9 Proactive Small Business Strategies to Prepare for Potential Recession

As a small business owner, you proactively deal with emerging challenges that can hurt your business. Competition, government regulations, and changes in consumer tastes are some of the significant aspects you've been analyzing. Have you thought of planning for a recession?

According to the current statistics, 44% of small business owners have not planned for a possible recession. So naturally, you don't want to watch as your business collapses under the weight of economic decline. Therefore, with the talk of a potential recession coming, here's what you can do to prepare your business.

1. Build an Emergency Fund

You've probably kept some money somewhere to assist in car breakdowns or unexpected cash shortfalls. You should also employ the same strategy and keep some money away to handle emergencies in your organization. Financial experts recommend keeping cash reserves that can run your organization for at least three months. The emergency fund should be quick and easy to access when your business is no longer generating income.

2. Optimize Your Cash Flows

The success of any business is highly hinged on cash flow management. Therefore, you need to ensure that your company's cash flow is kept positive by building a huge cash reserve, reducing organizational expenses, and ensuring your customers are paying debt obligations as soon as possible. On the other hand, you need to have minimum cash outflows. As a result, your business will have sufficient liquidity to maintain its operations.

3. Maintain Your Marketing Activities

Common sense will dictate that you stop marketing your business during an economic downturn. You'll be pushing resources out of your business when sales are declining. However, as much as you focus on cutting down your expenses, keeping your marketing department operational is essential.

You might decide to scale down but make sure you're still creating awareness and reaching out to potential customers. Keeping your presence in the market is a creative approach that can attract a few customers. Also, there's a higher chance that the majority of the customers will remember your business after recovery.

4. Identify Skills Gap in Your Business

As recession approaches, companies will release many experienced and talented employees. However, the majority of the released employees will struggle to get jobs. Only a few companies will be hiring. This is the best chance to make your move and fix the skills gaps in your business.

However, you might make mistakes if you're not prepared. You need to review the gaps in your organization and determine whom you need. It will be easier to get a perfect match with sufficient information.

5. Build Loyal Customers

In a recession, new customers will be hard to come by. Therefore, the majority of the companies will rely on their loyal customers. If you have a small group of loyal customers, you need to get down and work.

Be aggressive and focus on stealing customers from your competitors. For now, you can afford to offer discounts and other after-sale services to your customers. Use these marketing tools and build a vast customer base that will keep your company financially stable during the hard times.

6. Create Good Relationships with Lending Companies

Currently, lending interest rates have gone up. There's an expectation they'll even go higher in a recession. Besides, the massive number of borrowing companies will push such rates to levels that small companies cannot afford.

Financial organizations will also be picky. As such, previous relationships will play a vital role in accessing loans. Therefore, you need to ensure your small company has good relationships with the leading lenders in the country. These relationships will come in handy when push comes to shove.

7. Stick to Your Lane

Being ambitious is essential as it enables your company to start new branches and introduce new products. However, this is not something you should try during the recession. You'll be taking money out of your business and creating potential vulnerability.

Instead, you should stick to your lane. Focus on what you do best. Maximize what you've been doing. This is the only area where you can scale and remain competitive. 

8. Analyze Liquidity Options

Experts don't know how long the recession will last. It can be several months or two years. Therefore, there's a chance that your cash reserves will exhaust when the recession extends beyond six months. Running out of cash is a significant threat to your organization.

Therefore, you need to analyze some of the liquidity options available to your business. This is probably not a comfortable decision, but selling some of your assets can generate the necessary cash to push your company for several months. You'll be in survival mode. Therefore, parting with a share of your business should also be an option.

9. Plan Your Workforce in Advance

As much as you plan to fix skills gaps by welcoming new talents, you should also be prepared to release some workers. This will probably be the worst feeling you'll experience as an employer, especially if your workers depend solely on your business to feed their families.

However, this is what you might need to do to keep your company operational. Releasing surplus employees in your organization can help save some cash and use it to run critical areas. Additionally, restructuring your workforce to work part-time can increase your savings.

Work with Experienced Professionals to Protect Your Business against Potential Recession

As the founder of a small business, you might lack the necessary skills to implement the strategies discussed above. Moreover, these strategies might not be enough to protect your organization against extreme economic downshift.

You need to work with small business professionals who can guide your business and recommend recession mitigation strategies. At Proper, we believe that the success of our communities is based on the success of small companies. That's why we're focused on supporting small companies in Portland, Oregon, in:

• Marketing

• Creativity

• Forecasting and

• Brand Building

We believe these areas are critical as organizations prepare for a potential recession. Contact us today for professional consultation on how to shield your business against economic downturns.