By Jay Lesemann, CPA
As of April 25, 2023, the National Bureau of Economic Research continues to stand behind its claim that the United States is NOT in a recession,* even if signs are pointing the other way. For example, the GDP growth rate in the fourth quarter of 2022 was 2.6%, which was below the 6.9% growth rate in the third quarter. Additionally, the unemployment rate has been rising, and the stock market has been extremely volatile (looked at your 401(k) statement lately?).
Obviously, a recession is not great news for businesses. Slow growth, difficulty finding quality help, and rising inflation—can make owning a small business a significant challenge.
But there’s also good news. Economic downtowns can reveal areas of your business that need to be reviewed or expanded.
Here are 6 things you can do now to help ensure your business is on firm financial ground.
Cut unnecessary costs.
Lesemann CPAs can advise you on whether you should reduce your workforce, lower prices, negotiate better deals with suppliers (including what you’re paying for shipping), and more. Cutting expenses should be executed with precision—like using a well-sharpened pair of scissors—not an emotional machete. Being proactive is key. Too often businesses are slow to react to market conditions and bleed money in the process. Using forecasting models, we can recommend adjustments before they become issues.
Focus on your core customers.
Make sure you are providing the best possible service and products to your most loyal customers. Someone once said, “Loyalty takes time to earn and a moment to lose.” Be your customer’s advocate—not just another check they have to write.
Look for new markets.
If your current market is shrinking, consider expanding into new markets or developing new products or services. Again, this is where a strategic financial advisor can help you evaluate the right steps to take.
Get creative with your marketing.
Too often, businesses cut marketing first. Yikes, that should be the last thing they do! Marketing brings customers to you, so be very strategic if you’re considering making a change. There may be ways to market your business without spending as much money, but a full analysis is needed to ensure you’re not “stepping over dollars to get to pennies.”
It’s important to stay positive and focused during an economic downturn. Remember that this is a temporary situation that will eventually improve. A friend of mine in the real estate business told me that even though these downturns are difficult, there is a significant silver lining. Real estate agents who aren’t good at their jobs or treating it as a part-time business often don’t renew their licenses during these periods and find other jobs. This creates more opportunity for experienced, full-time agents who are experts at the home buying and selling process; thus, clients benefit from having more robust representation.
Request a financial review from Lesemann CPAs.
We will thoroughly examine your books and make recommendations that could save you money, not only on your taxes but also on your day-to-day business expenses. We know where to look for expense reductions while at the same time not squeezing your business. If you need to apply for a business loan, we’ll ensure that all your financial documents are in order as well as help to tell your story. If your business plan needs to be updated to reflect these changes, we can do that too. Our blog on business plans can provide some information on the areas we’ll evaluate.
Your business depends on having accurate data so that your forecasting and decision-making have the best possible opportunity to succeed. Having a trusted financial advisor on your team is essential. If you’re ready to partner with us, please call 704-895-6966 or email [email protected].