Prepare Your Business For a Recession in 5 Steps

We're all in a bit of a pickle economically aren't we? Whether we're feeling the impact of the perfect storm of Brexit, the War in Ukraine, the aftermath of the COVID-19 pandemic or sheer incompetence or corruption of politicians the world over (more likely all of them!) businesses the world over are feeling the brunt of this economic climate.

As we all begin to feel the effects this turbulent economy is having on us personally, the spending habits of consumers and the rising cost of just existing, businesses are beginning to realise they have some harsh decisions ahead.

As we head into a recession, how can we all (us included) prepare for it? What can we do to help stabilise our businesses, react to changes in the marketplace, safeguard our customers and staff and prepare for what's ahead?

We're glad you asked!

The good news is that economies have shrunk before, we've been through hard times in the past, so we can draw upon that experience.

This won't be exactly like the downturn during the pandemic, that at least had some Governmental support (furlough, loans, grants, etc.) but there are lessons we can draw.

We've put together 5 simple steps that you can do to help prepare your business and give it the best chance of surviving the coming financial storm. Batten down the hatches!

1. Review Your Finances

Sure, it's not a ground-breaking way to start, but sometimes the oldies are the best ones. Take some time to see exactly where you are as a business.

How much cash on hand have you got, what debts do you have, what money is coming in and going out, how much are your bills/wages and, all too easily forgotten, are there any payments coming up that are only accrued annually (website hosting fees, annual subscriptions, professional memberships, etc.)

Lay them out so you know what's coming in and what's going out over the next year or so. Keep it up-to-date, if you don't already (which you really should).

Now is probably not the time to commit to making any big new purchases or taking out another credit card. If you do, make sure shop around to get the best deal.

Also, if any deals are coming to an end (e.g. leases, hire purchases, etc) make sure you know when and how that will impact on your bottom line.

If you do have existing debt that might become unmanageable as belts are tightened, speak to them and see if you can review the terms, refinance or even look to consolidate them on better terms. If you don't ask, you don't know.

2. Reduce Overheads

Running almost any business will incur overheads of some description. It's time to look to reduce the ones you do have.

Once you've reviewed your finances and you know where the money goes, look at reducing them as much as you can.

This is important at the best of times, but essential with a recession looming and especially with the threat of a reduced income.

Take a look at those subscriptions you don't use and forgot to cancel (we've all been there), can you rent that 'thing' instead of buying it? Could you save by having staff work from home rather than paying for office space? Can you get a better deal on insurance or utility bills? Do you really need to hire that personal foot masseuse?

There are all sorts of changes you can potentially make to bring those overheads down.

3. Act Decisively

Once you know where you are, where you're going and how you're going to get there, financially speaking, it's time to do something about it. You need to act decisively.

That's not to say you need to panic and go flying off in all directions like a headless chicken. We know it's not an easy thing to do, especially if some of those decisions are going to have a real-world on people's lives (yours included) but once you know what you have to do, do it.

When you need to make a change, make it. Don't procrastinate, think it over AGAIN or have second (or third) thoughts, as Nike would say, just do it.

The longer you delay putting those plans into action, the harder it will be and the more money it's going to cost you in the long run.

4. Look After Your Staff

Unless you're a sole trader, you're going to have a team behind you. You've been through the good times and bad times together, so you can draw upon this again.

There may be times coming up when you need to ask them to do more than normal for less than normal. Remember that this cost of living is affecting them too.

If you can, speak to them and see how you can help them too. Can they work more flexibly to save on petrol costs? Car share? Alter their hours to save on childcare costs? There may be a plethora of options that might come to light just by speaking to your team.

5. Be Positive

Let's end this with some positivity. The recession doesn't mean the end of your business. Far from it.

Many businesses have weathered these storms and there's no reason why yours shouldn't be one of them. Furthermore, many learn valuable lessons from these testing times and go into bigger and better things.

Rather than listening to the doom and gloom in the media (who bloody love hyperbole and fear-mongering) and instead, take time to assess where you are, where you're going and how you're going to get there.

Use the opportunity to cut the costs where you can, not just to survive, but because it makes good business sense.

Use it to also look at how you can bring added value to your customers, who are also going through it. Can you help them to bring benefits to your business long after this storm has abated?

Squaring The Circle

Who knows. Maybe we're being dramatic. Maybe the economy miraculously takes a turn for the better (Rishi Sunak became Prime Minister today as we write this) or maybe I'll win the lottery this week and won't care quite so much (joke), but there's no harm in planning for the worst while hoping for the best.

Chances we are all going to have to make some pretty awful decisions about our business in the coming weeks, months and even years ahead, so try and get yourself and your business in the best possible position should the worst come to fruition.

We can't predict the future with the same level of certainty as some would have us believe and customer behaviours will change and we will all have to adapt but, as Benjamin Franklin once said;

"By failing to prepare, you are preparing to fail”

Isn't it better to be prepared than not? (the answer is 'Yes' by the way).

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Have you got any more ideas on how to prepare your business for tough times? What have you done in the past to weather previous storms? How did you manage? Did you come back stronger because of it? Let us know in the comments below.

Blog image courtesy of Stuart Frisby on Unsplash