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posted: 10/16/2019 1:00 AM

Surviving and thriving during an economic downturn

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The rumblings are getting louder. As we enter the 124th consecutive month of economic expansion, economists point to varying factors that may be precursors to the next downturn. Pair that with the typically higher volatility of an election year and there is reason to proceed with caution. The Federal Reserve's reversal of its position on inflation and interest rates has many asking questions for which there are no clear answers.

While no one has a crystal ball, economic cycles exist because what goes up eventually comes down. Now, with the Great Recession almost ten years in our rearview mirror, we are all better positioned to leverage the lessons learned into preparedness for what may lie ahead.

Mid-size and small businesses have played a key role in driving the economy forward in the years after the last economic downturn. Because of their size, these more nimble organizations are sometimes better positioned to pivot on strategy and seize opportunities to gain market share from their slower moving, larger competitors. However, no business is immune to the economic cycle.

What can business owners do to ensure that their companies survive and thrive through the next cycle?

1. Identify risks and vulnerabilities. Risk management should live and breathe in your organization. As we contemplate the possibility of a downturn, managers should consider their company's strengths and vulnerabilities. Evaluate everything from process to profitability. Which risks can you accept and which do you need to mitigate? What performance indicators do you monitor and why?

2. Be proactive, not reactive. If it's broken, fix it. If it works but can be improved, make a plan and execute. Good operators set quantifiable goals and measure performance against them. Projecting performance and setting goals provides the company road map for employees to follow, but also creates an opportunity for managers to share vision and communicate priorities.

3. Maintain open communication with your banker. If you don't have a solid relationship with a banker who knows your business, you need one. And like in any good partnership, communication is key. If you take the time to make sure your banker really understands your business at a day to day level, then he or she will be in a better position to understand the stumbles when they occur.

4. Liquidity is king. When downturns occur and demand for a company's product or service falls, revenues drop and profitability suffers. Companies caught in a tough cycle often do not manage their liquidity properly and their reliance on outside sources increases, making their business more vulnerable. Analyze your company's liquidity and have plans for back up sources when internal sources become scarce.

5. Stay true to your roots. This advice comes from personal experience. My business partners and I started Signature Bank in 2006 and the Great Recession began in 2007. One of the main reasons we were able to succeed is that we stayed true to our core competency of middle market business banking. Because we were able to avoid major missteps, we grew our company through the worst economic times and, in turn, helped a lot of Chicago area companies along the way.

No one knows when the next economic downturn will arrive, how long it will last and how deep it will be. But by making some of these priorities part of your strategy, you may find yourself in a better position to manage through the leaner times and strengthen your company along the way.

• Kevin Bastuga is co-founder and director of Signature Bank, based in Rosemont