How to Proactively Plan for a Recession

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Because indicators show a recession may be on the horizon, advance preparation is always a part of good planning. For your business to survive during and thrive after a downturn, you need to plan proactively. Here are some steps you can begin implementing today.

6 Ways To Prep For A Recession

1. Regularly Trim Costs

Cutting your overhead is essential to lightening your load. Outsourcing back-office tasks, for example, can save you time, money, and resources. Madison Resources is a great solution for this

2. Pay Down Debt

Before a recession happens, pay down company debt. Having strong balance sheets provides leverage to take on additional debt to acquire competitors or assets at lower costs during a recession. Ideal M&A candidates may be too expensive now but less costly during an economic downturn.  

3. Create a Mergers & Acquisitions Pipeline

Develop a list of M&A to pursue during a recession. Start by stress-testing your P&L and balance sheets to determine whether an M&A may be possible. Run a typical recession through your financial planning model. Since your results probably don’t meet cash flow and earnings needs, determine which steps can be taken to attain desired outcomes, such as cutting staff and canceling capital expenditures, and when the best time would be to take those steps. Keep in mind that it may take multiple tries to figure out action steps and proper timing that would leave the company healthy during a recession.  

4. Maintain Effective Management Practices

Be sure your company upholds healthy management practices at all times. For instance, emphasize top priorities for sales. Properly align your locations with business potential. Focus on positive customer experiences. Maintain everyday best practices, including during a recession, to increase your odds of making it through.

5. Deaverage Offerings

Apply different prices for services based on where they’re being offered. Because your geographic and business units may be affected differently during a recession, you need to increase revenue wherever possible. Understand the environments in which your company operates and choose your approach to strategy and resource allocation accordingly. 

6. Divest Assets

Sell off underperforming assets or divisions and high-performing, non-strategic assets. This is especially important if your business is capital-intensive or diverse. You can put off losses and reduce debt while generating liquidity and working capital. When categorizing company assets by underperforming or high-performing and strategic or non-strategic, be sure to consider the timing, need, and immediate and long-term financial impact of the sales. Keep in mind that you may be able to enter into sale-leaseback transactions for specific facilities to raise capital while keeping the use of necessary assets.

Leverage Madison Resources’ Expertise

Leverage Madison Resources’ expertise. We offer detailed profitability and operational analytics, expert financial management planning, and funding for acquisitions and other working capital needs. Talk with us today to learn more.