Dashboard: Inflation, Recession, the Metaverse. Oh, My!

[Music] welcome to another 21 hats dashboard I'm Lauren Feldman and as usual I'm here with Gene marks to talk about the stories and issues we think business owners should be following this week great to have you here Jean great to speak with you Lauren how are you I'm doing great and you I am doing good so far excellent we'll see what we can do about that let's start with one um that tends to freak people out and that's inflation it just hit a four deade high we found out um people do tend to freak out about it but you've told us in the past I've asked you about this over the months and you've kind of told us to stay calm is it time to panic now no I mean it's never time to panic I mean you know good people that are running good businesses never Panic they just you know make sure that they're keeping an eye on things then making their adjustments as it is you know sure so listen I mean we're we're having this conversation today on a Monday and um uh on June 14th uh tomorrow there will be a release of the producer price index for May uh the Consumer Price Index which came out last you know last week that's that's all in the past the PPI is what's going to show us what's coming up in the future and uh last month it was 11.3% I think it will be even higher this month that's a leading indicator of continued inflation and I actually think the PPI is a bit understated for a lot of Industries a lot of my clients and people I speak to a lot of their core materials have risen even higher than 11.3% so I guess you know no there's no reason to panic but you know we need to accept the fact that uh we are in an inflationary period and that's going to be going on easily uh for the next 6 to 12 months um you know so I'm hoping to see the PPI level out at some point and that'll give us an indication that you know inflation is finally hitting a you know a Max and maybe coming down but we need to you know we need to prepare um and make sure that we're managing our businesses around higher prices it's kind of an awkward moment in the sense that we have been told that inflation is something of a side effect the result of the growth uh that followed the the lockdowns and the um the the government money that was uh injected into the economy uh but but now we've got the inflation uh going even higher and a potential recession looming we keep appearing which is which is not a great combination right um you've told me in the past that uh quite a few of your clients are seeing a something of a slowing in their businesses and are starting to prepare has anything changed with that no still the same um as we're heading now into the summer um they're they're looking at you know a Slowdown this fall um and into 2023 and I think we'll see that across the board I don't I don't think no one I'm talking to is seeing a collapse um you know or or you know something to the extent of 2009 you know you type of Great Recession but definitely you know definitely a Slowdown is on you know is on the way it's being exacerbated by you know you know obviously inflation is a big issue and the high price of oil as well because that filters down into so many products that we have the next big thing we need to remember smart business owners always looking ahead um the next big thing that's going to happen is we're all going to be seeing much higher interest rates um the FED has already announced they're going to be having increases and that's going to have but we're already seeing some of those right already yeah I mean my you know mortgage rates are now like 5 to 6% and business rates themselves are coming up uh at that level as well and and uh you know we're you know the only way the strongest tool that the FED has to try and tamper down the acceleration of money into the system is by uh making money cost more and the way they do that is they raise interest rates so uh the cost of financing goes up uh the cost of capital goes up uh it becomes more difficult to get capital for your business if you're a startup we're seeing that in the tech industry right now you know tens of thousands of layoffs in Silicon Valley because a lot of these tech companies we have had you know a decade of easy money and now a lot of the tech companies are hearing from their Venture capitalists and investors that spet is now being turned off because it's becoming more expensive or unavailable so you got to make do with what you got so that's going to be the next story um in the next six months will be how businesses are dealing with uh the higher cost of capital and that's something we haven't as best I can tell so far most of those layoffs have been confined to the the tech industry startups as you as you said for now have you seen that spread at all any of your clients thinking about it not yet not yet in fact it's really it's interesting that you say that so I know for a fact that once we start seeing a Slowdown and the media starts covering you know a Slowdown the uh larger companies the big Brands they'll jump on that news and they're going to they're going to have layoffs they they couldn't lay off any of their dead weight during the pandemic cuz that would be like a PR disaster right but yeah listen but well that's always been the case in a recession but maybe not this time just because maybe there isn't as much dead weight since everybody's been struggling so much to hire is that possible now listen I work with a lot of corporate clients uh Lauren there's a lot of dead weight I'm telling you right now there's a lot of people out there that I know ain't working 40 hour weeks you know so um I I do think it's an opportunity for businesses because if there's one thing I've seen is that small businesses are still looking for people and you know again my smartest clients they're looking Beyond a Slowdown and you know our biggest issue is finding talent and you know if if some you know somebody gets laid off in a corporate downsizing might be the kind of talent that we can acquire if we've got the ability to do that um to position ourselves for the future and I think um we should all be on the lookout for that because I think that that is something that could very well be an opportunity for us all right next topic uh I've been reading a lot of stories lately about uh retailers uh mostly to some extent manufacturers too but especially retailers dealing with inventory issues uh Target and Walmart in particular got stuck with a lot of uh product that they're having trouble un loading I think they guessed wrong on some things plus the economy uh coming out of the pandemic changed a little more quickly than I think they expected and people started going to stores faster uh than they expected so they're they're stuck with a lot of stuff they're trying to unload uh you also have many ufacturers dealing with um you know supply chain issues that just go on and on uh there's an interesting story in the New York Times last week uh about uh Ford kind of speculating what would Henry Ford do if he were running Ford uh given that he was always trying to produce all of his own materials uh there was speculation in the story about whether he would be building his own computer chip factories um although they they mentioned did you know this the F-150 pickup uses more than 800 types of computer chips um that's kind of unbelievable to me um so most of these stories have focused on uh big big businesses I'm curious if are you seeing these Inventory management issues with smaller businesses it's even worse for smaller businesses um because the the whole um Narrative of inventory has changed because of the whole supply chain thing and by the way Lauren were we even did you even know what the supply chain was like two years ago like nobody knew i' never used those words now well you you knew the phrase you'd heard it but it's not certainly not something we were focusing on yeah everything is supply chain this supply chain this I've never heard this phrase use more in my life than Supply you know what I mean there's isn't there like a shortage of sriracha sauce did you read that you know a shortage of peppers they're not growing that's a big deal for a lot of people it's a big issue supply chain anyway uh that supply chain issue is hitting a lot of smaller businesses as well because they have to wait in line behind the bigger the targets of the world because they get their goods first you know um and it is kind of funny because you know was the The Targets in the Amazon and some of these other big box retailers in Walmart there were lots of stories earlier on this year about them bullying their way to get first dibs on a lot of these you know a lot of stuff coming over from China you know hiring their own boats and their own planes and all now they're stuck with a bunch of inventory boohoo you know but you know for manufacturers you know and and smaller job shops and distributor the The Narrative has changed from just in time to just in case um so if you're making something um they're people are buying in bulk and they're hoarding materials because they don't know when they're going to be able to get them again right now it's still it's still difficult because of all the supply chain issues out there so I am seeing a lot of um a lot of purchase of inventory being made by a lot of my clients um and that's a cash flow you know commitment right that there's a and there's some risk to that that it costs a lot of money you got to store the stuff and things can go wrong you might possibly buy the wrong stuff you're right um usually it's not these are companies again most of my client base are B2B so they're making the same stuff you know for their their end customers not it's not like they have to guess on Trends you know or well you know that that New York Times story talking about computer chips and the F-150 it said that computer chips have a shelf life and I didn't know that um it it makes me wonder if there are other things out there that have a you know an expiration date that I would not have guessed certainly are I mean obviously you know things that that go bad and in computer chips I think what they mean by the Shelf I don't know if they actually deteriorate themselves or if they just become less out of dates you know like the mors law thing like you buy a chip and then six months later there's like a better chip that became available do you know what I mean that could be so that's not that the industry is facing but you you the business themselves are are are buying this inventory it's the reason why they're doing it you you know we were just saying like it's costly because you know to invest in inventory you tie up all of your working capital and that stuff but for a lot of my clients they they look at it and they say you know it's more costly if we don't buy because if we can buy something for a buck 25 you know a pound now and we know it's going to be a buck 45 6 months from now you know um it behooves us to buy it at a buck 25 even now while interest rates are still relatively low because we know those are going up this year as well for the financing to do that there you know a lot of people are just they're trying to buy stuff in advance and you know in bulk assuming they have the capital available to do that um one thing about recessions I have to tell you you know Lauren is that um if you have cash um you you know you can really profit you know it's an opportunity to buy stuff because people are trying to unload it or buy stuff for the future or make investments I know some smart businesses that try to set aside cash precisely for that reason that's right that's that's exactly right and and I've had I've had some business owners that they they hoard their cash during good times I'm like why don't you you know invest in this orice and they're like no no we're waiting for the deals and the deals usually come in a downturn so inventory buys is something that you know if you're a B2B you know kind of business um is is what I'm seeing among my clients they they're buying right now where where they can um because like I said earlier they they know that the cost of not buying is is going to be more if they wait and they'd rather just have it spend the money now and have it in house all right next uh Bloomberg had a recent story and I know you've written about this uh in the past the IRS is now going to know about any payments you receive through venmo or other digital payment services um until this year I think anyone with less than $20,000 in total payments uh didn't have to worry about the IRS being alerted but now the IRS is getting a 10 99k I believe um and um that means I guess you got to pay your taxes but it also is some bureaucratic uh lifting that has to be done how big a problem is that I think there's there's there's an unreported problem to this which I wrote about uh earlier as well because I think that there's going to be another side issue um and by the way so if you're listening to this and you're just you're not completely familiar if you're using PayPal venmo uh I forget what Wells Fargo uh their cash app zel you know any of these cash outs before right um they now have a requirement that if a if they have a total of more than 600 in transactions $600 in transactions going from a specific business um they got to send a $199 to that business like hey you used venmo this year for $110,000 in purchases uh you received from us so we're sending you you know 1099 for that 10 we're also send they're also sending it to the IRS the IRS exactly right we're reporting that so you know a lot of businesses you know they monkey around with their cash receipts maybe they don't report it maybe they you know maybe they do but it's going to be this extra 1099 that you're getting that you're not going to really quite sure what to do with it so you have to file it away and make sure that whatever venmo is saying that they're they got on your behalf is somewhere reflected on your books uh because the 10 you know the IRS might find out about it all I hear about by the way is the IRS being so understaffed and underfunded I have no idea how they they even going to be dealing with this you know whole bureaucracy as well so that's another I'll tell you the the big issue that you should be aware about if you're a business owner though but watch out a lot of these uh Services have incomplete information about you they might not have your W9 information your EIN you know your Social Security whatever it is so or your address so they're going to be reaching out to you to complete that information so they can do these forms and that's going to start happening in the second half of the year which we're approaching and there's going to be a lot of nefarious people out there as well a lot of hackers that are going to be sending you emails pretending to be from PayPal asking you for information and because you've gotten these requests maybe from somewhere else you're like oh well I guess PayPal needs this too be careful because you might be sharing you know your your very confidential personal business information not with PayPal but with somebody else that's such a great Point yeah we're going to see a lot of that typically it would not come from PayPal right it would come from the from your client yeah you have to be smart enough to know that the email that's coming is not a PayPal address you know what I mean but but I mean it's not even you wouldn't even expect it to come from PayPal they're not the ones that would solicit that information it's the vendor the person that you're deal the client no in this case PayPal now because of this new rule PayPal has got to uh report on on transaction to you you know what I meanus so you are going to be and again PayPal might not have all of your information to do that so yeah you would you know you would be getting it would come from it okay and then the other thing also to to bear in mind is that just I talk about security because I do like some you know this text stuff if if people moving around you know you get this request say you get a legit request from PayPal um asking you for your EIN or your social security numbers they can do this for God's sake don't respond to this from a Starbucks or from an airport you know what I mean or if you're going to do that make sure you have a VPN on your device because now you're giving all this super confidential information over like a public router that can easily be hacked unless you encrypt it so I just think there we really have to be very aware of this because this very confidential information is going to be requested um of us over the next few months so be aware do you have a sense of how widespread this issue is I mean where where do we stand in terms of adoption of cash apps I mean obviously it's hugely important to businesses that are selling on uh eBay or Etsy or Amazon wherever uh but just in general do you know where we stand with that yeah I don't I don't have like the data to how many people use these cash UPS for their businesses but I see it all over the place I mean gez the guy on the beach you know is selling his $10 $10 ice cream sandwiches and he's accepting you know you know money from he's got a monopoly G yeah any I I paid him I grudgingly paid him on venmo and I hope that guy gets stuck with a big $199 at the end of the year but all these guys you know there's a lot of Artisans and Crafts People there's a lot of nonprofits as well that have to report these things so you know these are you know so there are a lot of organizations that use these cash apps a growing number of organizations not necessarily just people that are online so it it will have that impact a lot of Freelancers independent contractors doing work sure all right last topic um one of my goals for this year Jean has been to learn as little as possible read as little as possible think as little as possible about the metaverse um but every now and then I feel like I just have to check in and you just did a podcast um in which you kind of asked the question what what does this mean for small business owners and I guess my question to you is I so far I've been assuming the answer is nothing have we gotten to the point where it actually means something to business owners not yet but I I can tell you what's coming down the road okay okay here's what's going to come down the road first of all apple and other device makers are going to be coming out soon within the next year or two with with much better looking and usable glasses not these stupid Google Glass you know monstrosities but reif looking glasses that you can put on that way the same they're going to get better and better and better where you can just switch into a virtual world while you're wearing these glass just by giving it a command so that gives you instant access into a visual world and then you're you're looking through your glasses and you're in a virtual world so what what does that mean well Lauren if you're running a say me the Marx group okay my business well I am going to have clients including younger clients they're going to want to have like meetings with me to talk about a CRM product you know and they're going to be like well you know we'd like to meet in your Virtual Office because that's how we do business and I need to have space in the metaverse and like like real estate online in in in this virtual world so that I can meet with this client because that's what the client wants to do and by the way the client right now is in seventh grade you know I mean it's a generational thing right no no I'm 57 what they're teaching CRM in seventh grade huh well no 57 year old guy is going to be like oh I need to meet you in a virtual world you know what I mean like you know that's it's a it's a generational thing right the same generation that drove the original internet and drove mobile devices do you know what I mean that's how it's happened happening so they're going to say like listen we want to meet and you know we assume you have a virtual space so let's meet there why because it's way more cooler and interactive so then I have to rent a room or own a room in some virtual place and by the way it can't be some hole it's got to be like you know in a nice building that's a professional environment like oh you have you have space in that part of the virtual world that's a yeah that's that's a very nice play that's a high-end space you must be you know doing the right thing why are there lowend spaces in a a virtual world I can't we'll wait and see we'll wait and see because there's L wherever Lauren wherever you rent space to run 21 hats that'll be the low end you understand and then it'll be so so then we're gonna have space great we're gonna meet there and then I'll have my avatar which will look a lot better than it ever well it's me so it's not going to look that much better but it'll look a lot more realistic than any of the avatars right now so like I have this meeting we're looking around we're looking at each other and it literally is cuz we're looking through these glass like we're right across each other and having this meeting now by the way we're going to have it in a room and in the room going to be why is that better than Zoom oh because it's more in um what's the word for it the that I'm looking for Zoom it's like I'm I'm looking at a screen and I'm looking around you know my my my room and and and I can lower you lower zoom and go and browse something else and whatever whereas in the metaverse you're you're immersed in that room as if you were there in real life do you know what I mean so and the person's right in front of you and there's other people around you if you're having a meeting with multiple people it's way more closer to real life than what like a zoom screen is on your on your device you're in this room and you know you're you got to sit on a virtual chair and you're going to have a virtual desk in front of you because you'll have virtual documents you have to buy that from somebody somebody's going to sell you that virtual piece of furniture in that virtual chair and oh by the way you've got a room there and you want to impress your perspective client so you want to have like nice digital art on the walls you have to buy that as well and by the way you certainly want to be naked I I certain trust me no one right you don't want to be naked when you're sitting in that room so you're going to have to buy virtual clothes so you look good you can't just be wearing a pair of jeans God forbid you're in a business environment you need to buy professional attire which costs a little bit you see I'm going with I wear jeans in an actual business environment yeah I mean do you do do you see where I'm going with this like it's this whole this world that's being created as we're speaking right now and just like the internet there's a whole new generation that that's they're already there because they're playing games like Halo you know on it they're they're they want to be there because it's fun and it's different and it's immersive and it can be creative and it's it's going to generate a giant new economy like a$ 30 billion economy According to some some estimates right now within the next 10 years so that's just that's not only something that we as a business owners I promise you Lauren you will have an address for 21 hats somewhere in a virtual environment in the next decade and I promise you you going to have to buy all the virtual that you're going to have to buy to have a presence in the metaverse will you promise to wake me up when it's time you'll know about it you'll know about it it's the same thing as having a website and then oh the same we got a video on our website and oh we got to have a Blog on our website we gotta we got to we gotta you know what I mean that's what's going to happen I hear you I hear but I'm going to go back to ignoring it for now and and trust that you'll let me know Jean Marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times Forbes an entrepreneur you can also hear I'm on ABC's radio ABC radio's eye on the world with John Bachelor Jean hosts to small business podcast with paychecks Corporation and the Hartford thank you Jean as always thank you Lauren yeah we'll see you next week right uh absolutely always a pleasure have a great week everyone