GET READY FOR THE RECESSION
What is really happening to the global economy?
Everyone is aware of the state of the global economy is concerning. Consumers are under pressure, prices are going up, and workers need more money to pay their bills. This economic turmoil requires careful planning on the part of small and medium-sized business owners in order to navigate through these choppy environmental waters successfully.
Are we about to enter a recession?
There is a good chance that yes. The US economy has a 30% probability of going into a recession in the next 12 months and a 50% chance of doing so in the next 24 months, according to the CEOs of most investment banks - JPMorgan, Credit Suisse, Goldman Sachs, and economists on Wall Street.
What causes the recession?
When the housing bubble burst in 2008, it resulted in lower consumer demand, higher unemployment, and the possibility of deflation. Due to the current global turmoil and supply chain disruptions, the US economy currently has low unemployment along with rising wages and higher prices.
There will always be losers and ultimately winners in recessions. Businesses are more likely to survive an impending recession if they are aware of the risks their industry confronts and have robust measures in place to mitigate those risks.
How should your company prepare itself optimally for a recession?
1. Be open to possibilities
The best recession strategies entail careful planning and the capacity to spot opportunities as they present themselves without delay. These areas of emphasis are essential for your firm to survive any economic storm.
2. Aggressively monitor and manage your cash flow
You need to safeguard your cash flow. This is a MUST. The lifeblood of the company is cash. Executives must concentrate on the condition of their cash flow in unpredictable times in order to weather the cycles. Businesses can strengthen the condition of their cash flow in the face of future downturns in a few different ways I described in earlier articles on creating negative operating cash flow cycles that you should read. Charge upfront, streamline working capital, streamline fixed and variable cost structure etc.
3. Regularly carry out SWOT analyses
Even though it can be challenging to foresee the economy accurately, companies can nonetheless prepare for temporary cost increases and a possible drop in client demand. Executives can use this data to get ready for potential effects on their businesses.
4. Talk more with your clients
Another essential component for comprehending how the state of the economy may impact your organization is conversations with customers. Try to have regular interactions with clients to better grasp their problems. These discussions during COVID assisted leaders in developing plans to address shifting client needs. Find their pain points and come up with creative solutions.
5. Reduce wasteful spending
Due to inflation, a dollar will not go as far today as it did yesterday. So cut on all non-core areas in your business. Cut out all frills.
Maintaining top talent while reducing costs in light of the still-hot labor market by preserving or switching to distributed work can help businesses save money on office costs and employee salaries.
Most importantly, follow through on your plans and be aware of your progress. Boost your chances of surviving possible storms and coming out stronger