Riding High; Preparing for the Downslope
November 08, 2019
By Donna Zincone
EisnerAmper held their Long Island Business Summit on November 6 at the Old Westbury Country Club. The Summit’s purpose was to examine and spotlight some of the dynamics that drive our economy and to help attendees gain valuable insight into the trends and developments that make Long Island so rife with opportunity.
John Simons, managing partner of Corporate Fuel Advisors LLC, moderated a session with speakers Richard Parker, president and CEO of The Metro Group Inc., and Alan Wink, managing director – capital markets for EisnerAmper, on the processes and preparations needed to get your business ready for a softening economy.
According to Alan, we’re experiencing the longest economic expansion since WWII. At some point the economy will soften, and we’ll have to face the inevitable downturn. Economic growth has already started to slow down in major economies around the world. Now is the time for businesses to consider strategies and a business plan for the when the cycle pulls us into a downturn.
Business owners are facing doubt and uncertainty in regard to what will be going on in the next 10 years. Alan mentioned that 70% of our economy is driven by consumer spending --but of course, at certain points consumers become wary. There is uncertainty in the next presidential election. Economic growth in major corporations is starting to slow. The retail model is changing dramatically as well due to new minimum wage of $15, insurance costs and the continued growth of online shopping.
The panel discussed the need for strong financial reporting, so you can stay on top of your financial information. Having immediate access to your data gives you one more tool to enable you to act quickly and re-evaluate your business model and KPIs should the economy start slowing down. Real-time, accurate data is necessary to enhance decision-making for your business. Businesses should also prepare specific downside scenarios as part of their business model.
According to Richard, businesses need to understand the corrective actions they’ll need to take during the downturn. They need to understand how to change their business structure to adapt and get their business back on track. Inventory management, liquidity, and strong equity are all key elements. He said “So if you have a downside scenario where you have to take a haircut on a big portion of your business segment, understand how that loss impacts your cash flow and how to be proactive, leverage and shore up your balance sheet. Evaluate your cash flow regularly with a 13-week cash flow analysis, evaluate payroll costs and manage inventory. Look into diverse revenue streams. Businesses need to be quick and decisive and need a playbook in place to confront the eventual downturn and take corrective actions.”
Alan spoke of embracing technology and automation; and of the need to innovate and increase the value of your people and your business.