Worried about a Recession or an Economic Slowdown?
Practical Tips to Maintain a Healthy Business
You can hardly get through a day anymore without reading or hearing about the prospects of a recession. As Mark Twain said, "Everybody talks about the weather, but nobody does anything about it."
Rather than buy into all the doom and gloom, we actually feel bullish about 2019 and think you should, too. Here are our reasons for optimism, and later we'll talk about what you should do about it:
- Let's face it, news stories about a looming "recession" sell newspapers, take up airtime on cable TV and motivate folks to click on blogs and business websites. We're concerned all that talk can turn in a self-fulfilling prophecy.
- The unemployment rate in Northern Colorado continues to remain below 3%, and in Houston it remains below 4%.
- In the last two months, the stock market has dropped 15%. Yet even with the recent decline, the market is still up 14% since January 1, 2017. Historically, the stock market has averaged 8% growth per year, so maybe 14% in two years is closer to where we need to be.
- According to Zillow, housing prices rose 8% in Denver and are expected to increase another 7.3% in 2019. In Houston, prices rose 6.9% and are forecast to rise by 3.6% in 2019.
- Maybe what we're seeing is a "cooldown". Low unemployment rates, low interest rates and the recent rise in labor and material costs is unsustainable based on historic trends. Maybe the economy has been so hot and frenetic the past several years, that it's time to catch our breath.
- Do you maintain a Sales Pipeline? Are you tracking the status of pending or proposed projects, as well as marketing for leads on prospective projects? A Sales Pipeline will give you insight as to the volume and velocity of future work.
- Do you know the status of your work-in-progress? Are you tracking profit margins in real time to identify bottlenecks and opportunities to issue change orders? Are you winning the work, but losing the profit?
- Do you sell to customers on credit? Are you watching the aging of your Accounts Receivable? Are the 60+ day amounts beginning to rise? Unlike wine, those receivables never age well. Get on it! Perhaps start asking for retainers and advance deposits.
- Do you make it easy for your customers to pay you by accepting credit/debit cards and ACH payments? Sure there will be a fee, but it beats the time and stress of pursuing collection activities.
- Does your workplace culture reflect thrift and efficiency as core values? Your employees need to understand this is part of their job (as well as to keep their job).
- Do you maintain a rolling cash flow forecast? Perhaps 90 days or for 6 months out? This simple tool can help you predict a crisis and implement preventative measures in the meantime.
In times both good and rough, we are only a phone call away.