Goldman Sachs Senior Chairman Lloyd Blankfein—widely regarded as a financial wizard—said this week that there is a “very, very high risk” of a recession in the U.S. With inflation at a four-decade high, painful prices at the pumps, and supply chain problems leaving parents scrambling for baby formula, many other experts agree an economic slowdown is likely, unless Fed policy can prevent it.
“Recession” isn’t a word anyone wants to think about after the two years we’ve just had, but Blankfein is encouraging both big companies and consumers to be prepared. I’d recommend that middle-market companies do the same. We may get lucky and dodge the bullet, but there are too many unknowns to simply hope for the best. There are always opportunities in every business environment, even—especially—in tough times. Disney, Microsoft and FedEx are among those that got their start during economic downturns. The first-mover advantage always belongs to the companies that are thinking three or four steps ahead of their competitors. It should be noted that our last recession was a mere two years ago at the start of the COVID pandemic and ended just as quickly as it started.
Many of our middle-market clients are already working with their Marcum advisors to find ways to insulate themselves. It’s hard to protect yourself from slower customer spending, but one thing every company can control is its own operating costs.
All businesses, no matter how lean, can find savings if they look hard enough. A lot of companies are already understaffed, so “rightsizing” isn’t going to do the trick. What can be very productive is finding new ways to get work done using technology, like self-service options in restaurants and retail stores at the point of sale. Amazon Fresh, where there are no check-outs thanks to overhead cameras and digital sensors, and Panera, which has embraced convenient digital kiosks, are good examples of how to do this right.
Another place to look for efficiencies is advanced analytics. In manufacturing, distribution, and other industries, tech tools that let leaders get a snapshot of every aspect of their operations can point to opportunities for greater efficiencies, such as reduced waste. Inventory management should be an even higher priority than it already is, given the supply chain situation.
It’s also essential to optimize your balance sheet. In any challenging business environment, having a strong cash position, reducing debt, and securing sufficient access to capital can make a difference. Now is the time to identify ways to build a stronger balance sheet for the remaining quarters of 2022.
All of this takes energy, of course. If you’re suffering from CEO burnout—which has been reported to be a widespread problem at the moment—there’s a powerful antidote: Community. Marcum’s event calendar is back live and in-person, with our California Construction Summit and New York Food & Beverage Summit coming up in June. It is an understatement to say that we are looking forward to seeing some of you at these events!
On a more somber note, our hearts go out to the families of the victims of the Buffalo shootings. At Marcum, we reject all instances of hate and racism and are deeply saddened by this senseless and tragic crime. May all of the victims rest in peace.