“The time to repair the roof is when the sun is shining.”
– John F. Kennedy.
According to key economic indicators, the US economic outlook is healthy. That’s good news for small businesses, which make up almost half of all businesses in the US. Numbering nearly 30 million, these establishments generated 1.9 million new jobs in 2018.
The economy is cyclical, however, meaning that eventually the expansion phase will come to an end. Although most experts agree that the next downturn won’t be nearly as powerful as the Great Recession, it will indeed happen. Therefore, the importance of preparation for small businesses cannot be overstated.
There are things your business should do now, while times are good, to weather the storm.
1.Maintain a lean lifestyle. It can be tempting when the money is coming in to purchase more inventory, equipment, and hire additional employees. Be careful to extend resources cautiously and avoid tying up money in excess inventory that may be difficult to move when business slows. Discourage over-hiring by evaluating procedures and practices to ensure talent is being used efficiently.
2. Improve cash flow. Diversify your business by adding additional products and services that complement your existing offerings. Be mindful not to stray too far from your core competencies. Doing so could damage your company’s brand and reputation.
3. Take care of your people. It is important to communicate the state of the company with your team so that they are prepared if there is a downturn. It is extremely difficult for managers to lay-off good, hardworking employees. Obviously it is painful for the affected employees and their families, but it can also have a negative impact on the remaining staff. Honesty will help instill loyalty in the workplace.
4. Keep marketing! Businesses often make the mistake of slashing their campaigns when the economy slows. This is the opposite of what your company should be doing. During a recession, customers are more conscious than ever of their buying decisions. When money is tight, make sure that price sensitive consumers understand the value of your product. Continue to strengthen your relationships with current customers. Loyalty created now will pay dividends later when companies are competing for limited dollars.
5. Secure working capital, even if you don’t think you will need it in the short term. Lenders may be much more willing to work with you when they are not feeling the stress of a recessionary economy. When the business climate slows, financial institutions will likely be pulling back on funding new accounts. When your business and the economy are in good shape is the ideal time to lock down a business line of credit or an invoice financing line.
Hitachi Business Finance can be your lending partner. We offer a range of customized solutions designed to help you grow your business and stay prepared for economic changes.
Call one of our experienced officers today at (248) 658-1100 or fill out our simple application form and let us help you with your immediate and future cash flow needs.