How to Prepare Your Business For Economic Downturn
Covid has had a devastating impact on the entire economy. Before this pandemic, economists were warning of a possible recession in 2021. Despite this, many business owners were still taken unaware and remain concerned with how to keep their doors open.
Unfortunately, it looks as if we will be struggling with these economic problems for the coming months. According to an IMF statement, the outlook for global growth in 2020 is negative, and it will be at least another year until we start to see recovery.
Here we'll explore some tips and advice to help make your business recession-proof so you can weather the coming storm.
Signs of a recession
The full implications of Covid have yet to be discovered, but there are some warning signs that we're headed for a serious recession. Here are a few examples:
A dramatic increase in unemployment: There are millions of workers currently furloughed, and it is anticipated that these may contribute to a dramatic increase in unemployment. A rapid rise in unemployment rates is a sure sign a recession is on the horizon.
Consumers losing confidence: When consumers are feeling good, they spend more, but as confidence in the economy drops, spending habits tighten. When consumer spending does slow, it is a normal indicator of the arrival of a recession.
Workers don't quit: As a business owner, you can develop a sixth sense for when you have an unhappy employee who is getting ready to quit. When the economy is good, workers are more likely to walk out and quit as they are confident they will be able to find other work. However, as confidence in the economy starts to fall, most workers will stick with their jobs as they fear they may not find something new. This trend is monitored with the U.S Labor Department's Job Openings and Labor Turnover Survey. This data is released every quarter, and September's figures for quarter two are anticipated to show a lower quit rate compared to last year.
New car sales drop: After a home, a car is likely to be your biggest purchase. While you may need a car to get around, you don't need a new car. During strong economic times, there are more new car sales, but as a recession approaches, sales of new cars drop.
Erratic interest rates: When interest rates behave erratically, it is a key indicator of an impending recession. Normally, you may notice a 10-year note pays higher interest than a three-month bill. However, as a recession approaches, there is an inverted yield curve, which occurs when long-term yields offer a lower interest rate.
Fewer opportunities for temps: As the economy dips into a recession, it is harder for temps to find work. The opportunities for temps tend to be more available when businesses are struggling to meet demand and need additional help. As the economy sours and demand shrinks, companies no longer need temp staff.