“The Richcession”

Ephor Newsletter Q1 2023

As we initiate the year 2023 there are a few knowns from Q4 2022 that we as the small business community must accept, they include:

  • We now know the results of the November elections and in general what the political environment will be in the near term; which will not be “friendly” to the small business community.

  • We must accept that in the near-term that inflationary pressures and raising costs, especially in the labor markets will continue to be prevalent.

  • The Stock Market and Equity Markets have and will continue to “sequester” our wealth opportunities in “Exchanges.”

  • Interest Rates will continue to rise with borrowing capabilities only available to the best & low-risk-oriented business models.


In addition, many of the noted economists are predicting a recession in early to mid-2023. As the Strategic Practice Lead for Ephor Group, and as I enter the twilight of my career; my 45 years of experience and knowledge coupled with “learning” through 5-6 recessionary periods and economic downturns, I can state:

It is Ephor’s prediction that we will enter a “RICHCESSION” in early 2023. This economic downturn will have the largest effect on small business owners and entrepreneurs. (said differently the “upper class”) While we all know “recessions” mostly affect “households” and the working class, therefore the small business owner and entrepreneur will get a “double whammy!”

So, what is a RICHCESSION? A simple definition is an economic downturn that mostly affects the Upper class or the higher-income producers (white-collar workforce). The economic attributes that are currently prevalent, suggest we must prepare for the effects of a RICHCESSION which will include:

  • Due to the government's “disincentive” payments to work and increasing minimum wage laws the supply of labor will be more expensive, and less skilled and trained.

  • The skilled and higher income professionals (white-collar workers) will continue to experience layoffs (i.e. in Silicon Valley in the 2nd half of 2022 ~ 55,000 workers were laid off) In 2023 predictions suggest another 150,000 will be laid off in Silicon Valley alone. While white-collar workers generally have “transferrable skills” what is clear is their income potential will become stagnate or potentially decline.

  • Stock and Equity Markets in 2023: The household net worth of the “upper class and white collar” typically includes an investment portfolio inclusive of 401(k), IRA, SEP, etc. We all know that in 2022 the negative returns in the equity markets approached ~20%. In 2023 stagnate, or in the worst-case continuing plummeting stock equity prices will sequester our wealth creation in the near term. Therefore, in our businesses “Recurring EBITDA” performance becomes almost mandatory.

  • Additionally, interest rates for business debt will continue to increase throughout the first half of 2023, as the FED’s increases rates to “control” inflation and offset the effects of the Biden Administration spending sprees!


As such, what overt actions can we as the small business community do with our business models to “hedge” our businesses and our personal wealth creation capabilities in the near term? Ephor’s guidance includes implementing or enhancing the following “attributes” to your business model:

  • Create and convert as much of your revenue to a “recurring revenue stream” that is definable and repeatable.

  • New client/customer acquisition (revenue growth) should be a partner and channel distribution centric and focused. Do not hire expensive sales personnel in hopes that “they” will drive revenue growth. In our 23+ years of advising, investing in, operating, and “stewarding” small businesses this is the most common mistake made by entrepreneurs during “economic downturns”. Simply stated “throwing bodies” at business problems increases the probability of failure!

  • Outsource as many of the non-mission critical functions as possible. Functions such as financial reporting, accounting, HR & workforce management, inbound customer service etc. Near Shoring to LATAM is an extremely attractive alternative in that the labor costs are becoming more and more attractive compared to the India and Philippines providers.

  • Convert Fixed Costs to Variable Costs structures: Re-evaluate all costs structures and either convert to a variable nature or defer noncritical costs.

  • Get outside expertise to influence your business and focus on strategic options: all relevant services businesses need to understand, evaluate and manage the exogenous factors affecting the “strategic aspects” of the business for both the near-term and long-term horizons.


In closing, we at Ephor suggest that 2023 will be a challenging year that will require “change” and an “honest” review of our businesses. What we do know at Ephor is that in our 23+ years in the sector: “disruptive times of this nature” reward the best leadership team and business models, and “weed” out those that simply cannot adapt or are willing to change.

We wish you well in 2023!

Garry E. Meier
Strategic Partner Lead

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