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There’s about a 45% chance of a recession occurring in the next year, according to an August survey of economists by Reuters. Without providing his own forecast, Pagliuca acknowledged the possibility of “the ‘r’ word” arriving soon thanks to the high cost of capital, high prices, unpredictable currency fluctuations, global instability, and today’s other familiar economic challenges. Wise MSPs, he said, should prepare for the unknown by practicing five forms of “financial hygiene.”
First, he said, hit the books. “Look at your financial statements. Look at your financial books. Understand your balance sheet. Understand your accounts receivable. Understand your debt structure. Take a clear look at your balance sheet.” Guiding your business through tough economic times will be much easier with a clear view of where your finances are and aren’t healthy.
Next, he advised somewhat counterintuitively, think about lining up additional credit. “It doesn't mean you need to use it, but before the storm hits, it makes a lot of sense to make sure that you have it in case you need it,” Pagliuca said.
Third, build a plan for sustaining growth even if GDP continues to decline, as it did in both of last two quarters. “Failing to plan is planning to fail,” Pagliuca said.
Fourth, standardize everything. “Standardize your tech stack, standardize your service offerings, standardize your service support, everything you can,” Pagliuca said. Employing consistent tools and processes makes your team more efficient, lowers overhead, and frees up time for delivering high-profit strategic consulting services.
Finally, differentiate yourself from the competition by being an expert, not a commodity, Pagliuca counseled. “Be that strategic partner,” he said, by speaking with clients about how they can reduce costs and increase profits through the smart application of technology.
The good news, he added, is that while no industry is recession proof, managed services is more “recession resilient” than most.
“Ultimately the climate is quite strong,” Pagliuca concluded, “and if you do the right steps in time to prepare yourself on the downside, you will come out of this stronger, more profitable, and able to gain market share and expansion in your business.”
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