I wrote an article for Business Niagara's September issue on recession proofing. Here's an excerpt:
For the past decade we’ve enjoyed a booming economy in Niagara. Our manufacturing, tourism, wine, agricultural and commercial sectors enjoyed solid growth through the golden days of the late 1990s. At the same time our low-trading dollar made Canadian exports and travel here inexpensive and therefore attractive. The rapid expansion of Niagara’s tourism, wine and gaming sectors made Niagara one of the province’s hottest economies. Niagara was so seemingly untouchable that even as the nation started exhibiting the signs of recession Niagara managed to survive.
Unfortunately, the ride has ended. Recent interest rate hikes, increased competition from Asian economies, a strong Canadian dollar, high-energy costs and a coming requirement for passports for American visitors all point to an economic slowdown that could be especially challenging for Niagara.
Now I’m not an economist, but having worked with entrepreneurs and senior executives in planning and managing their personal and business finances, I have learned some important lessons.
While the extent of the slowdown remains to be seen, one thing that’s certain is that a tightening is in the offing. I believe there are key steps that would benefit almost any business during periods of reduced or negative growth.
The fact is that most businesses don’t experience critical financial challenges (e.g. bankruptcy) during recessionary periods. Tight times call for drastic measures so these businesses extend their payables and push their receivables; they deplete their inventories and overextend their credit facilities. Too often businesses survive the slowdown but face the real challenges on the upswing and often can’t fulfill new orders when things have improved. Too many businesses go bankrupt with work and contracts on the books.
The lesson I’ve learned from my smartest clients is that planning and proactivity on the front side of a slowdown are critical factors in riding out a downturn. These individuals have learned to anticipate and to prepare their businesses to weather the storm before they’re forced to react. The result? Businesses emerge leaner and stronger on an upswing.
These are the business owners who treat the recessions, downturns and slowdowns as opportunities to improve efficiency.
Obviously slowdowns have differing effects on Niagara’s industries. Manufacturers are going to feel the impact of a slowing US economy more than our service sector. Domestic travelers or even visitors from emerging markets like China could offset potential waning US demand for Niagara’s tourism sector from passport requirements.
It is important not to generalize about the specific impact of a slowdown on any Niagara sector or individual businesses, however, in the face of ‘macro’ trends, I believe there are steps that would benefit most businesses confronted with a slowing economy.
I continue on to offers steps to prepare and protect from a recession. I think it was a decent article and certainly generated some great disucssion and comments from clients and friends. I encourage you all to pick up a copy of Business Niagara it's a great magazine and always has decent info and profiles on Niagara Businesses.
CK
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