According to one recent study, there is a 96% chance that the United States will experience some form of economic recession within the next 12 months. If you needed a single statistic to underline the importance of planning ahead when it comes to your business, let it be that one.
Thankfully, this news isn’t a guarantee of impending doom for your organization. Not only do businesses of all types survive recessions regularly, but some also manage to thrive. If you want to make sure that you’re as prepared as you can be for whatever the economy happens to throw at you, there are a number of important things to keep in mind.
Monitor Those Expenses
By far, the most important step that you can take to survive an impending recession involves locating places to cut spending whenever you can.
This is something that became particularly important during the economic downturn caused by the COVID-19 pandemic. With countless employees suddenly working from home indefinitely, businesses realized that they didn’t need massive offices or retail spaces anymore and used it as an opportunity to downsize.
Take a look at your recurring expenses, categorize everything into an order based on importance, and determine what you can live with and what you cannot. Along the same lines, use this as a chance to start re-negotiating any vendor contracts with terms that may not be as favorable as they once appeared.
Note that not only is monitoring your expenses not something that you “do once and forget about,” it should also be done often – even during those times when the economy is objectively strong. There are always areas that you can cut and trimming as much “fat” out of your expenses as possible is a perfect way to make sure that you remain protected even in the event of the unexpected.
Another essential step you can take to survive a recession has to do with encouraging your clients to not only pay on time but to pay in cash upfront whenever possible.
To speak to the former, understand that most businesses deal with late payments regularly – but that doesn’t mean there aren’t steps you can take to mitigate the issue. If you haven’t already, switch to digital invoices and an electronic payment system to make it as easy as possible for people to pay you. Make sure that you know which invoices are outstanding and make follow-up phone calls to keep things moving.
In terms of collecting cash upfront, you could offer discounted prices and other incentives for people who are willing to pay now. Not everyone is going to take you up on that (as some might not be able to), but a lot of them will – allowing you to increase the amount of cash that you have coming into the business, making sure you have enough in reserves to help fend off a “rainy day” or two that may be coming.
Finally, during uncertain economic times, it’s always important to make sure that you’re being proactive about staying up-to-date with the market itself – at least to the extent that you’re able to.
At a bare minimum, you need to regularly perform a market analysis to guarantee that you know exactly what is going on and that you’ve identified any pivots that must be made in the short term. To continue to use the example of the COVID-19 pandemic, this was a period where consumer buying patterns and behaviors changed dramatically in a short window of time. Those organizations who insisted on pushing along as if nothing had changed tended to be the ones that suffered. Those who were able to understand these changes and make quick adjustments with their own efforts were able to make the most of it.
Likewise, read the news and make sure you’re aware of what the projected impact of such a recession is likely to be. Right now, things are still far enough away to where nobody really knows what might happen – just that something is (likely) coming. When that recession actually does arrive and the economy begins to detract, things can shift quickly. By staying in the loop about the larger economy, you have the actionable information you need to make more informed decisions on a day-to-day basis.
In the end, no business owner wants to deal with the impact of a recession – but that doesn’t change the reality of the situation. At some point, you are likely to find yourself in this situation and taking the appropriate steps today can help avert a potentially larger issue tomorrow.