There are many signs that the U.S. economy is in a technical recession, so small-business owners need to act quickly to make their businesses recession-proof. Follow these steps to make sure the long-term health and success of your small business.
How Small Businesses Can Prepare For a Recession
Invest in your staff
How can a small business keep its staff, keep hiring good people, and reassure everyone who works there that they will have a job? During a recession, small businesses should be able to offer non-financial benefits like flexible scheduling and other perks that motivate employees in ways that money can’t. They should also be able to offer financial benefits that are meant to invest in their employees.
Nate Schelhaas, Senior Vice President and Head of Life Protection Solutions for US Insurance Solutions at Principal, says that benefits should be shared more and made more personal. Explore different options for benefits, such as HSAs and FSAs, help with paying off student loans, disability insurance, and access to financial planning advice. Hold listening sessions to talk about any changes to the benefits programmes and stress open lines of communication and transparency.
Focus 10% more time on things that bring in money
Kelly Mosser, a coach for small-business success, said that now is not the time to change your business model to something completely new or riskier. Use this time to do things that will directly lead to more sales.
“Start doubling down on your core competencies,” Mosser said. “These are the products and services that have brought in the most money for your business in the past and have strong proof of concept.” “Spend 10 percent more of your time on activities that bring in money.”
Follow and manage the flow of cash
If you haven’t already, keep track of how much money comes into and goes out of the business each month. Revise your business plans to update your financial projections, check to see if you need to change your prices, and update your financial projections.
Small businesses that need more money can do a few things. Talk to your most important clients and suppliers. Check to see that they pay on time. If they can, business owners may ask suppliers if they would be willing to get paid faster if they got a better deal. If your small business needs an extra line of credit, put this need at the top of your list right now. Get help with money by contacting banks and credit card companies.
Lastly, go over the budget for your business and look at any spending you could do without. If you pay for software subscriptions that you don’t use, you should cancel them. Rethink the purchases your business needs right now and the ones that would be nice to have but could wait.
Start or add to a fund for emergencies
Does your company have an emergency fund with enough money to cover business costs for at least three to six months? Great! If not, start saving money for this. If yes, but you’ve taken money out of the fund and haven’t put it back, use this time to pay yourself back and build up a good cash reserve.
Use natural marketing techniques
Mosser said, “If you think you’ll have to cut your advertising budget if there’s a recession, now is the time to commit to a consistent social media strategy.”
There are a lot of free ways for small businesses to market themselves. For example, they can be guests on popular podcasts that are relevant to their business, get local media coverage, and become thought leaders in their field by guest blogging with relevant media outlets and writing and sharing content that resonates on LinkedIn.
Look at how well operations are running.
Brian Trzcinski, a certified exit planning advisor and the director of business market development at MassMutual, suggests that small businesses look into options like building a recurring revenue model (through subscriptions or autopay) and building different kinds of relationships with clients and suppliers.
Trzcinski said that small businesses should focus their resources on the products and/or services that customers want or need the most. This is similar to what Mosser said about putting 10 percent more effort into activities that bring in money. This will bring in the most money and give the business the best margins.
Focus on Important Relationships
Which of your business relationships are the most important? Are these connections with lenders, suppliers, or customers? Find your most important client relationships and work to improve them.
Schelhaas says that you should send a personalised note to your most important clients or customers, call them, or have a quick meeting with them. Use this time to let them know how much you appreciate and value their business, to find out how the economic downturn is affecting them, and to find out how your services can help ease some of their current problems. Focusing on strengthening these relationships could keep business going even during a recession.