During most of 2018, major investment banking firms such as Goldman Sachs and Morgan Stanley have been optimistic regarding their projections for the American economy. There are very few signs that suggest a recession would be felt between now and 2020. However, these forecasts come with the significant caveat of political stability. There’s no question we’re living in uncertain times. From Brexit to the Trump administration and Venezuela to Syria, a single geopolitical shake-up could derail Wall Street and trigger a recession period.
A recession doesn’t have to be the last nail in the coffin for your business. If you play your cards right, you may be able to weather a recession or at least minimize its impact on your business. Here are a few recommendations in this regard, brought to you by trusted financial advisor Jan Gleisner.
Formulate a Reasonable Exit Strategy
An exit strategy should have been included in your initial business plan. If not, you can make a plan to gracefully cut your losses if you sense there’s no way to survive a recession. The most common exit strategies involve friendly sales, mergers, and liquidations. These can all be fairly complex matters to carry out, which is why you should have a plan to follow in case you need to go through with them.
Forecast Your Cash Flow
By using QuickBooks or similar business accounting software, you can make projections related to your cash flow. At the same time, you can also make decisions as to how it can be improved during hard times. Let’s say you keep an eye on CNBC and notice that economic forecasts are looking grim. Since this would suggest your credit customers may run into difficulties making payments, you should make things easier on them. Think about renegotiating contracts, invoicing ahead of time, slashing amounts due, and offering easier credit terms you can reasonably absorb. The key is to keep cash flowing in during the worst part of the economic downturn.
Double Down on Marketing
When setting aside cash reserves and emergency funds for your business, you shouldn’t forget about your marketing budget. When times are tough, marketing becomes a crucial business process that shouldn’t be ignored. Keep in mind your marketing cash reserves can be kept low. For example, social media promotion is generally inexpensive. It’s more important to have a marketing plan in place as well as a firm commitment to execute it as soon as the first signs of a recession appear.
Check Your Business Interruption Insurance Coverage
Many companies survived the Great Recession of 2008 thanks to their business interruption clauses in their commercial insurance policies. Business interruption coverage can help a company stay afloat in case of catastrophic loss, which can be particularly devastating during a recession. If there’s a recession on the horizon, the last thing you want is to go through a catastrophic event that makes things even worse.
Before making any major financial decisions for your company, make sure to speak with a reliable business advisor. San Diego business owners can contact Jan Gleisner today at 858-337-2385 to speak about their financial future.