Surviving A Recession
I am not going to reference 2008, but it will be challenging. As markets enter even deeper trenches causing the average American to barely get by, it is likely too late to start preparing for a recession. Yet, late is better than never. In the world of business, especially small business, ownership and board members need to find ways to protect the entity. There are many ways to do this, but all require strict financial decisions.
A business should be generating cash flow. If a business is not, well, it's a little too late for this prepping thing. Let's say that cash flow is currently coming in, you need to stock-pile your cash physically. No, I don't mean put it in the bank. I mean physical holding of cash. The magic amount? You need to have two (2) years of operating cash (Sales, General, Administrative, "SGAs") minimum without taking orders. Some would argue and say you need 3-6 years of cash reserves like this. Some do say to have it "in the bank," but this can be interpreted in different ways. Should you go bury it in the backyard in old Folgers coffee cans? Nah. Get a lockable, fire-retardant safe. Stash it away. Remain calm.
If you can maintain your lifestyle, your employees' lifestyles, your business' operations, etc., you are sitting perfectly fine. It is truly impossible to be as profitable as you want during a true recession unless your business delivers 'needs' vs. 'wants'. Most businesses are not delivering 'needs', so you will have to take what you can get while trying to maximize the opportunities in front of you. You have to survive first before you can be truly profitable. The best profit opportunities come from great markets where the general consumer is likely to spend more money on 'wants' than 'needs'.
There are a lot, and I mean a lot, of financial resources out there for businesses to help with cash flow or working capital needs. The SBA offered an EIDL loan during COVID-19. Those EIDL loans were offered with 30-year terms at very, very low interest rates. Also, they were deferred for two years from the date of pay-out. Where else can one get terms like this?! Yet, there were a ton of businesses that did not know about this. Furthermore, the PPP Loans were 100% forgivable if the funds were used properly by the business. That's free money! The government is going to spend too much money every single day. At some point, you have to set your personal beliefs aside and fight for yourself. If you won't take it, someone else will.
Yet, back to the topic at hand, to survive the recession, one must also foresee the valley ahead. As a business owner, if you are too tied up in your daily operations to see the future (near future) for your business as a whole within the U.S. market, you will likely fall victim. Don't be a victim. Plan accordingly. Think big picture. Survive to play the game another day. If you'd like help on this, reach out to us at The 3XP Group. We'd love to help you protect you!