How do you recession proof your business

A recession can be defined as a sustained period of weak or negative growth in real gross domestic product (GDP) that is accompanied by a significant rise in unemployment rate. This ultimately results in an increase in the price of goods and services. In a recession, consumer spending drops, leading to a reduction in economic activity— buying and selling. The government may have to intervene through various measures—for example, to cut interest rates—to support the economy.

What does this mean for your business? It is anyone's guess, but the number one thing you can do for your business is put together a survival plan to make sure you can ride out this storm—and remain formidable when the skies clear.

Of course, you can take a deep look at your financial statements, and take an in-depth analysis or evaluation of your financial position, but you should always start with the first line item on almost every performance or tax-related form you fill: Income. Let's look at some questions and topics, and several other factors you may not have thought of for this process.

Income sources

• Are you able to sustain the current income level?
• How can income be increased?
• Diversify your services or products by offering new services or products to current customers and expand your customer base. 
• Accounts payable/receivable: Healthy cash flow is the oxygen of any business and ensuring you’re on top of paying and receiving your bills can help you avoid nasty surprises
• Referrals: If you run a client-based business, they can be the cheapest advertisement you have. Ask them for quality leads and be sure to thank them, even if the lead does not become a sale.

Pricing

Considering the increasing cost of goods and services, this is a good time to review and evaluate your pricing and price model. Do you need to adjust or create a hybrid price model? You may employ hourly, fixed value-based pricing, or a combination depending on the engagement if you run a service-based business. You can try bundling products to move stock and sell more items per sale for product based businesses.

Budgets

Prepare a budget, stick to it, and allow flexibility for only absolutely necessary changes. Budgets can truly help you stay on track and indicate the degree of any variation. These should be pointers to you to get back on track. It is easier to be on track when you can measure the deviation from projected/expected results.

Reduce costs

Small businesses are reducing costs to contain the adverse effects of inflation and recession. Ways to reduce costs include the following:

• Eliminating unnecessary expenses
• Renegotiate various leases on equipment, rent, and other service contracts
• Review rates or merchant fees for credit card processing
• Reduce meals and entertainment or find alternatives that are less expensive and still enjoyable
• Review utility bills and telephone contracts, and shop for cheaper alternatives with more offerings. The competition is stiff out there, so this is a great time to shop around.

Refine the system

Old systems are harder to use and more expensive to maintain. Take a look at your workflow. If you do not have one, document your processes using a flowchart. Assess your methods and the resources used. You might be surprised at how much time can be saved when new and efficient processes are put in place. Embrace technology and use the freed-up capacity to have a better work-life balance or generate more income.

Network/partnerships

Successful firms grow their revenue by partnering with other businesses that offer complementary services. Insurance companies, financial planners, legal practices, and involvement in local business chamber activities might bring about business with a long-term engagement and profits.

Secure/affirm customer loyalty

Having a loyal customer base is essential for a thriving business.

Offer your customers value, provide a personal touch, think about any pain points your business can solve for your customers. For example, if you run an accounting firm, can you offer business advisory services? Think about your industry and what related additional value you can offer.

Survive for 2023

Through following the steps above, you can be well on your way to ensuring your business can make it through a recession. The prospect of shutting down your business during an economic downturn can be daunting but it’s essential to think about, if only so you can determine how to avoid that possibility. With proper financial planning, firm budgeting and pricing practices, and customer relationship management, your small business will be given the best chance.