How to Safeguard Your Small Business for the Next Recession
The next recession is inevitable. Economic cycles are difficult to predict, so depending on who you ask, it could be early next year, not until 2021 or it may have already begun. Regardless of when it happens, a recession is forthcoming — and there’s no better time to prepare than now. When a recession lands, small businesses take the heaviest hit. Often, they don’t have a year’s worth of rainy day reserves to weather the economic storm. However, your business doesn’t need a massive savings account or 12 months of inventory to survive a recession. You can take small recession-proofing steps now to safeguard your business for an economic downturn — without slowing down your growth or denting your cash flow. Your small business can avoid becoming another recession casualty by taking the right steps. Prepare your business with these four practices to ensure your small business's survival and empower it to thrive during tough economic times.
1. Automate. Automate. Automate.
What’s more valuable than your time? As a small business owner, likely nothing. Now is your chance to look at how you’re spending your time day-to-day, week-to-week. Are there administrative tasks you can automate? Is there anything you can and should delegate? During the economic downturn, you’ll have a host of new problems to solve and fires to put out, and if all your time is already bogged down, you won’t have the necessary capacity. Start taking your precious time back one minute at a time. Find yourself setting a reminder to send the same email every month? Try using a Gmail plugin like Boomerang to schedule recurring messages. Filling out identical invoices to the same clients month after month? Use bookkeeping software like Sunrise to automate your invoice process. Alone, these tasks don’t take too much time — but collectively, they eat holes in your schedule and destroy your productivity. Start the automation process now so you’ll be prepared for when a recession demands even more of your time. Learn: How Does My Personal Credit Affect My Business?
2. Secure Capital Before You Need It
The best time to look for capital is when you don't need it. Don’t wait until the economic storm clouds start filling the sky to look for financing. Because let’s face it — big banks prefer working with less risky, established corporations on a clear day, less so when an economic crisis occurs. While your business and the economy are both healthy, secure financing that’ll help you now and in the unknown future. Obtain a business line of credit and begin building good payment behavior so you can continue to strengthen it. As you grow your payment history and decrease (or eliminate) late bills, you’ll qualify for extended credit lines. With additional credit, you’ll be better prepared to deal with a recession. Not only that, you’ll have the necessary financing to help your cash flow now as you continue growing your business.
3. Make a Business Plan
It’s hard enough to build a successful startup when the economy is booming. When the economy isn’t, you can’t rely on luck alone. You need a plan. Create your business plan now while things are going smoothly. Start with where you are today, where you want to be and how you’re going to get there. Make a detailed Plan B in case the economy decides not to cooperate. Decide how you’ll finance the business then and how this changes your business goals. While you’re creating your plan, take a look at your budget. Can you identify any discretionary expenses? Software like Sunrise can help you get a detailed look at how you’re spending money. Now is a great opportunity to reevaluate company policies for travel or trivial benefits — perhaps you even have some unused office space you can sublease. Another factor to consider is your business’s growth. Is it ready for expansion? If you’re noticing any of these signs , your small business might be ready to expand. However, if you expand too early and a recession hits, you could be in double trouble. Inversely, if you don’t expand when you should, your growth and cash flow could be stagnated before calamity even strikes — another dangerous situation.
4. Maintain 'Goldilocks-Approved' Inventory
Not too much. Not too little. Just the right amount of inventory. It’s a tricky balance. You want inventory on hand before a recession so you don’t have to spend your limited cash or credit during difficult times, but you don’t want money wasted on storing inventory that will be selling at a slower pace. Find the delicate balance so you can avoid unneeded waste while keeping the shelves adequately stocked. Find Out: What Is a Small Business? SBA Definition Explained
The Bottom Line
There's no way to completely recession-proof your business. You just can’t predict the economic impact and length of the crisis. But by implementing these four practices, you can boost your business’s chances of survival and even help it thrive in the meantime. And if the recession never hits (not likely), your small business will be better for the hard work you’ve put in reinforcing it. More From Seek
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