5 Strategies to Protect Your Small Business from Recession

A pandemic, lockdowns and decreased sales. Small businesses have been through so much over the past two years. If you’re now worried about the potential impact of a recession on your business, you’re not alone. As reports of a recession continue to grow, business owners are seeking ways to brace for impact.

In fact, according to The CNBC|SurveyMonkey Small Business Index Q2 2022 survey, eight in ten business owners believe the economy will enter into a recession this year. CEOs of large companies surveyed by The Conference Board were less pessimistic, but 11% did agree that they foresee a challenging recession. The majority (60%), however, said they expect the U.S. will have a short, mild recession. 

Either way, taking steps now to prepare for rocky economic times is a wise move. There are many ways you can achieve this, from cutting costs to lining up a source of financing for a rainy day. Here are a few steps and financing strategies you should consider implementing.

  • Have a source of financing on standby

Knowing the types of funding your small business can qualify for is incredibly important. During a time of recession and uncertainty, time may become a luxury you simply don’t have. Unexpected costs may pop up, and processes and ideas may need to shift to adapt. Sales may slow, while expenses grow. In these circumstances, cash flow gaps can happen over night. Having a source of financing on standby can help your business survive and even thrive during these tough times.

  • Meticulously monitor your cash flow

A harsh reality of an economic slowdown is that customers will more than likely pay their bills more slowly. This will very quickly impact your business operations. According to research by Fundbox, 64% of small businesses are affected by slow payments – and that’s during good times. Moving forward, make sure you keep a close eye on how money is moving in and out of your business.

  • Build a solid cushion of cash

Even during growth and prosperity, it’s important to build a cushion of cash. This money ensures you have what you need to continue to operate smoothly when things take an unfortunate turn. As we move into what experts are saying is a certain recession – some say it’s already here – it’s important to set aside as much as you can to help weather the coming months.

  • Get your debts and expenses under control

Take a close look at your financial situation. Whatever changes you can make to expenses and debts today will help you in the future. Be honest about which expenses are really necessary and which ones are not. If it’s possible to pay off or minimize debts in the coming weeks and months, do so. You’ll thank yourself later.

  • Wisely control your business growth

Believe it or not, rapid growth can be a real challenge for a business. As encouraging as growth is, it also presents a big problem: finding the funds to fuel it. As they say, you have to spend money to make money. Rapid growth means investments in supplies, employees, products, advertising and other business expenses. So, even if your business is still thriving right now, make sure you watch your costs and control your growth.

Using these five strategies and steps should help you recession-proof your business. The biggest takeaway is to be aware of external shifts and changes and closely monitor the financial health of your business.

Summary:

Use these steps and financing strategies to help recession-proof your business. Make sure you’re prepared for the uncertain months ahead.

Related Posts