Numerous indicators suggest the United States economy has entered a technical recession; therefore, small-business owners must act swiftly to make their companies recession-proof. Follow these steps to ensure the long-term health and success of your small business.
How Small Businesses Can Prepare For a Recession
Invest In Workers
How can a small business maintain its staff, continue to hire talent, and assure all current and future employees of job security? Small businesses should be able to offer intangible benefits, such as flexible scheduling and other perks that motivate employees beyond monetary compensation, as well as financially focused benefits designed to invest in employees during a recession.
Principal’s SVP and head of life protection solutions, US insurance solutions, Nate Schelhaas, recommends overcommunicating and customising benefits. Explore diverse benefits options, such as HSA and FSA offerings, assistance with student loan repayment, disability insurance, and access to financial planning advice. Hold listening sessions to discuss any changes to benefit programmes, and emphasise openness and transparency.
Focus 10% More Time on Revenue-Generating Activities
Small-business success coach Kelly Mosser stated that now is not the time to switch to an entirely new or higher-risk business model. Utilize this time to concentrate on sales-driving tasks.
“Start doubling down on your core competencies,” Mosser advised. “These are the products and services that have historically generated the most revenue for your company and have solid proof of concept.” Spend 10 percent more time on revenue-generating activities.
Monitor and Control Cash Flow
If you haven’t already, track the amount of cash that flows into and out of the business each month. Examine whether pricing adjustments are necessary and revise business plans to reflect updated financial forecasts.
Several methods are available to small businesses in need of additional capital. Communicate with your top customers and suppliers. Ensure they are paying promptly. If possible, business owners may inquire if suppliers would be willing to expedite payments in exchange for a better deal. If your small business requires an additional line of credit, give this a high priority immediately. Contact banks and credit card companies for financial assistance.
Finally, review your company’s budget for any discretionary expenditures. If you pay for software subscriptions that you do not use, cancel these subscriptions. Reevaluate the purchases your business requires immediately versus those that can be delayed.
Create or replenish an emergency fund
Does your company have an emergency fund with at least three to six months of operating expenses? Great! If not, begin to build this fund. If yes, but the fund has been depleted and not replenished, use this time to repay yourself and rebuild a sufficient cash reserve.
Utilize Organic Marketing Strategies
“If you anticipate cutting your advertising budget in the event of a recession, now is the time to commit to a consistent social media strategy,” Mosser advised.
Small businesses can utilise a variety of free marketing strategies, such as appearing on popular, relevant podcasts, gaining local media coverage, and establishing themselves as industry thought leaders by guest blogging for relevant media outlets and writing and sharing content that resonates on LinkedIn.
Assess Operational Effectiveness
Brian Trzcinski, certified exit planning advisor and director of business market development at MassMutual, advises small businesses to investigate options such as constructing a recurring revenue model (through subscriptions or autopay) and diversifying client and supplier relationships.
Similar to Mosser’s recommendation to focus 10 percent more on revenue-generating activities, Trzcinski stated that small businesses should allocate their resources to the products and/or services that are most desired or required by customers. This action will generate the most revenue and the highest margins for the company.
Prioritize Valuable Connections
Which relationships are crucial to the success of your business? These relationships may be with lenders, vendors, or clients. Determine the most important client relationships and work to strengthen them.
Schelhaas suggests sending a personalised note to your most important clients or customers, calling them on the phone, or scheduling a brief meeting with them. Utilize this time to express your appreciation for their business, learn how the recession is affecting them, and determine how your services can help alleviate some of their current pain points. In the midst of a recession, a focus on strengthening these relationships may result in continued business.
