The idea of Economic Downturn in the present time could seem like an action that only Debbie Downer could make. In the end, retail sales are at record levels and unemployment is at a record low while that the United States is enjoying the second-longest expansion of the economy ever recorded.
If there’s anything certain about the business world and business, it’s the fact that it’s unpredictable. In this series, we’ll show you how to make sure you are prepared for uncertainty, limit risk, and safeguard your company.
But whatever goes up must be able to come downturn. And as any experienced small-business owner is aware that being prepared for a recession is always a good idea. With many economists forecasting that the possibility of a recession in the coming years it is the perfect time to plan for the future.
Economic indicators that track the economy
Watching the most important economic indicators will aid in identifying the indicators of a recession and can be prepared. Here are some important economic indicators you should be watching:
- Gross Domestic Product (GDP):This measure of the U.S. economy is the most accurate indicator of its overall health.
- The Consumer spending :When consumers are confident about the economic situation, they are able to spend more without restriction.
- Consumer Price Index :If prices rise, consumers will have less money to spend. However If the price of your products are falling this is a negative indicator to your company.
- Consumer Confidence Survey :Indicates the economic optimism of consumers in relation to their savings and spending habits.
- Current Employment Statistics :Monthly indicator of hours of work and earnings.
The Bureau of Economic Analysis publishes monthly tables of the U.S. Economy at a glance that can be very helpful.
Keep track of your company’s most important Performance Indicators
Equally important to the general economic picture is your company’s financial performance. The primary metrics of success (KPIs) that are most important will vary based on the industry you work in and the company’s needs. For most small businesses, they are the indicators you need to be watching:
- Cash flowDo your cash reserves suffice to cover your obligations?
- EarningsHow many dollars is your company earning?
- Margins of Profit:Are your profit margins sound? Are they expanding or shrinking?
- Utilization:Are you using financing efficiently to grow your company?
- Retention of customers:What percentage of the company’s revenue comes from customers who are already there? If you’re seeing high levels of customer turnover or churn, it’s a red flag.
- Cost to acquire a customer:How much does it cost you to find every new customer?
- Value of customer lifetime:How much money can you anticipate to earn from a client over the duration of their association with your company?
Make plans for future financing requirements
The best time to take out a loan is when you don’t require it. Even if you think that you won’t ever need to dip into it, consider different options to access your business capital in the event of. Consider obtaining a business line of credit, or apply for new, low-interest credit cards for business and keep a solid connection with your banker for business. This puts you in a place to tap into business finance when other banks may have run out of funds.
Make sure your business is protected by insuring it
It’s impossible to insure your business against recession however, you can protect your business from dangers that can befall entrepreneurs in every economy. Make sure you’ve got enough coverage for commercial property, general liability insurance as well as the business-income insurance to shield your business from loss or fire, lawsuits, and other unexpected events. It is possible to get all three of these coverages when you purchase the BOP (BOP) at The Hartford.Downturn
Based on the nature of your business it is possible that you will require workers insurance for compensation, commercial auto insurance as well as other endorsements. A conversation with an insurance professional will help you decide on the most appropriate type of insurance for your business with the lowest cost.
It’s impossible to prevent an economic recession, but with the assistance from The Hartford, you can be prepared for the turns and twists life throws at you.Downturn