Is A Recession Coming?

How to prepare for one just in case

Is A Recession Coming?

It’s critical for you to keep your cash flowing. Start by examining your accounts receivable and payable right now. What’s your monthly cash flow today? Are there invoices that are past due? If so, call those customers and try to collect now.

Due to inflation, it’s likely you’re spending more than you typically do. Look for areas where you can cut back now before you’re forced to. One area that business owners often overlook is subscriptions and dues. Are you paying for publications or newsletters you rarely read? Are you a dues-paying member of organizations that you never interact with? Are you paying for technology apps you rarely use?

Keeping your overhead spending low during a recession will make a significant impact. Are you still operating remotely? This is a smart way to keep costs low. Spend your money wisely. Use credit cards that offer cash back or other relevant rewards.

But maintaining cash flow isn’t just about monitoring money in and money out. It’s also important to spend time nurturing your current business relationships. You want to cement them now, so you would be the last to go if they’re forced to cut back during a recession.

Now is not the time to cut back on prospecting for new clients and customers. Instead, think of ways you can immediately make your business top-of-mind for them. Perhaps you can offer extra training, support services, or discounts for buying in bulk or making early payments.

Keep Investing in Marketing

When money is tight, many businesses reflexively reduce their marketing spending. Don’t do this. The businesses surveyed in the Small Business Recovery Report don’t intend to — 45% of companies say they plan to implement new competitive strategies so they can stand apart from other companies. The businesses surveyed say branding is their “primary differentiator,” so it’s a good time to make sure your branding looks current and that you use it consistently in-store/office/facility, online, and in your marketing materials.

I discovered another interview I did with Marketplace back in 2008, where I advised small business owners they need to understand the power of social networking and online marketing. This advice still holds true today. The Small Business Recovery Report shows that 44% of businesses now market through social media and digital channels.

And the new Q2 2022 Consumer Trends Report from Jungle Scout, an all-in-one platform for e-commerce businesses, reveals the influence social media and advertising has on consumer purchases:

  • 35% have purchased a product after watching a social media brand’s live stream
  • 42% say being “followed” around the internet by ads is a helpful reminder, while 32% say they are “creeped out” by the tactic [retargeting]
  • YouTube is the most trusted social media platform for finding and purchasing products, followed by Facebook and Instagram

Financial Options

The time to borrow money is before you actually need it. The business owners surveyed in the Small Business Recovery Report say they have or plan to apply for a line of credit. Numerous places offer small business lines of credit. Check out CAPLines, “an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs. It features four lines,” from the Small Business Administration (SBA).

A recession guide from FreshBooks advises small businesses to contact their lenders now if they are concerned they might have trouble meeting their financial obligations during a recession. Ultimately, the guide suggests, “they’d rather work with you on your payments than see you go into default.”

You’re Not Alone

We’re still not certain there will be a recession, but if you prepare now, you’ll be better equipped to handle one if it does occur. It’s also important not to be afraid of this. Being fearful leads many businesses to reduce or stop investing in their companies, which essentially guarantees you won’t grow and can endanger your survival.

It’s critical to surround yourself with people who can help, like a SCORE mentor. If you don’t have a mentor, you can find one at Score.org.

This article was originally published in the NMP Magazine August 2022 issue.
Published on
Aug 01, 2022
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