Castle Wealth Advisors, LLC
Analysts say the economy is getting lethargic in 2008 -- some are even whispering the "R" word -- recession, and this has business owners worried. "But there are important things they can be working on," said Gary Pittsford, CFP, CEO and President of Castle Wealth Advisors, LLC. An Indianapolis-
1. During an economic downturn, he recommends business owners keep their gross margins as high as possible. "Maintaining usable cash flow is important in good years," he said, "but even more so in bad years."
2. He says business owners should watch their expenses, compared to normal national averages. This includes payroll, rent, advertising, and accounts receivable. Collecting the accounts receivable in a bad year is very important; you want to collect cash quickly. If customers file bankruptcy, that's bad too, so get as much collateral from your customers as possible. And the harsh reality of downsizing is another issue small business owners might consider too. If General Motors can layoff 10,000 employees in a bad year, it may be necessary for you to let go of two or three of your workers as well.
3. Liquidating old inventory is the third most important point you might do to weather a slowing economy. Slashing prices on slow moving and old merchandise gets customers in the door and that old product off your shelves, which will generate the important cash flow you may need this year.
4. Finally, go hunting for lower interest rates for loans you may have outstanding. Dropping rates have been the trend for the past 12 months, so now is the time to take advantage of lower rates and the savings refinancing brings.
If recession hits in 2008, it should be a short one, but you want to come out of this year with strong profits, higher gross margins and lower expenses than you had last year. While sales may be sluggish this year, budgeting and cutting costs could neutralize the effects of a recession on your business. Getting back to the basics in a slow year will save you money and strengthen you business.
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