Recession Survival Guide for Businesses
One would think there wouldn’t be a need for recession planning—we should see it coming. The constant sine wave of business cycles makes recessions as inevitable as surging booms. Of course, if you put 10 economists in one room, you’ll get 11 opinions, so the exact timing of recessions is darn near impossible to predict. Still, like hurricanes, recessions come along once in a while, and occasionally one will wreak havoc on the shoreline.
One of the great business models that can teach how to weather recessions is seasonal retail, such as a small business that sells swimming pools and backyard leisure items in the summer. When seasons change its business needs, you can bet the farm that the display changes to snow blowers, wood stoves and chain saws in September, and Christmas trees in December. Recessions come as regularly as seasons, just not as often. Businesses and consumers alike should be prepared for them just as they prepare for winter.
To get started, you first must understand the financial ebb and flow of your business. You should be using a computerized accounting system. Quickbooks is the premier system right now. (If you’re using an old paper system and doing your own bookkeeping, your first task is to change immediately. Buy the software and take a course in using it. They are available online, as well as various classroom settings).
Your primary tools are found in the company financials, sales and customers sections. You will use three primary Quickbooks’ tools:
1. Profit & Loss Statements (P&L). The program will allow you to see all your expenses and income—categorized—and tell you if you’ve made a
profit or suffered a loss during that time period. Run the P&L as far back as you can, five or 10 years if possible. Do it for each quarter and