Is Your Business Recession-Proof?

  Talk of a possible global recession has been widespread with a number of economists predicting it could happen in 2023. With the prospect of a downturn looming, consumers generally stop spending money or look for ways to cut costs because of uncertainty about the future. This has a knock-on effect for businesses everywhere. The smart thing to do is take steps to be able to navigate possible economic headwinds because no business is recession-proof, even if your company is growing.

Strategies For Survival

There are a number of measures you can adopt to protect your business and give it the best chance of survival.

Strategy #1: Build a business emergency fund

The pandemic has shown us how crucial having an emergency fund for your company can be. It’s a financial cushion that will enable your business to weather difficult times. A good rule of thumb is to have three to six months of operating expenses saved. One main benefit of having such a fund is that when economic conditions slow down and affect sales across your industry, most competitors will cut investments across the board. This then presents a greater opportunity for your business to step in and fill the gap. For instance, if your competitors stop buying digital ads, but you are able to allocate even a nominal sum from your emergency fund, you can maintain a visible presence.

Strategy #2: Cut or reduce unnecessary operating expenditure

To prepare for a possible recession, start doing everything you can now to cut unnecessary expenditure to help to strengthen your cash position. Reduce your outgoings but do so smartly:

• Renegotiate the lease for your office space, find less expensive office supplies, and re-evaluate the services your business really needs
• Assess at your vendor relationships. Any opportunities for cost reductions?
• Examine your employee resources. Do you have the right people with the right skill sets to sustain your business and continue to properly serve your clients?

Strategy #3: Obtain a line of credit

Explore ways to secure an emergency financing line while things are running smoothly. One way to shore up your cash reserves is to obtain a line of credit from your bank or credit card company. The time to apply for a line of credit is now, before a recession strikes, since most financial institutions typically limit the availability of such facilities.

Strategy #4: Look for new opportunities

Every recession presents a unique opportunity for businesses to diversify, expand or even pivot their portfolio. This is exactly how many businesses managed to survive during the Pandemic – when the demand for one type of product or service was cut off by the lockdowns, they looked at other ways to bring in revenue. Start thinking of new products or services you can provide to expand or diversify your offering. Take a look at the likely upcoming trends in your industry. For example, are consumers switching to different products or services because of eco factors? How can you fill that niche in your own business? Remember, don’t put all your eggs in one basket; you need to have some agility to adapt quickly to changes in consumer behaviour and economic conditions.

In every crisis lies opportunity

Watching and waiting isn’t an option. A recession can be an opportunity for businesses to grow. The best way for your business to survive and take advantage of any opportunities that emerge during a recession is to plan ahead of time. Don’t make the mistake that most companies do by waiting until things start getting tough then only start to act, because by then it could be too late. In the meantime, if you need some guidance on the smart way to structure your business, our team of professionals at Quadrant is ready to assist.