As a small business owner, it’s natural to be worried about a possible recession.1 But don’t just fear the recession – prepare for it.
Studies have shown that resilience helps a business2 bounce back from a slow economy. You can become resilient by creating a flexible game plan, reinforcing the soft spots in your business, and making other forward-thinking moves.
Planning now means you won’t have to scramble later. Find out what you should improve now and how to address your pain points.3 Give yourself plenty of options to thrive in a time when you otherwise wouldn’t expect to.
Free up your cash now
Businesses that fared better during a recession didn’t necessarily have stronger revenues than businesses that fared worse, according to research by McKinsey & Company.4 But they did have stronger margins, which eased the impact of the downturn and helped them rebound faster in the recovery.
Free up some of your cash now while times are good. Cut unnecessary costs, but be smart about it. Reduce your production costs, cut any plans that aren’t as lucrative as they should be, and look for ways to reduce overhead. That way you’ll have a financial cushion or you can invest proactively5 in ways that benefit you – like improving your company’s productivity or online presence.
Speaking of productivity, it’s always a good idea to become more efficient6 as a company. Don’t wait for a downturn! This can include:
- Delegating tasks – Maybe you should be working on business development but you’re too bogged down in other tasks that someone else can do. Delegate those tasks so you’re free to move your business forward.
- Setting SMART goals – Setting goals that are Specific, Measurable, Attainable, Realistic, and Timely can help employees stay focused and efficient.
- Retraining your employees – If your business can be made stronger or more efficient with newer processes and technologies, this might even put you ahead of the competition.7 Invest in retraining your employees as needed – it’ll benefit them, too.
Focus on opportunity
A recession has its obvious downsides – but it also presents opportunities8 if you’re able to pursue them. You might get better deals on investments, equipment, property, or other assets. And there are more talented workers available that might be a great addition to your crew.
Don’t skimp on marketing
You might be tempted to cut your marketing budget when the economy is tough. But you still need to keep your business visible.9 According to Business Insider, marketing during a downturn could bring you a better return on investment than in a strong economy, especially if your competitors stop marketing. That leaves more customers to see your ads – and choose you.
Seek payment options
If your customers have trouble paying you in a downturn, try offering different payment options – like extended terms with smaller payments. This can help build customer loyalty and get you favorable word-of-mouth. Vendors might also be more willing to offer you longer terms or price reductions in a recession10 that you can use as a financial buffer.
Have a financial lifeline
Even if you’ve cut expenses and become more efficient, it’s important to have funding options you can turn to for cash flow management, covering unexpected expenses, or freeing up cash.
It’s common for a business to have a business credit card, line of credit, or other types of funding they can use when they need it. For example, QuickBooks Capital offers funding for terms up to 12 months, which can be helpful when you have a short-term need to manage costs.