Skyrocketing inflation and stagnating wages have made many people suspect that a recession will soon arrive. Others argue that the recession is already here. For those with family-owned businesses, you have more concerns than most. You want to look out for your own future, that of your family, and that of the business!
How can you do all of that?
Luckily, history has given us experience and strategies to follow that can help protect your financial interests even in the face of a recession.
Facing economically uncertain times can rattle anyone’s nerves, even if your bank accounts are in good shape. It’s easy to overreact to daunting situations such as a drop in your home’s value or in your stock portfolio. Science shows that we tend to feel a severe aversion to loss, even more than we enjoy rewards. That means that we’re likely to act in a panic and sell off stock to avoid greater losses even when the market might later recover.
What does this mean?
Try to control your anxiety. Do meditation, exercise, and always remember to keep a long-term view. Recessions last an average of just 10 months! Chances are things will spring back and your assets will recover in value. I know it’s hard – but let me tell you that I’ve experienced this first-hand during the 2008 downturn. I lost half the value of my home and my investment properties also took a hit. But, with patience, using a budget, and knowing it was a temporary situation, I weathered the storm. You can too!
Or, on the flip side, take advantage of lower prices to grow. Buy devalued stock that will soon bounce back or consider purchasing other businesses that come up for sale. This can help you advance toward your financial goals.
In your multigenerational family, things can quickly get complicated when it comes to managing savings, investments, and the family business during a recession.
First, ensure that your family’s finances and the family business finances are separate. This will improve your ability to apply for and receive a business loan if necessary during the recession. Also, separate finances will set you up for acquisitions or establishing franchises. Keep in mind, a recession can be a great time to take over a market segment when the competition dwindles. Plus, it’s just good practice to run your family business separately from other family affairs.
During a recession, you can consider strengthening your family’s portfolio by purchasing stock in companies that have lowered earnings but strong potential. When the economy recovers, these will be the first companies to make gains. That way, you can grow your family’s wealth. Other strong options to consider during a recession include government bonds and high-interest savings accounts.
Also, if you haven’t set up a specific family governance structure to help your family communicate about everything from finances to passing on values, and how to pass the family’s history and wealth through the generations, it’s time to get started! This structure will help you communicate effectively and make decisions quickly even during difficult times.
Now, it’s time to consider the family business. A recession can be brutal for business, yet it can also be an opportunity for growth. Family businesses that charge ahead and continue to innovate will do best even during an economic downturn. With that in mind, don’t forget to continue marketing either!
Jewel Brown learned all about starting a business during hard times when she opened her business during the recession of 2008. Getting creative, she ran special discounts and promotions to keep customers coming through her doors! Although she had to skimp and save at home, eventually the crisis passed and her business stayed afloat.
Some things that require little investment but can add big value include improving customer service with extra value or beginning a customer loyalty program. These little changes can increase customer retention and help your business thrive during a recession.
Do you need a financial planner with expertise in family businesses, multigenerational families, and family governance? Elaine King is here to help. Get in touch today!
