It may feel like a half glass empty mindset, but it is within the interest of a small business owner to expect a recession. Why, you ask? Because recessions are a reality, because they are simply part of the process of running a company…and ultimately, because they will happen.
While it is often difficult to predict when and/or why a recession will happen, it would be downright foolish if you didn’t prepare for an economic downturn. Yes, economists can attempt to predict when and how the next expansion or recession will take place, but they can also come about completely unexpectedly.
What we do know is that while they do vary in length, a recession, on average, takes places every four years. If we consider how long the average small business would have to be in existence in order to be considered successful, it is clear that if you are planning on running one yourself, you will have to survive at least a recession or two.
But how can you prepare for the unexpected? Well, let’s take a look at four ways to recession proof your small business!
Pay off debt
For many small businesses, it is inevitable that they will need to go into debt in order start or expand the company, and/or launch new products. While this could be considered a necessary evil, it is often necessary, so what matters is how you react to it. If a recession happens when you are in debt, it will very difficult to access cash. In addition, the economic climate will mean that investors will be scarce.
So, the best line of action is paying off as much debt as possible, as soon as possible. There are many ways to tackle the issue of debt, so it is best to consider every possibility in order to find the best solution for you. Eliminate unnecessary spending, formulate a plan to increase revenue, modify your budget or consider debt consolidation. It is a bold move to take on debt when starting a small business, be bold when paying it off.
Stay in the know
It is straightforward, as a small business owner, economic issues matter. These issues will affect your company directly and it is your responsibility to stay up to date with the latest financial news. By doing this, you will be better prepared to participate in political decisions that will affect your business as well as to prepare and adapt the future of your company based on logic and reason rather than gut feeling.
Remember your roots
Complacency is often the downfall of a small business. As business improves and opportunities arise, the allure of attracting new clients has the possibility to allow an owner to forget about how and why they are in the position they are in. It is your existing customers …and small business owners regularly fall into the trap of overlooking them in the pursuit of bigger and brighter things. It may sound like a cliché, but it is common knowledge that if you keep your core clients happy, they serve as the perfect ambassadors for your business within the local community.
It might appear to be a healthy business if your stockrooms are filled to the brim, but remember, the more stock you are in possession of, the more cash that will be difficult to liquidate in the event of a recession. The advice here is to strike a balance between having an unnecessarily large inventory and too small of one to meet demand. This will ultimately depend on the business and the product, but it is more than worth your while to have an efficient inventory management system in place. The goal is to have the right amount of the right stock, and at the right time.