A recession can strike a damaging blow against your small business. Sales may drop, customers may delay payments and inventories may swell. You’ll want to ensure your company is in a solid position to withstand the downturn and return to growth once it’s over.
1. Examine Past Recessions
Business planning for a recession can mean evaluating the impact of previous recessions. If your company has been operating for a while, you can look at what happened during earlier recessions, what steps you took and how well they worked. If this is the first recession your business has faced, you won’t be able to evaluate as closely, but you can examine the industry trends.
2. Look for Places Where You Can Shift Costs
Depending on your company and industry, a wise business strategy during a recession could be reallocating some of your spending. For example, maybe you can scale back your advertising or marketing budget to free up funds for staffing or production.
3. Tap into Credit
Credit can get tight during a recession. If possible, consider business financing options like opening lines of credit or taking on investors. Access to credit could tide you over during times of negative cash flow.
4. Review Your Strategic Plan
You likely have plans to grow your company. When you’re facing a recession, those business plans might be overly ambitious. You may want to put your growth plans on hold and focus on maintaining your business as it is until the recession ends, then ramping back up.
5. Evaluate Your Product Lines
If your business sells multiple products, which ones are the most profitable? Which are the most recession-proof? A smart small business idea during a recession is to pivot some or all of your production to the products that are in the best position to bring in revenue during a downturn.
6. Take a Hard Look at Your Costs
During a recession, you need to be able to cover your necessary expenses. That means you might need to scale back on some business expenses that are nice to have, but not essential. Every business is different, but restaurant meals, travel, equipment or vehicle upgrades, and customer entertainment expenses like golf outings might need to take a back seat until your business bounces back.
7. Rethink Your Office Space
During the pandemic a lot of businesses shifted to remote work. Are you still maintaining the office space you had in 2020? If so, consider whether you could scale back, move or sublet to save on rental or mortgage costs.
8. Consider Cutting Staff
No one likes to let employees go, but if a recession hits hard enough, keeping everyone employed might not be feasible and you may need to trim your staff. You may want to offer generous severance or early retirement packages if possible to lessen the impact on people who have been loyal to you.
9. Communicate with Your Customers
Your business isn’t facing a recession alone. If you have to raise prices, lengthen shipping times or make other changes to survive the downturn, let your customers know what you’re doing and why. Remind them why they are essential to you. You want to reinforce the mindset that you’re in this together.
Find a Farm Bureau Agent Near You
A Farm Bureau agent or financial advisor can share their small business ideas during a recession or review your financials to make sure you’re in a position to withstand a downturn and thrive when you get to the other side.