By Brett Cheney, Peoples Bank Commercial Market Leader
Economic cycles are inevitable, and few can accurately predict whether they’ll be sustained or short-lived. It’s the erratic nature of them that make a strong partnership with a reliable financial institution so crucial. At Peoples Bank, we take pride in providing a higher level of service to our customers with expert advice focused on long-term reliability for your business. With over 100 years in business, Peoples Bank understands the ebbs and flows of economic and business life cycles.
Understanding economic contraction
It may seem counterintuitive, but a down cycle or “economic contraction” can be beneficial for your business in the long term, if approached strategically. During this period, it is easier to identify less productive assets as well as cash flow drains within your business. Because a down cycle often occurs in tandem with other disruptions, if your business can weather the proverbial storm, this can be the time to create, innovate, and optimize your business. The only constant, after all, is change.
The present dictates the future
Understanding where your business is at in the life cycle can be as important as understanding the economy. Forbes describes the business life cycle as a spectrum with four phases: Startup, Growth, Maturity, and Renewal. Knowing where your business position on the spectrum should inform your decisions in times of economic uncertainty.
Managing your business for a down cycle
You should not only understand your business today but anticipate and plan for your business in the future. Assess how your business will be impacted by the subsequent phases of the economic cycle and prepare to take advantage of that position. Starting from a position of strength makes navigating economic cycles easier. To start from a position of strength, you should have your balance sheet and income statement positioned for cyclicality.
To increase your business’s durability through cycles, when times are good, build liquidity, keep debt levels moderate, and build equity. One way to increase resiliency and limit tax liabilities is through a Capital Construction Fund, contributions toward your retirement, and purchasing of productive assets. As you navigate cycles, look, for opportunities to limit concentrations in earnings and be sure to actively manage your expenses.
Peoples Bank wants the same thing as you: Success and longevity for your business. I hope you will reach out to me or another member of the Peoples Bank commercial team if you have questions. Your business started as a dream, together, let’s help your dream grow.
Brett Cheney is a Commercial Market Leader at the Peoples Bank Ballard Financial Center. To learn more about commercial maritime lending at Peoples Bank, visit their website at https://www.peoplesbank-wa.com/business.
About Peoples Bank
Peoples Bank is a locally owned and operated, independent full-service community bank with $2.4 billion in assets. Headquartered in Bellingham, Washington, Peoples Bank has been serving the community for 100 years and operates 23 locations throughout Washington. Reflecting its strong financial management practices, dedicated employees, and long-standing customer relationships, Peoples Bank was awarded a superior five-star rating from BauerFinancial, a leading independent bank rating firm. Learn more about Peoples Bank at www.peoplesbank-wa.com. Equal Housing Lender. Member FDIC.
Originally published in Fisherman’s News
Equal Housing Lender