are profitable and which aren't? And the way you look at that is what is really the gross margin on the work that you're really doing? What is it? How much money do you make after you pay for the cost of the service or the cost of the product? That's what we need to focus on because the more profitability you can have at the gross margin line, chances are you'll be able to take more money home at the bottom line.

The second thing is you've got to focus on, if you can, getting paid upfront from a customer or paid at time of service. I think accounts receivable and people paying you 30, 60, 90 days really hurts the small business owner because you become a bank for your clients instead of just giving whatever service you're supposed to give them. You got to get your money now because on accounts receivable, your money is stuck inside your business and it doesn't do you any good there. It'd much rather be in your bank account. I remember when I used to travel a lot and do some in-person consulting gigs, people were saying, "Well, can I write you a check now?" And I said, "Well, of course." A lot of people said, "No, no, no. You can just mail it to me." "No, no, I'll take it now."

Gordon Henry:

So Barry, fascinating stuff. Tell us a little bit about your new book, Change Masters, Masters of Change.

Barry Moltz:

So the reason that I wrote this book called Change Masters because I would be invited into companies that had problems and would sit down and we'd decide what they really want to accomplish, what the problem was, and the change they had to make in their business in order to achieve whatever their goal was. Maybe it was more sales, more profitability, whatever it really was, we'd lay out something very detailed and then 80% of the time, Gordon, absolutely nothing would happen.

And so I got to wondering why was it so difficult despite good intentions, despite people paying someone like me, an outside expert, to come into their business and help them with the change? Most of the time they did nothing. So we did a lot of research and what we found out was that change is hard because biologically your brain is programmed not to change. Your brain wants to keep doing the same thing over and over again because it is a pattern making machine because it believes that if something's worked out previously, if you keep doing the same thing, it will keep you alive again. So your biology fights against you making any kind of change. So I want to write a book. It actually ends up being a 20-step process in how people can actually make the changes they know they have to make.

Gordon Henry:

You see so many small businesses on the technology front sticking with their old ways of doing things and resisting adopting new technology, even though, probably deep down, they know the technology in so many ways has changed, whether it's their customer database, whether it's using email or social media, and many small businesses are still stuck doing things a way that bigger businesses long ago abandoned and probably it's just, it ain't broke, don't fix it, right?

Barry Moltz:

Well, listen, the devil I know is better than the devil I don't know. Why do people stay in relationships far past their expiration date? Because they'd rather keep doing the same thing over and over again than to risk whatever the unknown is. Think about this. When you drive to the office, sometimes we get in the car and automatically we're there. Your brain is on auto drive, and as you get older, quite honestly, your brain gets lazy and it doesn't want to do new patterns or new changes.

Gordon Henry:

So fear of change and what the outcome might be is what keeps us stuck in our old patterns. And that's really what your book is attacking and giving people a whole process for making those changes. That's the purpose, right?

Barry Moltz:

Yeah. Because you can remember while you're trying to make that change, you're kind of in this abyss of the unknown. You're not quite sure what's going to happen, but I think the key to making any kind of change is just like that old joke. How do you eat an elephant? Well, it's one bite at a time. Try to make small patient changes so you can change direction if something doesn't work out. When we retell the story, Gordon, we always talk about, well, this change was some massive change. We took some huge risk, but the most effective changes are actually a series of very, very small changes.

Gordon Henry:

Makes total sense. When you think about anything we've done, whether it's losing weight or getting into an exercise program or starting almost anything new, you always sort of have to just go one step at a time and once you get going, the momentum starts to propel you forward. But it is daunting.

Barry Moltz:

And that's the problem with when people try to join gyms, right? When's the most popular time to join a gym? January 1st. When the most people leave their gym? January 30th because the first week they go five days a week, then they go four days a week, then three days a week, then two days a week. If they would just start out one day a week, they could build on that rather than going from five down to nothing.

Gordon Henry:

Right. Well thanks for the words of wisdom, Barry. It's always good to reground ourselves and kind of what did we do successfully or unsuccessfully, and where are we going and how we going to get there? And everything you've said is immensely helpful in that regard. Barry, I know barrymoltz.com is your website. Is that the best place for people to find you?

Barry Moltz:

Or on every social media. It's just Barry Moltz, except I don't do TikTok.

Gordon Henry:

Great to see you out in Arizona with the sun coming in on you, and we'll look forward to next time seeing you in probably cold, snowy Chicago, or at least chillier Chicago.

Barry Moltz:

And Gordon, thanks for everything Thrive does to really help Main Street businesses, really again, in 2023 operate more profitably.

Gordon Henry:

Yeah. Well, it's in our blood just as it is in yours. And we're doing everything we can to build up the software that is helping so many small businesses succeed today. So thanks for coming on the show, Barry, great to have you here.

Barry Moltz:

Thanks for having me, Gordon.

Gordon Henry:

And I want to thank our producer, Tim Alleman and our coordinators Diet Barnett and Daniel Huddleston. And if you enjoyed this podcast, please tell your colleagues, friends and family to subscribe, and please leave us a five-star review. We'd really appreciate it. Until next time, make it a great week.

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