Strategies for Navigating Economic Uncertainty - Tarsus.pro

Over the past few years, business owners have had to adapt to surging interest rates, sustained inflation, geopolitical conflict, and a US recession that always seems to loom one quarter away. These challenges can make it much harder for business owners to keep their companies on a path to success. With that in mind, let’s explore a few of the best strategies for navigating economic volatility.

Minimize Your Company’s Expenses

During periods of economic uncertainty, the first thing you should do is revisit your company’s expenses. This means conducting tasks like:

1. Identifying and documenting all recurring expenses
2. Renegotiating supplier contracts
3. Searching for cheaper alternatives to existing expenses
4. Considering cutting non-essential expenses

During a potential recession, many business leaders rush to cut the company’s headcount. But there is a good chance that you can reduce expenses elsewhere before turning to layoffs.

Keep an Eye on The Fed’s Updates

The Federal Reserve (the United States central bank) controls the cost of borrowing money across the economy by adjusting its flagship interest rate. This rate trickles down into other areas of the economy, making it easier or harder for businesses to borrow money.

Currently, the Fed’s flagship rate is between 5.25% – 5.50%, and the central bank has signaled that rates will likely stay elevated for longer. It’s a good idea to keep an eye on the Fed’s announcement schedule to get an idea of where the economy might be heading. Doing this can help you understand if the cost of borrowing is getting cheaper or more expensive and adjust your business decisions accordingly. 

Consider a Business Loan, Line of Credit, or Grant

Running out of money is one of the most significant risks for young companies navigating economic volatility. During potential recessions, it can be expected for consumers to quickly pull back their spending – which can cause cash-strapped businesses to go underwater. To avoid this, consider taking out a business loan, line of credit, or grant to have a cash cushion during hard times. All three options will provide your business with cash in slightly different ways:

1. Business Loan: A business loan is a sum of money borrowed by a business from a lender with the agreement that it will be repaid, typically with interest, over a predetermined period.
2. Business Line of Credit: A business line of credit is a flexible financing option that provides a predetermined amount of funds that a business can borrow from as needed – similar to a credit card.
3. Business Grant: A business grant is a sum of money provided to a business by a government agency, non-profit organization, or private institution, typically with no expectation of repayment.
   

Bring on a Strategic Financial Advisor

In many cases, business owners are dreamers who saw an opportunity in the market and took advantage. But, they’re not necessarily financial professionals who are well versed in the financial aspects of running a business. If this sounds like your company, it may be a good idea to bring on a strategic financial advisor.

This advisor will be able to offer advice on best practices to help the company navigate economic volatility. Additionally, you can hire a part-time or fractional CFO to keep costs low and increase strategic insight into the business financials over time.