If you’re worried about a recession and what it might do to your small business, you’re not alone. But there are things you can do to help recession-proof your business. Here are six ways to get started.
[Read more: Start. Run. Grow.Weathering Financial Uncertainty]
Embrace adaptability
If there’s anything we’ve learned in the last two years, it’s the importance of adaptability. Change is inevitable, so the ability to pivot and be flexible is key to surviving any recession.
"You can't be married to any specific strategy, product, or service," said Abhi Lokesh, CEO and co-founder of Fracture. "You've got to be willing to try everything you can, see what works, and pivot accordingly."
Lokesh, who launched Fracture at the height of the Great Recession in 2009, acknowledges that change can be difficult. Still, entrepreneurs can't let pride, stubbornness, or tradition get in the way of survival.
"It's a matter of being incredibly detail-oriented and leaving no stone unturned in the pursuit of being as financially stable as possible," he told CO—.
Listen to your customers' current needs
Understanding and serving your customers' needs is important at any time. But it’s crucial to empathize with their struggles in the midst of a recession.
Eli Diament, founder and director of Azurite Consulting, recommends using primary research to understand these changes better. By conducting customer research via surveys or focus groups, you’ll understand how your customers’ needs and buying habits are shifting.
"If done effectively, primary research will allow you to tap into the decision-makers and users you want and need to hear from," Diament added. "A well-designed and precisely targeted survey can collect these insights far better than any panel, 'gut feel,' or word-of-mouth."
Cut unnecessary costs
Keeping a close eye on expenses and cash flow can help you plan for your financial future and avoid overspending. Of course, it can be hard to cut back on your costs and maintain a high level of quality in your products and services.
That’s why Lisa Vitale, business matchmaker at BarterPays!, recommends getting creative with your spending. "This is going to be a long, financially lean road. Seek out alternate revenue streams to continue building your client base, allowing you to preserve your financial stability, even when existing customer sales are down."
William Vanderveer, CEO of Redefine Healthcare, always recommends keeping six months' worth of expenses in savings in case your sales drop. However, this isn't always possible, especially for businesses that depleted their savings trying to stay afloat.
If you constantly find yourself short on cash flow, you may want to explore financing options. It’s always better to have access to a line of credit before you need it.
[Read more: A Practical Guide to Funding Your Small Business with Business Loans and Beyond]
It's a matter of being incredibly detail-oriented and leaving no stone unturned in the pursuit of being as financially stable as possible.
Abhi Lokesh, co-founder and CEO, Fracture
Know your numbers
In addition to cutting expenses, you need to know where your business stands financially. You need to understand what’s happening with your cash flow, profit margins, inventory, and monthly sales. Use accounting software to monitor your business’s day-to-day operations closely and check your financial reports.
Keep in touch with your employees
Recessions aren’t just stressful for business owners — they’re also stressful for your employees. Your employees are feeling uncertain about what the future holds, and they may be worried about losing their jobs.
That’s why it’s important to communicate openly with your employees. Let them know what’s going on in your business and why you’re making certain decisions.
It’s also helpful to begin building an agile workforce before a recession hits. If possible, give employees the option to do their work remotely. You can also supplement your business with freelancers or independent contractors.
[Read more: Are Your Employees Really Engaged? Here's How You'll Know]
Keep investing in your business
Surviving an economic downturn will be difficult for any business owner, but keep looking for opportunities, even when things feel bleak, said Vitale.
"Don't stop marketing and advertising," she said. "Businesses that continue to invest in themselves and advertise during recessions come back stronger and bounce back faster than those that don't."
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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