Edward Tuorinsky, Managing Principal of DTS, brings two decades of experience in management consulting and information technology services.
Signs are starting to point to a recession just as businesses were hoping to emerge from the pandemic times. The economy is the latest challenge in a string of unnerving events for businesses and their leadership. How you respond now will determine where you land after this storm has passed.
I’ve always found that in times of turmoil, it’s best to go back to the basics. The strategies that build a strong business foundation can carry you past any number of obstacles or roadblocks. And starting early is its own advantage; while others panic or scurry later, you’ll already have a plan. Begin with five foundational strategies:
1. Set a budget and shore up cash reserves.
Creating and tracking a budget provides insight into how you’re spending your money and your cash flow throughout the year. In lean times, it’s more important than ever to have a detailed plan for the expenses you know you’ll have, from employee pay raises to insurance premiums to hardware upgrades, as well as the activities you know you need to do, like protecting data and systems or complying with industry regulations. I encourage you to think through every line item, right down to hosting next year’s holiday party and work perks like gym memberships. That level of detail allows you to make choices quickly if you need to free up cash.
And speaking of cash reserves, 90 days’ worth, or the equivalent of 4-6 payrolls, is the amount of cash you need to have access to. If you don’t already have lines of credit, the time to set that into motion is before you need it and, hopefully, before there’s more of an economic downturn. Better to have it and not need it than to need it and not have it.