QUESTION: Are we in a recession or headed there?
ANSWER: It’s been a rollercoaster in the stock market, but we had a
nice bounce back day to finish the week! Stocks have been priced for perfection
for a while so a pullback was inevitable (and necessary), which unfortunately
uncovers inefficiencies and risks that weren’t apparent during the bull market.
These things always have the potential to cause location specific recessions.
For example, the lower gas prices will put a lot of energy companies (that hold
a lot of debt!) out of business, which may cause potential location specific
recessions (in PA, TX…). NJ/NY/CT is always vulnerable to a banking crisis where so
many families are tied to NYC and the financial industry (losing jobs/bonuses,
etc)- we never know what a pullback in the market can expose (dot.com bubble, real
estate, etc.) but so far there is nothing pointing towards a country wide,
long-term recession.
The wildcard is obviously the coronavirus. Generally (and
historically), pandemics and hysteria like this don’t last too long (testing
will hopefully be prevalent soon, we’ll begin to gain more knowledge, and life
will go back to normal despite the virus continuing to be around...).
Unfortunately, we don’t know when this hysteria will end, so during this time
we need to pull down on our discretionary spending (obviously cut out the meals
and entertainment, travel, product purchases etc.). If you’re getting hit hard,
speak to your landlord and try get to forgiveness with rent (it’s in their best
interest for you to stay in business), and if this continues longer than
expected, obviously you’ll have to look at the team structure and payroll- your
largest expense allocation (which we can potentially also find relief from the gov’t- so much is still outstanding).
This time is a great reminder of our #1 goal- cash cushion!
This is when we use it, to bridge any gap a disruption may cause. If you
don’t have a cash cushion, liquidity is a must- the federal government is trying to help through the SBA (although, you typically have to jump through hoops to get a loan…).
However, banks have opened up, especially local banks in the community. I’ve seen many looking to help the small business owner with liquidity at low
interest rates- definitely a time to contact your local banker and see how they
can help.
During any crisis, leadership within and retention of current clients is the number one goal, with communication by phone to all clients, reassuring them that they have a safe
and clean place to focus on their health. Continue to market- the fitness
industry should come out on top as health will now be a number one focus for all
individuals!
I’ve seen a lot of community support for small businesses, attendance down, but clients keeping their memberships… but no matter where you live, today is about weathering the storm, keeping as much revenue as possible coming in, and when the dust settles, we’ll reassess any damage and create a new roadmap to secure that cash cushion once again!