The U.S. economy, and New Jersey’s with it, has been growing for a historically long period. While this is good, it has many people wondering when the growth period will finally end and the economy will contract. While we don’t have any answers to that question, the news website Allbusiness.com has some advice for businesses on how to prepare for an economic recession.
Michael Evans, managing director for the Newport Board Group, says an economic downturn is always possible, and whether it reaches the level of a recession or not, employers can have their organizations ready for when it comes.
“In the event of a downturn, you’ll no longer be insulated by growth,” Evans writes. “Disciplined decision-making will be essential. You’ll need to lead with the right proportions of cost-conscious frugality and bold innovation.”
Evans suggests businesses:
- Manage profitability.
“A 10% decline in revenue could wipe out the entire bottom line of your company,” Evans says. “Having a contingency plan to produce marginal, short-term profit despite a drop in revenues can make all the difference.”
- Identify and maintain strengths, best customers.
“Identify the strengths that have enabled your success to date, and those that will be important in the future,” Evans says.
- Be ready to decide what you can stop doing.
“Companies that create enduring value typically excel at discontinuing what no longer adds value,” Evans says. “Be ready to make changes in cost structure that will least damage your strengths and will hone your value proposition down to what customers really value.”
- Manage liquidity as hard as profitability.
“A downturn might force you to deal not only with negative growth but also with liquidity constraints. Trying to maintain liquidity on a smaller revenue base can be crippling,” Evans says.