The possibility of a recession is keeping company owners up at night in an economy that is being hampered by a pandemic, more government expenditure, and supply chain problems. A recession is frequently signaled by two quarters of negative growth. Despite this year’s record employment growth, the economy has deteriorated. As a result, it’s critical for firms to plan ahead and prepare for impact.
Here are 6 ways to buffer yourself against the effects of a recession:
- Keep In Mind That Cash Is King
Key things to think about include reviewing your financial projections and cash flow forecasts and making any necessary changes; eliminating extra shifts if business volume has decreased to save money on labor; Making costs and commitments a priority; reducing unnecessary spending or postpone payment; recalculating anticipated taxable income and making any adjustments to projected tax payments.
- Reduce Borrowing Expenses by Paying Off or Combining Debt with High Interest Rates
Examine your present debt to see whether you can refinance high-cost loans. Refinancing or acquiring fresh capital may be difficult in the present economic issues.
- Revisit Investment Strategies
Consult with your experts to assess whether changing your investment plans in light of the present economic situation is necessary.
- Pursue Merger & Acquisition activities
The current climate has seen a lot of merger and acquisition activity, which may be a terrific way to add new company capabilities, talents, and market share in growth markets. Greater interest rates, as stated in our most recent post, result in higher discount rates and lower transaction values; therefore, if you’re looking to acquire, the current environment may present appealing chances.
- Focus on Talent
Employees may provide you with the edge you need to get by during unpredictable times. Employee morale and productivity might suffer as a result of frequent layoffs. Be open and honest with your staff since mass layoffs might lead to a negative workplace culture.
Businesses may also profit from analyzing employee strengths and weaknesses. This helps in realigning workers in accordance with operational requirements. Additionally, new leaders may be found and inspired to assume additional responsibilities.
- Plan for the unexpected
Plan for as many alternative outcomes as you can, as well as how to deal with them. For instance, we would need to reduce travel or selling, general, and administrative (SG&A) expenditures by XX% to make up for a XX% decrease in sales. Run cash flow predictions for a variety of outcomes. Find strategies to save money and earn money.