Along with the excitement that comes with a new decade, 2020 brings a lot of speculation on the economy, including a focus on what we call recession proofing. While business owners don’t know for sure if a recession will hit in the near future, the need for ensuring your business can weather the storm is real and growing.
Bill Lyons from Griffin Funding, says, “Make financial moves to stay nimble.”
The more nimble your ship is, the quicker you can make decisions and implement change throughout the culture and organization. If you want to recession-proof your business, ensure that you are nimble. Here are my recommendations:
Be proactive about taxes.
One of the biggest expenses a business owner can incur are taxes. It’s best to be prepared and have a plan in place to minimize what you’ll end up owing.
If you don’t have an internal CFO who is forecasting, budgeting, managing lines of credit and managing cash flow, consider hiring an outsourced part-time CFO or working with a proactive CPA (not reactive) who can help you plan throughout the year.
I also recommend getting your CPA financials quarterly and sitting down to plan and strategize.
Finance to keep you recession-proof.
In addition to building cash up on your balance sheet, apply for a low-interest line of credit with your local community bank so you can utilize it for growth, acquisitions or for a period when you need to pivot to a new marketing plan or a new product. A line of credit and cash together will put you in a position of strength and provide you the fuel you need to navigate through a recession.
Don’t wait to apply for a bank loan until you need it because more often than not you won’t get approved. Banks most often will lend you money only when you don’t need it.
Navigate a recession.
If you’re a giant cruise ship you could be a sitting duck if a recession comes. By the time you turn the wheel, a year may pass before the rudder starts to turn the ship in the new direction it needs to go. If you are a big fat cruise ship with lots of overhead, put a plan in place to be able to transform it into a nimble ship quickly that can execute. If that isn’t an option then put some nimble ships around you (small independent ancillary businesses) that can either protect you or diversify you. Do this especially if you are in a business that is sensitive to the market and outside forces.