By Eric Gelb, CPA, Senior Managing Director and Elisha M. Brestovansky, CPA, MBA, Director
In an environment marked by fluctuating tariff negotiations, ongoing debates in Congress over tax proposals that could significantly impact businesses and divergent views on whether a V-shaped recovery or a potential recession lies ahead, businesses are navigating considerable uncertainty. Regardless of what the future holds, it’s crucial for businesses to strategize and plan proactively. While factors like tariffs, tax policies and broader market dynamics may be beyond a company’s control, there are actionable strategies to position your business for resilience and potential growth.
Here are 10 strategies to position your business for a recovery and mitigate the impact of potential economic downturns:
1. Keep an eye on the news – but don’t overreact. Plan for the unexpected.
Changes in tariffs and tax laws, of course, can have big impacts on businesses. The tariff situation, however, has taken a number of unpredictable twists and turns. On the tax side, Congress is still in the very early stages of the debate – so any bill on the table now could be significantly modified or gone altogether when they get to a final bill.
Prudent business leaders are watching things unfold and considering their options – evaluating their supply chains and ways to mitigate the impacts of tariffs, watching the tax debate and understanding which proposals should be tracked because the final result will impact their bottom line.
The prudent path is to analyze and plan for as many potential scenarios as possible and create ways to mitigate those scenarios. If, for example, revenues fall short of plan and expenses exceed plan or if sales fall XX%, we will need to cut travel or selling, general and administrative (SG&A) expenses by XX% to make up the difference. Run cash flow forecasts under several scenarios (e.g., meeting plan, missing plan by 10%, 25%, 50%, etc.). Look for ways to conserve and create cash.
2. Cash rules – mind your cash flow.
Key points to consider include:
- Review your business forecast.
- Get a firm understanding of your cash flows and your business’s primary inflows and outflows. Analyze the sources of cash inflows.
- Prioritize expenses and obligations.
- Eliminate nonessential expenses or defer payment.
- Analyze accounts receivable due from customers and pay particular attention to your accounts receivable aging schedule.
- Sell aging inventory. To generate cash, price the inventory so that it sells.
- Consider selling idle machinery and equipment to generate cash and eliminate maintenance and repairs expenses.
- Recalculate forecasted taxable income and adjust estimated tax payments as needed.
3. Revisit investment strategies.
- Meet with your advisors to determine if your investment strategies need to be adjusted in light of the current economic outlook.
- Review your capital expenditures and repairs and maintenance plan.
- Consider whether it’s prudent to accelerate or defer spending.
- Meet with your advisors to analyze whether bringing in outside investors would be beneficial. In today’s climate, according to S&P Capital IQ, as of May 2025, Private Equity investors in the U.S. held $1.4 trillion in “dry powder,” looking for an investment. Investment funds could provide liquidity to enable a renewed focus on business strategy, growth capital and capital to implement a rollup.
4. Manage borrowing costs by consolidating or eliminating high-cost debt.
Analyze current debt to determine if refinancing high-cost debt is worthwhile and feasible. Given the current environment of economic challenges (e.g., a business’s lower free cash and reduced profit margins) and banks’ tighter underwriting standards, refinancing or obtaining new capital may be a challenge. Other options, however, may be available. Common forms of financing include:
- Unsecured and secured long-term debt
- Short-term debt (e.g., lines of credit, cash advances and credit cards if the interest rate is attractive)
- Loans from friends and family
- Personal loans and/or an equity infusion
- Government-backed loans (e.g., SBA loans)
- Crowdfunding
- Peer-to-peer (P2P) lending
- Convertible debt
5. Pursue M&A activities – if it makes sense.
Mergers and acquisitions can be a great option to add new business capabilities and skills and gain market share in opportunity areas. Market uncertainty and higher interest rates typically lead to higher discount rates and lower deal valuations and, sometimes, investors take a “wait-and-see” stance which slows down the deal process. Selling a now nonstrategic unit might create liquidity and free up management time. There are many factors involved in making the decision to acquire or sell a business, including, of course, how tariffs or tax reform could impact their acquisition target or the price at which a business could be sold.
6. Automate processes where feasible.
Automation has come a long way – especially with the advancement of artificial intelligence (AI). Business automation and robotic process automation (RPA) can be utilized to streamline processes which may include:
- Onboarding for new employees and customers
- Marketing
- IT service support
- Contract generation
- Purchase orders
- Processing invoices
- Routine and repetitive tasks and functions
7. Focus on talent.
In times of uncertainty, employees may be looking to make ends meet. Frequent layoffs and shifting additional responsibilities to employees without commensurate compensation can lead to burnout and plummeting employee morale and productivity. Be transparent with your employees as large layoffs could create a harmful environment.
In addition, businesses may benefit from assessing employee strengths and weaknesses to realign staff according to current and forecasted business needs. New leaders may be identified and can be encouraged to take on more responsibility. Award merit bonuses for creative, profitable ideas.
For example, the Chief Executive Officer (CEO) of a newsletter publishing company created a policy where employees were given spot and special bonuses for new business and money-saving ideas. For some of the best ideas, the CEO paid a percentage of revenue or savings. One employee had suggested that they trim the size of a book by 0.25” or so all the way around. This met certain USPS rules so they saved an estimated 10% on shipping costs. They were able to keep the original shipping and handling cost constant – and the employee received a bonus for the idea.
8. Continue marketing your business.
In an economic slowdown, many businesses trim their marketing and advertising budgets to conserve cash. In fact, businesses should re-evaluate their marketing strategies to strengthen any opportunities, reduce any weaknesses and make the most of their marketing budget. With online pay-per-click (PPC) and other direct response advertising methods, companies continue to shift marketing dollars online where they can target a particular audience. At the same time, if direct mail via the U.S. Postal Service (USPS) has declined in your industry, this could be the time to test a direct mail package because your mailing may stand out today.
9. Take advantage of tax planning to minimize the effects of taxation.
Businesses may be able to benefit from a multitude of tax strategies including:
- Planning for retirement
- Compensation
- Accelerated depreciation (Section 179 or bonus depreciation)
- Special studies (e.g., cost segregation, research and development, Section 179D)
10. Consult with the specialists.
Meet with your trusted advisors to help make and maintain your strategies for success.
Contact Us
If you would like to know more about this topic or have questions, please contact your PKF O’Connor Davies client service team or:
Eric Gelb, CPA
Senior Managing Director, Financial Services
egelb@pkfod.com | 914.341.7049
Elisha M. Brestovanksy, CPA, MBA
Director, Tax
ebrestovansky@pkfod.com | 845.670.7140