If you didn’t see, Silicon Valley Bank collapsed on Friday.

Here’s how this happened (as simply as I can break it down).

First, if you ever wonder how banks actually even make money, here’s how…

You put money into a business savings or checking account…and get paid interest to keep it there.

The bank not only has to pay you interest…but they also have those nice locations on every corner of the best real estate in Anytown USA, so they need to get a return.

Bank are simply investors…they take your money and put it in places to try to make more money (it’s a liability on their balance sheet).

Since Silicon Valley Bank focused on tech businesses. They exploded during the pandemic, and as of Friday, were the 16th largest bank in America

This was obviously because of the massive uptick of growth in tech and virtual businesses (think zoom).

As money poured into this bank and interest rates reached crazy low rates (near zero)…

…SVB decided to invest in long term bonds, which essentially ties up the cash for a long period of time (10 years in this case).

Since the money was put in long term bonds it meant they didn’t actually have the money on hand to give back to the businesses if they decided to pull out.

It’s not illegal or anything but doesn’t go well when a bunch of their clients try to pull out their money all at once…which happened and is what caused the collapse.

The tech companies started pulling out because interest rates were quickly rising (up to 6% right now) and getting money was way more expensive.

The tech businesses were also having trouble getting more money from Venture Capitalists…forcing them to use their own cash for growth, hence why they started pulling their cash out of the bank.

Like a bad rumor, word got out that they had the money tied-up in long term bonds and enough of them pulled out…causing the collapse.
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Dam.
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Based on what I’ve heard…all people that had money in these banks will be made whole (we’ll see).

But unlike 2008, the investors and managers of the bank will not be bailed out.

Here’s what I think this means for you (and me).

I’ve been getting texts from clients asking how this affects them and if this will cause a recession.

My crystal ball told me “I’m not sure.”

But stuff like this brings fear.

Fear typically reduces spending in some people.

Which does affect you and me.

It affects certain people more than others.

The person that has a huge net worth and loses a bunch of money still has way more money than they need to live their life.

The person that loses their job or loses a huge part of their wealth will put their gym membership on the chopping block, probably first.

This shines the light on WHO you should be marketing to.

If you market to affluent people, stuff like this has less of an impact on you.

It definitely still could impact you, just less than the people that focus on people with lower incomes that look for bargain type gyms.

The fact of the matter here is you need to know what’s happening and understand that it’s likely we’ll not see anything close to what we saw in 2020.

So you should know you’re battle-tested.

But keep your eyes open.

Pour into your existing members.

Have a great marketing plan.

Charge prices that make you profitable.

And by all means, keep your mind strong, even when it gets tough.