Now that Federal Reserve Chairman Ben Bernanke finally has admitted the U.S. could be facing a recession, business owners can set up contingency plans for a slowing market.
But because it's been awhile since the U.S. faced a recession of real consequence, ways to gird your company for one may not seem obvious.
According to Suzanna de Baca, president of Private Capital Solutions Group, Des Moines, Iowa, there are three main things you can do when facing a downturn in the market:
- Critically analyze your budget. When you are trying to trim costs, resist the urge to cut all discretionary spending, de Baca says. She says skimping on expenses related to marketing, advertising and branding may seem like natural places to cut but doing so could harm your company in the long run. In a tight market, marketing and advertising efforts can keep you in front of your clients. A homeowner who needs a new roof system during a recession not only is going to want a good value, he or she is going to want someone trustworthy and dependable—qualities good marketing can help promote.
- Understand your account ledgers. A slow market is the ideal time to strengthen your accounting reporting systems, de Baca explains. Make sure you keep good records and track your profits and losses. Most important, make sure you diligently collect invoice payments. All companies are guilty of letting accounts receivable slide now and then. But during a recession, poor collection procedures can begin to hurt your company even more. De Baca suggests you identify the weaknesses in your accounting procedures and fix them as soon as possible, which will better position your company when the economy rebounds.
- Be discerning. A downturn in the market is stressful. To minimize the stress, de Baca suggests you scrutinize your company and pursue only those activities that strengthen your business. This could mean changing your relationships with suppliers and clients, improving certain processes and strategies, and cutting costs only in areas that will result in long-term improvements.
Whether or not you call it a recession, these are challenging times. The tips de Baca provides can help you survive the turbulence and put your company in a solid position for the inevitable economic recovery.