We have dusted off two previously published blogs focused on uncertainty because the steps recommended worked then and again now. The on and off tariff cartwheel is causing pause everywhere. In the past, the large corporate world was postponing investment, this time the middle market is slowing decisions too. Doing nothing is not a strategy but a reaction without knowing what to do next. We have a few suggestions that can move you ahead in small steps.
Inflation in the US is moderating, but still above 2.5%, which means the Fed is still undecided on interest rates cuts but they have ceased withdrawing cash from the monetary system. While the White House is clamoring for rate cuts, the majority of economists recommend no cuts as they see potential tariff impact as inflationary.
Consumer spending remains strong, but people are changing what they buy according to Costco and Walmart. They comment that consumers are focused more on staples and house brands as the effect of inflation is hitting their budgets. The impact of higher prices and negative economic messaging by the media is causing consumer confidence to decline to new lows. The summer vacation industry reports declining bookings for the summer as demand softens.
Inventories are currently being built in advance of tariff initiation while hiring is slowing. Economists expect companies to reduce buying as customers are expected to order much less at higher prices, thus leading to a business downturn. Trucking, railroads, and logistics firms are already making contingency plans based on alternate scenarios.
So as a business owner, what should you do? Here are some suggestions:
- Look for alternative supply sources that may be less affected by tariffs. Are there substitute products?
- Maintain or increase inventories where possible; tariffs will make existing inventory more valuable.
- Focus on your accounts receivable to increase your cash and avoid losses from struggling clients.
- Focus your employees on managing costs and avoiding discretionary equipment purchases.
- Keep your banker up to date with your strategic focus and profitability management. You will need their relationship if the economy begins to slow.
- If you have international business, establish new subsidiary operations in Canada and Mexico. Trade between these two countries with Europe and Asia will not be affected by US tariffs. Avoid tariffs by keeping international business offshore.
- Have Plan A for a soft landing, Plan B for a recession, and Plan C to expand your business if some competitors falter.
Our sources of information come from ITR Economics, The Wall Street Journal, and industry publications. We summarize multiple opinions and data charts to provide you with strategic insight into operating your businesses.
C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We analyze and advise on these issues frequently through sophisticated modeling and experienced management. Give us a call or visit our website for more information and details.
We have been there and done that through serving more than 100 companies, 250 years of combined experience, and having sold our companies totaling more than $500 million!
