More than 50% of our workforce comes from small and medium-sized businesses. (SMBs) as they are called, play a major role in our economy due to job creation. They are essentially the “backbone” of the American economy which is why it is important to protect them during hard times.
The pandemic negatively impacted many SMBs, even post-COVID and the uncertainty around the possibility of a recession keeps many business owners nervous about what could come. Here are four ways that you can begin recession-proofing your business:
- Have Access To Capital
It’s important to have at a minimum 12-24 months of capital saved in order to help carry you through an economic downturn. You may think it will be hard to put away this much money but review your expenses to see where you can make some cuts, and what you can do to generate additional revenue. The extra that comes from those efforts can be put into savings.
2. Review Your Benefit Packages
Unemployment is still quite low and the labor market is competitive. In order to retain and attract employees, it is important that you stay up to date with the current market compensation and benefits. But don’t offer more than necessary to attract staff if funds are tight. Some businesses offer 100% medical coverage or additional benefits not usually available, and the extra expense can put you in a tight spot. Offer fair benefits, but don’t overextend yourself.
3. Keep An Eye On Customers’ Purchasing Behaviors
The best way to understand how your business will be impacted is to stay engaged with your customers. If you sell to other companies, understanding their purchasing decisions will show you if they plan to scale their business or cut back. If you sell directly to consumers, asking them what products or services they need most will allow you to cater your offerings to their requirements.
4. Access New Customers
If you are only selling to a small area, it may be time to find other opportunities to expand your customer base. For example, if you are a retail store located in a brick-and-mortar location, you might want to consider selling online to access more buyers.
Overall, having enough capital to withstand an economic downturn should be a priority as cash flow is one of the most important considerations to maintaining a successful company. This doesn’t mean you should avoid planning your business growth or stop investing in your company, it just means you need to be prepared in case of a recession so that you can continue to be profitable.
