Russ: This is the BusinessMakers Show heard here and online at thebusinessmakers.com, and it's guest time on the show and I'm out on the road in San Francisco, and my guest is America's small business coach and author of The Recession Proof Business, Victor Cheng. Victor, welcome to the BusinessMakers show.

Victor: Thanks Russ. I really appreciate it.

Russ: Well tell us first about being known as America's small business coach. What did you do to get that reputation?

Victor: I always make the joke that I'm American, I love small business, and I'm a coach. No, but seriously, I've really been very active particularly in this recession on really trying to advocate and represent the small businessperson's point of view in all the chaos that's happening and reluctantly not a lot of folks are doing it. I wish somebody else would. That's why I decided to stop up and that's how it's gotten the moniker.

Russ: Well I tell you what, we're compatible with that too. We do it all the time as much as possible. We're not feeling good right now the way that these innovators, entrepreneurs, and small business people are being treated.

Victor: Where almost 45 percent of the U.S. economy produced by far the majority of all the new jobs in this economy and everyone seems to realize that we do need no jobs. We have this recession, but no one is paying attention to the small business owners, which is unfortunate.

Russ: Well I tell ya, they're in the audience here today and they always are with the Businssmakers show, and I think they're particularly interested in your book, The Recession Proof Business, Lessons From the Greatest Recession Success Stories of All Time. Tell us how you put that together.

Victor: When the markets crashed and kicked off this recession or at least the part of the recession that most people identify with, I was very concerned for my own business and that of my clients and decided to do some work around what did companies do in the past that really made it? This recession was so severe. No one had really been around that had the experience to get you through it, and so I started gathering this research for myself, started sharing it with clients, started telling my friends and colleagues about it. Got invited to give speeches. More people wanted to hear about it. They wanted to send it to their friends. Decided to write a book about it and ended up writing this book.

Russ: Well your comment about it being so severe bothered me early on when it seemed to me like, boy, it was gonna be the all time mother load of recessions, and so many people kept trying to treat it as though it was just an ordinary down cycle.

Victor: No. This one's definitely gonna be a severe one. We're pacing for about a percent shrinkage, which will probably be number two in history relative to the Great Depression and probably 3-6 times worse than our typical US recessions. It's definitely a severe one.

Russ: Well I know our audience would be particularly interested in these lessons from the greatest recession success stories.

Victor: Sure. There are four big rules for building what I call a recession-proof business, and these are the rules that I observed really from the companies that survived and really dominated in the recessions of their day. The first big rule is the people that win in a recession, there was that focus on the opportunities that still exist. The companies that lose are the ones that focus on the opportunities that just left, and that's a very, very important rule because there's still a lot of money left in the U.S. economy.

Russ: Well it sounds very basic and straightforward, but I can just also see somebody that had their business always directed in one of these areas that is evaporating and it's just hard to let go.

Victor: It absolutely is. I think the biggest challenge with this recession isn't the contraction in the economy. It's letting go of what used to work and what no longer works, and that is a much more difficult transition.

Russ: And Victor, there are some huge things that used to work that don't appear to work very well. I mean the newspaper business, even terrestrial radio world. Those whole categories seem to be suffering much more than normal. It's just amazing.

Victor: It is. There's a lot of change going on through this economy. The example I always give is the U.S. auto industry. New car sales are down 50 percent. You hear that everywhere. What you don't hear is used car sales are up. The auto repair business is up. People still got cars. They still got to drive to work and they still have drivers licenses, so the money is still out there, but it's definitely being spent a lot differently on different priorities.

Russ: Okay. Good point.

Victor: Rule number two is to follow the trend and make the trend your friend. As I mentioned earlier, a lot of money is still being spent in the economy, but it's being spent on different things. They key is to figure out what it's being spent on now. I mentioned the auto industry. Auto repair and used car sales is a better place to be. If you look at things like entertainment, entertainment continues to do well. If you look at the medical field, cosmetic surgery is down, but cardiac surgery is up. So for every sort of thing that contracts, there's always something that flips on the outcome of the positive side. For the big companies that really prosper, what they do really well is they figure out what customers still want to spend money on and they get there first before their competitors.

Russ: Okay, well where the money is now. Should a small businessperson actually be trying to position themselves or pursue categories of business that had significant amounts of bailout money?

Victor: Well I actually looked at that and I actually looked at the bailout bill. Went through it line item and line item. I'm talking about the stimulus package here. It is actually incredibly fragmented. There is $1 billion being allocated to retrofitting the U.S. Air Force bases. There's another $1 billion being allocated to schools. I mean it is really being spread very evenly and very thinly across the entire economy, so I don't think you should start a business just to go after bailout money because it's basically impacting the whole economy fairly consistently, better off to look at what the customers really want regardless of bailout money and particularly get skills around it and build a business that is deigned to last.

Russ: Okay. I had Jason Ponton as a guest on the editor of technology review and he was quite critical of the stimulus dollars as they weren't seeming to be put in places that would actually create jobs at all.

Victor: It is the hilarious thing, and this is my big criticism of the stimulus package. If you actually look at it line-by-line it's like the favorite projects of every Congressman on the planet. It is like literally hundreds and hundreds of things that have probably nothing to do with creating jobs, and my hope would've been that if you're gonna spend that kind of money, almost a trillion dollars, you ought to put in some job creation, and very little of it is actually ending up there unfortunately.

Russ: I'm beginning to think sometimes you and I are the only two that see this. It's crazy. [Laughs]

Victor: Maybe we should run this country.

Russ: There you go. Well I got you off track here so you're still going, that's two of the four rules for creating a recession-proof business. Continue on.

Victor: Sure. Rule three of creating a recession-proof business is to be extremely unique from your competitors. Be different. I'll give you some examples. I was speaking to a plumbing company down in Plano, Texas and their big motto is they are the on-time plumber, and they were willing to put their money where their mouth is. If they're late, they'll pay you $5. So if you need a plumber you can get pipes fixed anywhere, but if you need it to be on time, well there's only one person in Plano, Texas who does that, so offering something different and unique and standing out is very important in a recession because customers have a lot of choice and they wanna know why they ought to be buying from us. You need to give them a really good reason.

Russ: Okay. Then what's number four?

Victor: Rule number four is to get the word out. When you are following the trend of solving problems that customers still care about and still wanna spend money on, and when you're solving those problems in a unique way you've got to get the word out. The best example I can think of is that in 1960 one of the companies I studied was Dominoes Pizza and for years, about a decade they were focused on delivery of pizza and delivering it fast, and then in the 1970's when another recession came along they had the very famous marketing campaign, which you may have heard of, "Hot, fresh pizza delivered to your door in 30 minutes or less or it's free." It was a combination of the uniqueness and getting the word out, and that business skyrocketed until the owners sold it for $1 billion and all that started in a recession, during the recession.

Russ: Cool, cool story. I'm talking with Victor Cheng, America's small business coach, and we'll be back with more with Victor after this. You're listening to The BusinessMakers Show heard here and online at thebusinessmakers.com.

[Aflac Commercial]

Russ: This is the BusinessMakers Show heard here and online at thebusinessmakers.com. Continuing on with Victor Cheng, America's small business coach. Well Victor, I know you have this quantitative economics degree from Stanford University. You're immersed in the small business world. I would love to hear your description of what went wrong. What got us into this terrible economic condition?

Victor: No problem. It's really simple. Two things happened to cause this recession. We borrowed a lot of money and we spent it. That's it, and the reason this recession is so severe is the amount of money we borrowed is enormous, and the amount we spent was enormous, and now that we have too much borrowing and too much spending problem it sort of fell in on itself, and that's the reason why this recession is so severe.

Russ: Well when we were borrowing it and spending it, it looked like we had a great economy, didn't it? I mean everybody was buying homes and bigger homes and refinancing and every city you'd go to in America you'd see this development with a Pottery Barn there and the stores, The Limited here, everywhere. It was all over the place.

Victor: You know the best phrase I heard about to describe that phenomenon is there's a big difference between getting a credit limit increase versus getting a revenue increase and I think unfortunately in this last boom we had huge credit limit increases from the federal government level to commercial banks down to the consumer level and unfortunately that money we spent really wasn't earned. It was primarily borrowed and that train has run dry.

Russ: Okay. Give us your perspective on employment in general. Is it gonna stick with us for a long time and be a huge problem?

Victor: Yeah. I think in this recession we will end up spiking at over 10 percent, which is pretty significant, and what I think it is, it's really reflective of what I call an economy in transition. When you have all the great rocket scientists on this planet in this country to go work on Wall Street rather than build rockets or design new technologies, well that's a misallocation of talent, a serious one, and in a lot of ways unemployment is extremely good because we're flowing the talent from where we shouldn't have been in the first place to where it needs to go. So all those unemployed rocket scientists on Wall Street are now going into technology industries to build the next technologies that will fuel the boom. So I think it's good in terms of that transition, and I think it will end up being high because we were so out of place where our economy should have been allocating resources ‘cause of all this artificial spending driven by the borrowing that it will stick with us for a while even after the economy "technically" recovers. I think the unemployment will stick around for a while.

Russ: Right. Weren't all the rocket scientists recruited and pulled over there because the speculators were all making so much money?

Victor: Absolutely. You would literally get scientists from MIT and all the tech shops and they would go to Wall Street and just crunch numbers ‘cause it's more profitable. All this financial engineering was where the value was placed rather than real engineering, and fortunately those guys are all coming back, so we actually have a shot in the long run.

Russ: So you think when the economy normalizes people won't be attracted to Wall Street and the speculation industry not nearly as much as they were.

Victor: Not nearly as much and I think in the long run we'll probably not have learned our lesson because history shows we'll always repeat our mistakes unfortunately, but hopefully we get like a ten-year stance where people remember and we stop doing stupid things.

Russ: Okay. Now I did a little research on you too before we sat down and I sort of discovered this intriguing question that I felt compelled to ask you, and that is why New York City call girls are considered the masters of making money even in a recession.

Victor: Here's the deal. When you're looking for how to survive in a down economy you've got to look and study the survivors, and what better place to look than the women of the oldest profession on planet earth? There's this interesting economist who studied the call girls of New York City, the high priced ones that have Wall Street executives as their clientele, and he followed them through three recessions, three stock market crashes, to look at how many customers they have, whether they're unemployed, whether they have healthcare, how much revenue per person, all these sort of hard MBA type numbers. The shocking things is when you look at those numbers you will be shocked at what sells best amongst the high priced call girls of New York City in a stock market crash.

Russ: And what is that?

Victor: That's listening. The reason it's listening is because imagine this, the Wall Street executive on a Monday morning or Monday afternoon loses $500 million, is too depressed to go home to his stereotypical trophy wife who's gonna leave him, and goes to the call girl but is too depressed to have sex. In a recession, in a stock market crash, sex does not sell, so what's a girl to do?

Russ: She has to be his listening person.

Victor: That's right. So if sex doesn't sell, being a high priced therapist does sell, heck, we'll be a high priced therapist.

Russ: And this researcher discovered this?

Victor: He discovered it. He mapped the numbers out. He was looking at product nix by market type, so it's a fascinating lesson and the business they're really in is in the business of selling what sells.

Russ: All right. We'll be back with more with Victor Cheng after this. You're listening to The BusinessMakers Show heard here and online at thebusinessmakers.com.

[Aflac Commercial]

Russ: This is the BusinessMakers Show heard here and online at thebusinessmakers.com. Continuing on with Victor Cheng, America's small business coach and author of The Recession Proof Business. Now Victor, I already mentioned that you had a quantitative economics degree from Stanford University, but I think our listeners would like to hear more about you. given your passion about small business and the trouble that we're in today, why don't you paint a picture of Victor Cheng? Where did you grow up and what were you all about?

Victor: Sure. I grew up in San Diego, California. My parents were business owners. Their parents were business owners. I'm a third generation small business owner, always had a passion for – I worked with my parents' business since the age of 9 and first job after Stanford was working for the big companies. I got that job that my father who hit the glass ceiling in his career didn't feel like he ever could get, and I got to work with the big companies, and I got to see some of the dumb things they do, but a lot of the things they did extremely well.

Russ: I think you were with McKenzie for a while.

Victor: Yes. I was with the McKenzie company. That's the big consulting firm all the Fortune 500 CEOs use. Was a high flying rising star there, and I decided all this amazing information I'm learning really would've been helpful to my parents 10-20 years earlier, and long story short after a long career as an executive in high tax, taking companies public, came back to my roots really to help other small business owners and their families and their children live better lives by having better businesses.

Russ: Okay. How do you actually help them?

Victor: I do a lot of things. I have a blog, VictorCheng.com. I publish books. I give lots of speeches, do a lot of outreach, and I'm also a paid business coach so a portion of my work I do for free. A portion of it is to get paid to earn a living and it's just something I feel so passionate about. It's really the backbone of America, the American economy, and it's people who really put everything on the line to really make their lives better. I have a huge amount of respect for that and I help out any time I can.

Russ: Well we like to say on the Businessmaker show, these are the people that innovate and make all of our lives better. I mean jeez, without that it'd be kind of depressing. So let's say that we have a listener right now that's totally intrigued and wants to get a copy of your book, The Recession Proof Business: Lessons from The Greatest Recession Success Stories of All Time. How would they do that?

Victor: The book is available for sale at Amazon and Barnes & Noble, but it's also available for free to your listeners. I'm so passionate about this topic I sort of decided to give away one million copies of this book, foregoing my profits on that, to really help get the word out.

Russ: You said one million, right?

Victor: One million copies. So your listeners can go to my website, www.bailoutusa.com. That's my own small business bailout, ‘cause I was tired of no one else doing it, so I decided I'd do it myself and that's www.bailoutusa.com and they can get the book there for free. They only pay shipping and handling. I can send them a paper copy book as well. Just go to bailoutusa.com.

Russ: Okay, but if they didn't wanna pay shipping and handling they can get a digital copy right there.

Victor: That's right. There's a digital copy right there on the website.

Russ: Well you're certainly doing your part about helping out small business. Victor, I really appreciate you sharing this with us today.

Victor: It's a pleasure.

Russ: You bet. We've been talking with Victor Cheng, America's business coach and author of The Recession Proof Business: Lessons from The Greatest Recession Success Stories of All Time, and you're listening to The BusinessMakers Show heard here and online at thebusinessmakers.com.