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 SurvivalThere 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 fundThe 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 expenditureTo 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?