Are We Headed for a Period
of Slow Growth?
As we are in the midst of one of the longest economic expansion periods in our nation’s history, it is easy to wonder where we are in the economic cycle and when are we headed for the next economic slowdown. Entering the second half of 2019, economic data has been mixed. While most consumer metrics have remained strong, some manufacturing data, while still expansionary, has begun to fade. The question is one that is impossible to answer or foresee, but most economists agree that we are likely “late cycle” in the current economic expansion.
First off, it is never too early to look ahead. Preparing now enables your company to gain market share, maintain a strong base, and, most importantly, accelerate when things begin to turn around.
Understandably, leaders may be reluctant to take strategic initiatives until a real threat has been recognized; however, focusing on forward-thinking actions like the six below can help to benefit your organization in the long term:
1. Remember the saying, “Cash is King”
Companies with extra cash are better positioned to create a competitive advantage. The first thing that occurs when growth slows is customers start paying invoices more slowly and vendors start asking you to pay sooner. A strong cash reserve can help you manage this hurdle as well as position you to take advantage of other, often more prevalent, opportunities.
2. Strengthen your overall balance sheet
- Consider reducing spending on items that are nonessential or nonstrategic to long-term growth.
- Enhance collection efforts on receivables and manage accounts payable.
- Reduce inventory levels to items that either have a strong turnover, or items needed to manufacture orders in your backlog.
- Liquidate slow-moving inventory and turn it into cash.
3. Swim in your sales channels
Your most important business assets are your current sales channels, backlog, and existing customers. To better position yourself for a slowdown, consider using channels to expand sales of new products and services.
4. Diversify
No matter how confident you may be in your existing sales channels, customers and economic factors are often unpredictable, making it easy to remain conservative in your approach. However, it can pay dividends to pursue new opportunities in order to broaden your company's horizons.
5. Outsource non-strategic services
Most companies engage outsourced services (i.e., delivery/transit, accounting/tax, payroll, insurance, etc.). In an economic downturn, a key strategy is to convert fixed costs to variable costs; outsourcing may be one way to do this.
Having a sound strategy in place can pay huge dividends when valuations begin to drop. Identifying targets early can be vital so you can pull the trigger when the time is right.
Although most companies have enjoyed the current economic expansion, an economic slowdown is inevitable. While it is virtually impossible to predict when the next slowdown will occur, one thing is certain: It is never too early to prepare.
