Wouldn’t it be wonderful to have a crystal ball that could provide an accurate forecast of what was ahead for the economy and your business? Without that in hand, we’re left to rely on the minds of economists and an analysis of historical trends. With central banks raising interest rates to fight inflation, what we’re hearing and seeing more and more these days are forecasts of a recession in 2023.
Whether or a not a recession happens – and how long it may last – remains uncertain. But either way, it pays to be prepared. Here are some ideas to help get your business through an economic downturn and get set up for growth when the recovery comes.
Inventory management: Review worst-case scenarios – and find your comfort zone
If your business sells goods, managing inventory can be tough. This year has been particularly challenging because looking to last year doesn’t provide much guidance. During pandemic restrictions when many sectors such as restaurants, tourism, and events were put on pause, more money flowed into goods – from bicycles to home gyms and computers for home offices.
Now the script has flipped, with the demand for goods lessening, resulting in higher store inventories and empty shipping containers piling up at ports around the world. Vacations, outings with friends and other in-person experiences are high on consumers’ priority list now.
How does a business manage through such an environment? The key is to keep in constant contact with your accountants and other professionals, and get granular with the data. With the economy changing quickly, you need to monitor your business and financial data to watch trends that occur on a monthly, or even a weekly, basis. From there, find a comfort zone on inventory levels that works for you, in relation to your cash flow and capital.
Review your supply chain – and buy closer to home where possible
You may have heard about the trend toward “onshoring.” It means that with global shipping networks seizing up, as they have in the last three years, more manufacturers are moving their operations closer to home.
One factor driving the move has been China’s strict COVID-19 protocols, which have repeatedly shuttered its factories, delaying product shipments, often for months. The response has been swift, with makers of everything from electric vehicles to medical devices and even microchips recently announcing new North American plants.
The takeaway? Keep your supply chain under constant watch. If you get an opportunity to source goods closer to home, consider taking it, even if it means paying more. The added reliability may be worth it.
Employee compensation – think flexibility and benefits
If a recession does come, it will do so with an unusual twist: a desperate shortage of workers. As of the second quarter of the year, there were nearly one million job openings in Canada. That’s raised hopes that a recession will prompt businesses to simply take down their “help wanted” signs instead of resorting to layoffs.
Even so, workers will likely remain scarce, making it critical that businesses keep as many of their top performers as possible, so they’re ready to move and compete when the recovery comes.
However, many businesses may not be able to offer higher wages in a recession. If your company is among them, consider other ways to attract and retain talent. Things like improved medical and dental benefits may be good options, or ensuring your benefits plan includes a mental health component (more on that below).
Remember also that the pandemic has prompted many people to re-evaluate the role of work in their lives and put more emphasis on time spent with friends and family. To that end, consider offering flexible hours, more opportunities to work from home or more personal time in lieu of higher wages.
Get staff interacting to boost mental health
As we head into 2023, it’s important to bear in mind that we’re also moving into another year of uncertainty – following several years of dealing with the pandemic, isolation, soaring inflation and now a potential recession threatening jobs. Supporting your employees’ mental health is always key, but it’s especially so today. Adding mental health services to your benefit package is one way to do this.
Other options could be as simple as increasing contact between your employees wherever possible. This could be as easy as organizing regular outings for your staff so they can reconnect and get to know one another better. However you plan them, get-togethers can be particularly helpful if you have home-based employees, as in-person connection can take away the feeling of working in a vacuum that these employees can sometimes feel.
A tip for after the recession: Lock in lines of credit for the next downturn
Finally, a recession will undoubtedly bring lower interest rates. If that’s the case, it may be a good time to speak to your advisor about arranging lines of credit at lower rates, or other lower-cost borrowing options. You don’t have to use them, but having them on hand could be a big plus when the next downturn or bout of inflation hits, if you need lower-cost financing to sustain your business until things turn around.
Get ahead of business challenges with the right advice
As a business leader, you’re often busy dealing with day-to-day issues – it can be tough to look past next week, never mind planning for next month or next year. Your BlueShore Financial advisors are here to help. It’s their job to learn the ins and outs of your business and give you a vital outside perspective. They can also connect you with financing, everyday banking and other financial services that could save you money and help you grow your business. Make an appointment today.
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