There has been increasing talk of a burgeoning recession, whether because of a historically rare decade-long economic expansion or recent reports of an inverted yield curve, which is traditionally an indication of a downturn.
Any recession is hard on all Americans, but it can be particularly devastating for Small business who often have more to lose.
Recessions impact every business differently. You need to know your break-even point – where your total revenue equals your total expenses. Analyse your books to understand whether you need to increase revenues or lower costs.
- Improve cash flow
Cut any expenses that aren’t helping your business make money. Look at ways of lowering fixed expenses. To reduce the cost of inventory, for instance, ask your suppliers if they could charge you less if you agree to a longer-term contract.
- Making customers a priority
Customer service is about providing customers with what they want, when they want it. If your business provides quality customer service, you are likely to retain your existing customers. This also means you have a greater chance of keeping and increasing your client base.
- Managing staff
Make sure you have an up-to-date human resources (HR) plan. Use your plan to detail your staffing costs, which will allow you to accurately cost your products or services.
- Finance New Equipment And Software
Equipment leases are a relatively easy type of financing to get because the equipment you buy collateralizes the loan. So even younger companies can get them with a personal guarantee.
- Diversify Your Revenue Stream
Diversifying your revenue stream can be a key component to reducing your company’s risk of recession.
- Choose flexibility over cost.
A downturn brings less economic activity, so it seems intuitive to focus on cutting costs, but that might not be prudent. Production costs are typically lowered (and kept down) by making large upfront investments in capital goods like machinery and factories.
- Preserve cash and reduce debt
When getting into a business, it’s common to acquire debt. However, it’s important to preserve cash and reduce debt as soon as possible. Studies show that companies with high levels of debt are especially vulnerable during a recession.3