There are economists saying we’re currently in a recession. Some also claim that economic stagnation is on the horizon. Others think that the economy is finally leveling out after the turbulence of the last few years. These are all good guesses, but there aren’t any clear markers to indicate which is the most accurate.
While I can’t say for sure which is correct — everything about today’s market is a rollercoaster — I can, however, say two things I know for sure:
- The economy is definitely tightening.
- The best time to start planning for your company’s future is right now.
A few weeks back, I had the opportunity to attend the 2022 CFMA tradeshow where I had some eye-opening conversations. I was able to speak with some of our clients, getting both their reflections on the last few years and their expectations for what’s to come.
The construction industry has been doing well, and contractors are pleased with the gains they’ve experienced — they’ve established great pipelines and have been very profitable over the past few years. But still, they’re far more cautious than celebratory, concerned about getting caught unprepared if — and when — the market destabilizes.
As the economy constricts — with material shortages halting production, high labor costs impacting jobsites and gas shortages causing spikes in prices — companies are finding themselves without a backup. The contractors I spoke with feel as though they’ve been too focused on immediate concerns like monitoring their current jobs, handling labor shortages and managing the backflow of projects. Worrying about a contingency plan to handle a recessing economy wasn’t something they considered, and now there’s the fear of getting caught in a bad situation because they weren’t looking far enough ahead.
The good news is there’s still time and opportunity to develop and evaluate your company’s financial plan. Consider the following questions (and if you don’t have a solidified, well-thought-out answer for each of them, it may be time to start devising a strategy for the future).
- How are you getting in front-of and managing your debt? What will high interest look like for your company?
- What does your access to capital look like?
- Are you calculating your cash flow, and how far into the future are you accounting for? Is it enough to sustain your company during a time of economic instability?
- How often are you looking at your balance sheet and are you using the presented information to make sound financial decisions?
It’s always a good thing when a company does well. It’s even better when a company can sustain their good fortune. Congratulate yourself for your current success but still keep an eye to the future. It’s always a suitable time to monitor your cash flow and find ways to unload your debt.
Preparation is the key to withstanding an unpredictable economy. Stop waiting. Start now — the clock is ticking.
 Weiner, Jeffrey. “Recession?” Marcum. 20 May, 2022, https://www.marcumllp.com/thoughts-of-the-week/recession