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Eric McKinney
/ Categories: Bank, Finance

Protecting Your Business Financially

Protecting Your Business Financially

The U.S. economy is an incredibly complex beast, and trying to understand and predict when the next recession will come can be a daunting undertaking, if not outrightly impossible. The simple truth is that you should always be prepared for the worst, and take steps to ready your business to weather any potential storm of economic upheaval. Here are 5 simple steps you can take to make your business more resilient to changes in the economy.

Diversify Services and Have Savings

It’s important to set aside a portion of your earnings into a savings account that won’t be impacted by the markets so you can keep the doors open when times do get tough. Diversifying the products or services that your business offers can be a good way to keep multiple options for revenue open so the damage to your bottom line is limited. This way you can also refocus your financial opportunities when the markets allow for it.

Set Aside Enough into Your Financial Reserves

Financial experts advise that, generally, your business should have a healthy amount of reserves (six to 12 months’ worth of expenses) in your business bank account. Having a business line of credit in place can also help bridge the gap when things do slow down or in emergencies. Having enough saved to weather the storm can oftentimes be the deciding factor between success and failure.

Evaluate All Aspects of Your Business

Running a business makes plain that your revenue will always experience peaks and valleys. A smart way to set yourself ahead of the curve is to utilize the good moments to reflect and assess. What aspect of your staffing, inventories, and compensation is lending itself to your success? Where can costs be saved, and are you able to downsize? Asking yourself these questions in moments of financial booms can help to prepare you for if, and when, the markets turn against you, thus enabling you to react to the lulls in your business calmly and quickly.

Watch Debt and Look Out for Redundancies

As a decade of historically low interest rates comes to its conclusion, it’s crucial as a business owner to make efforts to eliminate as much debt as they possibly can before a recession hits. An overall assessment can help you identify any redundancies in your business and figure out if you have room to downsize or eliminate costs.

Prepare for Two Major Impacts

Finally, preparing your business for not one but two consecutive economic downturns can be the key in ensuring you endure a recession. If you adopt this mindset formally, and proceed to implement this thinking in planning your budget, growth plans, and financing, you may set yourself up to mitigate the impact of an economic downturn and ensure that you are able to maintain healthy growth and stability.

As is the case with any kind of significant planning, it’s important to have partners you can trust to help make decisions and navigate a good course of action. The Eaton Business Team is always a good place to start.

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