Economic Slowing is Beginning to Show: How to Prepare with Contingency Planning

If you’ve been keeping up with recent economic news, consumer spending has plateaued, construction companies are laying off workers, and manufacturing plants are running below breakeven volumes. John Deere & Co. just announced they are cutting back production and laying off salaried workers. The Wall Street Journal carries daily stories about the Fed keeping interest rates high for the extended outlook and reports continued slowing of consumer spending, which past indicators mean recession.

We’ve been talking about an impending recession for a couple of years now, and even with this unwelcome news remaining in the media, there are companies doing very well, but are wondering when the music will stop. Smart companies are looking for early warning signs of a slow-down in their markets. We recommend doing some contingency planning now, even if your company is doing well. Having a plan in place if the slowing indicators appear, will allow you to react faster than your competitors and gain at their expense.

?Consider these actions to build a strategy and plan steps to protect your company from deteriorating markets:

• Review inventories and discount for sale the slow-moving stock. Create extra cash now for insurance or reduce currently expensive debt.
• Review surplus equipment and determine if it should be sold to generate more cash.
• Set up frequent reporting of customer habits that may be changing. There will be early warning signs that must not be missed.
• Make reducing bank debt a priority with cash flow and give capital expenditures a second review.
• Create a human capital plan that identifies key people needing to be reassured that their jobs are safe and determine who is expendable if the slowdown is severe for your firm.
• Create multiple sales plans to increase selling efforts, and alternate pricing structures to gain market share and prepare for competitors panic price cutting.
• Understand your cash flow structure and reinforce your forecasting capabilities for 26 weeks of cash management. Early warning of issues supports better problem solving.
• Even with continued bad news, there may be opportunities for you. If your cash flow remains strong, look for opportunities to get inventory at better prices or equipment at bargain prices.
• Think about how to maximize revenue growth if you do not see a significant slow-down. Your competitors could overreact and hand you market share.

While this approach is not entirely bulletproof, our experience shows this process improves success rates. It’s the attention to detail that improves execution and increases the business acumen of your team. The process also supports forward-looking behavior, and the adoption of better ideas and processes.

Our team has succeeded in these fast-moving environments and can share client success stories, as well as achievements from running our own businesses. We invite you to reach out to discuss ideas and we welcome challenges to our stories. All you need to do is send us an email or phone call—and see if we do know how to manage your situation.

C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We mentor and advise private company officers frequently through sophisticated and experienced management experience. Give us a call or visit our website for more information and details. We have been there and done that through serving more than 100 companies, 250 years of combined experience, and having sold our companies totaling more than $500 million!