Questions to ask amid economic jitters

BVWireIssue #203-4
August 28, 2019

economic data for valuations
economic forecast, industry analysis

Whatever your feelings about the recent inverted yield curve or downbeat economic surveys, more business owners may be awake at night worrying about an oncoming recession. Earlier this year, a survey found that over half of small-business owners felt that a recession was coming. A recent survey by the National Association for Business Economics reveals that 74% of U.S. business economists expect a recession in the U.S. by the end of 2021. If business owners feel bad times are coming, they will (hopefully) take steps to help survive, which may impact operations and forecasts.

Ask questions: Looming economic trouble should trigger some questions on an analyst’s part during the due diligence process. Examples: Are you taking any steps to conserve cash in case you hit a slowdown in sales? Are you arranging for financing now before credit tightens? Will you be delaying expansion or large capital expenditures? How do you think a recession will affect your suppliers and customers? Are you diversifying your base of customers and suppliers to blunt the recession’s ripple effects on your company? You get the idea. Make sure you understand the potential impact of these types of issues on your subject firm.

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