As the renowned World Economic Forum convened in Davos last month, global leaders observed a dismal economic outlook.
According to WEF’s Chief Economists Outlook report, two-thirds of economists foresaw a possible worldwide recession by 2023. January also saw the World Bank alerting that we are alarmingly close to plunging into an economic downturn.
Although the International Monetary Fund projected in its end-of-January assessment that global economic recession could be avoided, they have forecasted a UK recession and warned the US has only a “narrow path” to avoiding one. Experts from the IMF, World Bank, and others agree that sharp interest rate hikes by central banks are contributing heavily to this looming downturn. As inflation continues to skyrocket without intervention, it is essential for governments around the world to take immediate action against these rising rates if we wish to avoid a full-blown recession.
So what does this mean for the US? Well, we certainly know there’s been plenty of talk about a recession over here. For some people, a recession could be deadly; for others, it could be business as usual – or nearly usual. And, to some companies, it could be a time to thrive.
February saw the Federal Open Market Committee raise interest rates for the eighth consecutive time since March 2022. You should know that not all Fed rate hikes will directly influence your finances, and every area of your financial life isn’t necessarily affected by said changes in policy. Nevertheless, maintaining a close watch on shifting monetary regulations is integral if you wish to maintain control over your economic well-being – and even more so if you’re a small business owner.
According to surveys, small-business confidence has sunk dramatically recently, especially among professional forecasters and company executives. It’s been difficult for several years for firms that lack the resources to weather change, and making money is becoming increasingly difficult.
If your business is feeling the effects of the recession (or soon-to-be recession), it’s crucial to take action to ensure that you can finish the year strong. Here are a few tips to help you recession-proof your business, which we urge all of our clients to take note of. We’ll also dive into why business consulting can benefit small companies during economic distress.
How do I recession proof my business?
1. Review your expenses and cut costs where possible.
This is obvious, but reviewing your expenses and seeing where you can cut costs in difficult economic times is essential. This may include renegotiating contracts, switching to cheaper suppliers, or reducing staff hours. Recession-proofing your business by cutting costs wherever possible is the best way to ensure its long-term viability. Reviewing expenses regularly will help you identify areas where you may be able to make savings and allow you to adapt your business model as necessary. Taking proactive steps to reduce costs can give your business the best chance of weathering the storm during a recession.
2. Increase your prices.
If you want a recession-proof business, now is the time to increase your prices. Your customers will be more than willing to pay a little extra for your products or services, especially if they are essential items. In addition, rising living costs mean that your customers’ incomes are likely to be higher, so they can afford to pay more. Of course, you need to be careful not to price yourself out of the market, but a slight increase is unlikely to lose any customers, and it could even result in higher profits for your business. So if you haven’t increased your prices in a while, now is the time.
3. Focus on customer retention.
Any business owner knows that acquiring a new customer costs more than keeping an existing customer. Therefore, focusing on retaining customers during a recession is essential. This may include offering discounts, payment terms, or providing additional services. Whatever you do, ensure you’re doing everything possible to keep your customers happy.
4. Diversify your revenue streams.
Diversifying your income streams is always a good idea. Still, if your business relies heavily on one source of revenue, the industry must rely on one source of income. Not only does this make your business more resilient to economic downturns, but it allows you to grow in new directions. There are many ways to diversify your income, but some of the most common include product development, marketing initiatives, and expansion into new markets.
5. Invest in marketing.
Many business owners know marketing is essential for attracting new customers and keeping existing ones engaged. But during a recession, it’s even more important to keep your brand top-of-mind so that when customers are ready to spend again, they think of you first. You can implement many cost-effective marketing strategies, such as content marketing, social media marketing, and email marketing. But regardless of your chosen methods, ensure a strong plan is in place. This will not only help you weather the current economic downturn, but it will also position you for success when the economy rebounds. So don’t hesitate to invest in marketing – it may be the best decision you make for your business.
6. Focus on delivering quality products and services.
Many businesses are feeling the pinch as the economy continues to struggle. It can be tempting to cut corners to save money in tough times like these. However, this is often a mistake. Your customers will notice if you start delivering inferior products or services, and they will be quick to take their business elsewhere. Instead of cutting corners, you should focus on providing quality products and services that will keep your customers returning. This may require investing in better materials or hiring more experienced staff, but it will be worth it in the long run. You can ensure that your business remains successful even during tough economic times by delivering quality products and services.
7. Build up your cash reserves.
As a business owner, it is vital to have an entire cash reserve. This cash cushion will help you weather any bumps in the road and keep your business afloat during tough times. There are a few simple ways to start building up your cash reserves. First, take a close look at your expenses and identify areas where you can cut back. Then, make a point of setting aside a portion of your profits each month to boost your reserves. Finally, consider taking out a business line of credit. This will give you access to emergency funds if you ever need them. By following these simple steps, you can ensure you have the cash reserves you need to keep your recession proof business running smoothly.
8. Reduce your debt.
If you’re one of the many Americans struggling with debt, you’re not alone. The average household owes more than $8,000 in credit card debt. And with the economy in a downturn, it’s more important than ever to get your finances in order. One of the best ways to do that is to start paying down your debt. Not only will you save money on interest payments, but you’ll also be in a much better position if you lose your job or face other financial challenges. So if you’re ready to get serious about reducing your debt, now is the time to start making a plan. You can find plenty of resources online to help you get started, and there’s no time to take control of your finances like the present.
9. Get creative with financing.
If you’re struggling to keep your business afloat, it may be time to look into alternative financing options. The Small Business Administration (SBA) offers several loan programs to help you get your needed funding. A line of credit is another option that can give you access to cash when needed. Invoice factoring is another possibility: you sell your outstanding invoices to a third party at a discount in exchange for immediate payment. There are many options available, so it’s essential to research and find the one that’s right for your business. With creativity, you can find the financing you need to keep your business running smoothly.
10. Plan for the worst-case scenario.
A recession is an economic downturn typically characterized by a decrease in GDP, an increase in unemployment, and a decline in consumer spending. While a recession is often unavoidable, there are steps that you can take to minimize its impact on your business. One of the most important things you can do is create a contingency plan. This plan should outline what you will do if your revenue decreases or you have to lay off staff—having a program allows you to be proactive and adapt quickly to economic changes. Additionally, it is essential to keep your business flexible during a recession. This means being willing to change your products or services to meet your customers’ needs. Lastly, it is crucial to maintain communication with your employees and customers. By being transparent and honest, you can build trust and loyalty among your team and help weather any storms that come your way.
So, what about business consulting?
Well, it’s more important than ever for businesses to make intelligent decisions and take action to strengthen their bottom line. Business consultants can provide valuable insights and advice to help small companies to stay afloat and thrive in tough times.
Small businesses are the backbone of the American economy.
They create jobs, support families, and contribute to their communities. A recession can impact even the most resilient small businesses, and it’s more important than ever for small businesses to get advice and support to stay afloat and become recession proof businesses.
Business consulting is one of the most effective ways to get help during a recession.
Consultants can provide critical insights and guidance on navigating these uncertain times and help businesses reduce costs, improve efficiency, and make intelligent decisions about moving forward.
Ultimately, business consulting gives businesses the tools they need to succeed.
In a recession, that’s more important than ever. Consultants can provide valuable guidance and support, helping small companies to stay afloat and thrive during these difficult times.
Hiring a business consultant doesn’t have to be expensive, and the benefits can be well worth the investment.
Working with a consultant allows small businesses to focus on their core strengths and improve their chances of success even in challenging economic conditions.
Have you considered business consulting? Click here to read more about our consulting program, or contact us today to speak with one of our experienced consultants. We look forward to helping your business grow – no matter what you may be going through right now.