7 steps for PE to prepare for a recession


When a weather forecaster says it’s probably going to rain, we instinctively grab an umbrella and a raincoat, knowing it’s best to be prepared. Likewise, when an economist says we’re headed for a recession, it’s prudent to grab a proverbial raincoat. Here are seven steps to prepare businesses for a time of economic uncertainty.

According to a recent article by FinancialTimes, nearly 70% of leading economists predict that the United States will soon enter a recession and that inflation will reach its largest annual increase in 40 years. Now is the time for middle-market private equity firms to adopt downturn preparedness and response plans and provide direct support to their partner companies to weather a downturn.

The middle market does not have the luxury of debating the possibility of a recession. We have a responsibility to prepare partner companies while simultaneously capitalizing on changing market conditions. Control middle-market private equity is in a unique position to help partner firms prepare for economic uncertainty because of the close and direct working relationships they have with founders and senior executives.

As the founder of a Baltimore-based middle-market private equity firm Access funds, my partners and I are control investors committed to building sustainable businesses in essential service sectors. In the aftermath of Covid-19, supply chain disruptions, rising inflation and other crises, mid-market control investors like Access Holdings must have a framework in place to tackle each new challenge. with a repeatable basic formula – assess the situation, plan, act, evaluate and revise the plan.

Access Holdings launched its downturn preparedness and response process with executives, directors, advisors and our portfolio partners in April. As a recession approaches, it is essential to maintain a systematic and disciplined approach to keep everyone aligned and grounded in direction and priorities. Here are seven key steps we are taking to prepare our businesses for a period of economic uncertainty:

  1. Maximize liquidity to protect your business while maintaining the flexibility to respond. Constantly monitor working capital and reassess capital investment plans.
  2. Revisit prices to find opportunities to pass on costs, introduce tiered pricing to retain customers looking to lower prices, and deploy technology to dynamically adjust prices as market conditions change.
  3. Increase communication to ensure alignment and responsiveness across your organization. Establish frequent meetings with management to discuss market conditions, actions taken, and goals/results.
  4. Revisit critical initiatives, such as customer programs or mergers and acquisitions and sort out what is most important for the organization’s long-term growth and success.
  5. Look for opportunities to innovate and evolve your offerings as customers adapt to the changing market environment. Consider consolidating or streamlining offers or launching new offers based on changing customer preferences.
  6. Reduce supply chain risk restructuring supplier agreements, creating new supplier relationships, improving procurement processes and governance, and evaluating alternative solutions.
  7. Automate data collection and analysis using digital tools to quickly collect operational data and external insights to improve decision-making and identify opportunities to streamline operations and improve efficiency.

Hockey Hall of Fame Wayne Gretzky famous: “I skate where the puck is going, not where it was. Anticipate and plan now for future business challenges. This will protect partner companies and their workers from the consequences of a recession and create opportunities for long-term growth once the economy emerges from the other side.


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