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A quick how-to guide for businesses preparing for a downturn

The Associated Press//July 5, 2019//

A quick how-to guide for businesses preparing for a downturn

The Associated Press//July 5, 2019//

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Forecasts of slower economic growth during the second half of the year have many small business owners turning more cautious. While economists’ predictions aren’t dire, owners who remember the lessons of the Great Recession are nonetheless becoming even more careful about increasing their risks than they have been in recent years.

Here are steps owners take when they’re uneasy about the economy.

— Hire cautiously. Many owners have been cautious about hiring ever since the recession, not wanting to hire staffers they might have to lay off if revenue falls off during a downturn. In a Wells Fargo survey taken during the second quarter, 26 percent of owners questioned said they plan to add jobs over the next 12 months, down from 29 percent in the first quarter. A U.S. Chamber of Commerce/MetLife survey also taken during the second quarter showed that fewer retailers planned to hire over the next year — 21 percent versus 36 percent during the first quarter.

— Scale back capital investments. The Wells Fargo survey found that the number of business owners planning to increase their spending on equipment and other big-ticket items and investments fell by 2 percentage points to 33 percent. While that’s not a dramatic change, it does point to owners taking fewer risks.

— Lower expenses. Although the government doesn’t track companies’ spending on items such as rent, utilities, supplies, meals and other everyday expenses, owners do look for ways to save money when they fear revenue will fall. Purchases are prioritized with many non-essential items put on the back burner.

— Manage inventory. Businesses have been paring back their stocks of raw materials and supplies. In a monthly survey of manufacturing executives by the trade group Institute for Supply Management, an index measuring companies’ inventories fell 1.8 points to 49.1 in June from 50.9 in May.


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