Economic / Future Trends

Is your business ready for the next slowdown?

CEOs are feeling pessimistic about the future of the U.S. economy, thanks to softening customer demand, erratic trade policies and unpredictable tariffs — all of which are making it difficult to make decisions and plan for the future.

In fact, in a survey conducted in June by the research team at Vistage, only 13% of CEOs expected economic conditions to improve, compared with 32% the year prior. That’s according to the Vistage CEO Confidence Index survey, which measures the economic optimism of CEOs each quarter.

The Q2 Index, created from data from over 1,400 leaders of small and midsize businesses, found that CEO confidence was at its lowest point since Q2 2016, leading up to the presidential election.

The survey also found that:

  • 35% of CEOs anticipate an economic downturn in the year ahead
  • Fewer firms (64%) expect increased revenues and profit growth
  • Fewer firms (56%) are planning to hire or invest

 

“We’re toward the back end of the cycle,” says Connor Lokar, an economist from ITR Economics. “We are seeing waning confidence on both the consumer and business side of things. And when those two converge, it typically indicates a downward trajectory for the growth of the economy.”

The outlook may seem grim. However, the news isn’t all negative. There are no massive layoffs happening, and housing prices have not collapsed. Also, employment is high and inflation is low. We are not on the brink of a financial meltdown.

That said, the economy is slowing, and CEOs should take measures to weather the coming recession. From our latest report, here are 5 ways to protect your business in today’s uncertain economy.

1. Manage your cash flow.

It’s time to give your balance sheet a hard look. For example, could your loan agreements create liquidity problems if your lines of credit are withdrawn or recalled? Growth is predicted to slow over the next four quarters, and cash flow considerations will be key.

2. Take advantage of sliding interest rates.

Falling interest rates are silver lining in the cycle. Interest rate traders expect the Fed to cut rates by 25 basis points once or twice this year. And the 10-year treasury rate is starting to slide due to mild inflation, global economic uncertainty and an appetite for U.S. treasuries.

“This offers some debt-restructuring opportunities for companies,” says Lokar.

3. Prepare your employees for change.

Coming off the tremendous growth of 2017 and 2018, many employees may not fully appreciate the challenges to come. 

“Everyone’s mugs are topped off with Kool-Aid,” Lokar says.  “Everyone’s buying into their own hype. They’re used to hitting stretch goals and getting bonuses and healthy raises.”

Communicate to employees that external economic forces could bring some negative pressure. If employees are unprepared, the expected downturn could be a rude awakening.

4. Snag top talent while you can.

Some turnover is likely in a soft economy, and you should take advantage of the hiring opportunities in this environment. 

“If you can afford to pick up the extra payroll expenses, grab those individuals in preparation for the next growth cycle,” Lokar says. “This is a nice opportunity in today’s labor market.”

5. Empower your people. 

Don’t try to steer your ship alone; share your map with everyone on the team. 

“Communicate information downward and outward so that everyone understands that the waters are going to get a little rougher over the next year,” Lokar says.

This post was originally published on Inc.com on Sept. 24.

Category: Economic / Future Trends

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Joe Galvin About the Author: Joe Galvin

Joe Galvin is the Chief Research Officer for Vistage Worldwide. Vistage members receive the most credible, data-driven and actionable thought leadership on the strategic issues facing CEOs. Through collaboration with the Vistage community of…

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