6 Tips to Help you Prepare your Business for a Recession

Let’s be honest, the economy right now is not in the best position with the longest-ever recession in prediction. This is going to be a tough time for a lot of us and especially for those who are still recovering from the effects of the pandemic. There is going to be a lot of uncertainty for many businesses, and you may not feel prepared to face another economic recession.

So, if this is you, here are six tips to help you get your business prepared:

1. Understand your finances and manage your cashflow


This is a time where you really need to understand the numbers in your business because expenses will be higher, and revenue will be lower. Look at your cashflow forecast, so you can prepare for the leaner months when less money is predicted to come in. What could you do to increase your revenue?


2. Strengthen you cash reserves


Not having sufficient cash reserves can leave you in a tough spot, especially in a recession. Think of ways to add to your cash reserve rather than depleting it - be strategic. Instead of reinvesting all your profits into the business, put some in your savings to increase your cash reserves. You may think that paying off your debts is your best option to cut down costs, but this can actually deplete your cash reserves quite quickly. Look at the interest on your debts instead and priorities paying back the one with the highest interest. Think about the cost implications of all your financial decisions and determine what will produce the better financial outcome for your business.


3. Strengthen your customer relationships

Throughout a recession, people may be spending less, but they will still be spending their money. Treating your customers right, so they become loyal customers will do wonders for your business. It costs five times as much to attract a new customer than to keep an existing one, so really focus on strengthening your customer relationships as this can save you money too! So, make sure that you are following up any client engagement, answer their queries and stay connected. A good CRM System will help you find out how and when to reach out.

4. Monitor your clients


A recession can be financially difficult period, so your clients may start to take longer to pay you back. This can have huge implications of you own finances, so think about ways you can prevent this from occurring. You might want to update your payment terms to deter clients from paying late. Make sure to chase your invoices as soon as they become overdue, so clients don’t feel like they get away with paying late. Monitor your clients payment habits, so you can get on top of this issue.


5. Evaluate your services


Think about what your most successful revenue channel is and put your effort towards promoting this service and protect it. Now is the time to evaluate what your business is offering to determine whether those services are providing you with a strong enough profit margin. It may be that you have to adapt or cut one of your services. Alternatively, you could offer a new service if you notice an opportunity in the market.

6. Conduct Market Research

Try and gather customer feedback as much as possible and use this to make informed decisions about ways you could improve the things you offer. You should also review other businesses in your field so that you can promote what makes your business unique. The changes you make can be simple, it's all about keeping your customers satisfied and exceeding their expectations.

A recession may create numerous barriers and obstructions for your businesses. However, it’s how you deal with those obstructions that can determine the success of your business. So, while many small businesses scale back expansion plans, reduce their workforce and cut services, make sure you switch up your strategy and keep your business afloat!

Use this recession as an opportunity to evaluate your business and what you can do to come out of this recession in a stronger position.

If you're worried about the affect a recession could have on your business,
try outsourcing work to us!