The current economic state has many people worried about what the future may hold. For entrepreneurs, this is a time of both uncertainty and opportunity. In this interview series, we spoke with entrepreneurs who have faced tough times before and offered advice on how to prepare their businesses for a potential recession. As an entrepreneur, it is important to remember that every situation is unique and you must adapt as needed in order to survive and thrive.
Title: Business Lawyer, Blogger, and Coach
Recession can force many businesses to backfire and eliminate their monthly expenses. In this case, one should start with the costliest prospects in the budget, especially those categorized as high-interest debt payments.
The Fed’s interest rate is important to this factor as the rate influences all other forms of short term borrowing. The high-interest debt mainly comes from owning a credit card. Even when the rate is at its lowest, the average credit card annual percentage rate was close to 16 percent. So carrying a balance can be less than likely as it would cost you thousands of dollars at a certain point. Getting rid of that debt could free up immense space in your budget which can then be used to bolster emergency funds.
Title: CEO Publisher Owner
1. Shift your priorities to survival & cashflow, not growth.
2. Prepare your company to weather the storm and fall out which will be longer than you expect, 5 years and possibly 9 as in 1974 to 1983.
3. Go lean on advisory, not operating, roles and on new capital investments. Keep as much dry powder, cash, as possible.
4. Pay down any debt as fast as possible given the DC Government is printing money faster than Jimmy Carter and has doubled the price of oil in less than 2 years by stopping pipelines and fracking where ever possible coupled with new regs and attacking our biggest employers such as the FAANG group, rightly or wrongly.
6. Eliminate marginal products or services to focus for survival and save cash.
7. Be alert to pick up star people or products who are cut loose in this period.
8. Communicate your new goals to your stakeholders to get their support and cut them loose if they don’t agree with your goals.
9. Out source and simplify as much as possible such as with AWS or it’s copies to cut risk.
10. Shift your sales and operations to your low cost offerings which predominate in recessions.
“Maintaining excellent customer service and cultivating client relationships are crucial steps to preparing the business and helping it succeed. Staying close to your clients and exceeding your promises makes sense in any economic circumstance, especially during a recession.
Furthermore, knowing and responding to changing consumer expectations can allow your business to preserve revenue while also extending its client base.”
We’re preparing for the tough times to come for two months now. When it comes to the internet, going with the flow simply can’t work. We went through the 2008 recession as well, and what made us get out of it successfully was a mindset concentrated on keeping the business afloat and keeping the employees happy.
This meant we reduced the profit margins to 0 and even had to bring some capital to the business to make sure we stand strong. The alternative would have been to lay off some people and lose valuable members of our team, which we didn’t even want to consider.
Title: co-founder and CEO of Haven Athletic
Don’t stop marketing!
When a recession is looming, companies begin looking at where they can cut costs in order to stay afloat. Marketing is one of the places many companies immediately begin sapping revenue from. You need to continue generating sales even during a recession, and the only way to do that competently is to continue marketing your product to your customers.
Vanishing from the public eye can be a death sentence. Consider what you can do to improve your marketing and search for new and unused avenues to reach your base. It may cost a bit of money and effort but it’s far better than being forgotten.
Title: Marketing Director/Videographer
Undeniably, the global economy is going downhill and recession is just around the corner. Many businesses either small or big scales are on the edge. The threat of recession can cause a lot of problems and stress on the businesses owners and the last thing they want is to close it.
And to prepare for this difficult time, the first thing to consider is to reassess your business’s current financial status. Do you have enough funds or do you have more debts? Is your cash flow enough to sustain the incoming crisis? With these questions, you can have a bird’s eye view of your finances. Be smart and meet your debt obligations and avoid unnecessary expenses.
Being reckless with your expenses can lead to bigger problems ahead and might even cause the downfall of your business. Keep track of your expenses, even the smallest transaction matters. Do not be confident that you have enough funds to sustain your business for the first year, because we do not know how long a recession will lasts.
You should also have separate personal and business cash reserves and keep track of the in and outs of your money. Be mindful of your money, you should be the first one to know where it goes and so on.
And also, aside from building a secure financial reserve, you should also safeguard the welfare of your employees because they are what keeps your business going. Be a responsible business owner, think of the families of your employees that depend on them. They will be first one to be affected in this crisis if you are neglectful of their worth. Include them in your budgeting. If it is possible not to lay off employees, then don’t do it. Think of better and efficient way to reduce the cost of manpower without having to terminate them. By doing this then you are not just after the progress and security of your business but also protecting your manpower which is a good way to face the crisis successfully.
Title: CEO at Best Water Softener System
Reconsider your investment strategies.
The revaluation of investment approaches falls under the productivity umbrella. Many leaders who forecast recessions postpone their investment plans. But this is not always a poor option, that could be expensive. Where one company has chosen not to seize assets, such prospects become a gold mine for another.
Marketing and Customers.
Customers are worth their weight in gold to a company. Retaining and attracting clients is critical for a firm to thrive through difficult times. Rival analysis, leveraging on competitive gaps or failings, offering innovative services, and luring competitor clientele are all part of preparing for a recession.
Redirecting Resources and Streamlining Operations.
If decreasing costs is a no-brainer for a company, executives should consider increasing productivity and simplifying operations to achieve otherwise comparable results for a tenth of the cost. Take advantage of the economic downturn to rethink your policies and procedures. Where may you save costs and divert them?
One method to direct costs more intelligently is to review inventory management. This could entail learning new skills and experimenting with different methods to increase efficiency. Similarly, it may be worthwhile to discontinue items/solutions that just aren’t beneficial to the company. Profit is the priority. Many business owners offer products/services to differentiate themselves from their competition amid difficult economic times. However, make sure you do your homework first.
Title: Business Development Manager
Focus on your core product and core message.
And by “message” I don’t just mean marketing—I mean the story your company is telling by the way it does business. My company sells coolers and gives part of our profits to organizations that support veterans; if there is a recession, we’re not going to pick that time to start selling goldfish and donating money to organizations that rescue kittens (though that sounds fun, too!).
In times of financial uncertainty, consumers look to trusted brands they can rely on; so be that brand they know and love, rather than trying to look like something you’re not.
Title: Founder – Quenchlist
As a business owner, it’s important to be prepared for a recession. Here are a few tips:
1. Plan ahead. Anticipate what you might need to do to weather the storm and make a plan accordingly.
2. Cut costs where you can. Tighten your belt and reduce expenses wherever possible.
3. Focus on cash flow. Make sure you have a solid handle on your company’s cash flow and take steps to improve it if necessary.
4. Build up your reserves. If you can, put away some extra money to help tide you over during tough times.
5. Stay flexible. Be prepared to adjust your plans as the situation changes.
By following these tips, you can help your business survive and even thrive during a recession.
With the uncertainty that a recession brings, I try to focus on the things that are within my control. For my business, that primarily means reducing burn rate and diversifying our traffic sources.
By cutting unnecessary software subscriptions and renegotiating costs, I can improve our balance sheet today and ensure we’re ready to handle a bumpy road ahead. I am also striving to lean more on free traffic sources like Pinterest and Google. As advertising costs rise faster than consumer spending, these platforms will become much more important revenue drivers.
Personally, I prepare myself for a recession by focusing on my long-term goals. Reminding myself that the business cycle is natural and inevitable helps me to reorient my decision making and ignore the short-term financial pain.
Vida de Oliver
You can’t be sure the market isn’t panicking about the world’s economic problems, from Brexit to COVID-19. Creates doubt over supply chains and the work across industries, from manufacturing to services.
Are you committed to facing any hard times that might occur? What are the best ways to prepare yourself and your business? How can you make sure you survive more difficult economic times?
This short, simple guide will teach you everything you need to know about preparing for a recession.
1. accept that a recession is coming
2. make a plan
3. cut costs
4. boost revenue
5. stay the course
It’s no secret that recession-proofing your company takes careful planning and execution. To make sure your company is prepared to weather any economic downturn, start by diversifying your revenue streams, building up cash reserves, and reducing expenses. You should also have a clear understanding of your customers’ needs and how they may change in a recession. By staying focused and prepared, you can help your company survive and even thrive during tough economic times.
Before a recession, it’s time to stop taking risks and start saving up for when prices drop. Recessions can be a scary economic threat but they’re also an opportunity if you prepare properly in advance.
Talk to your CFO and make a plan to stabilize your finances by reducing debts and increasing savings. While some businesses struggle and shut their doors, there will be just as many eager to capitalize on rock bottom prices for services or property. Like a game of musical chairs, the key to keeping your business going during a recession is making sure you’re in the latter category.
One of the first things you could do is review your business cash flow. By doing so, you’ll be able to understand how money goes into your business and identify the different channels you’re spending your money on.
This helps you make wise and strategic decisions in case you’ll need to tighten your spending or reduce cash outflow. Based on your review, start creating contingency plans so you can act immediately if a recession happens. However, as you try to reduce your expenses, one thing that you should not invest less in is your marketing efforts. In fact, it is recommended that you increase and improve your marketing efforts, especially as your competitors reduce theirs. This will make your business stand out and help you retain and increase your clients which can help your business survive the incoming economic downturn.
It’s all about forming long lasting customer relationships.
When a recession is imminent, you have to fall back on your loyal customers to get you through. Customer acquisition is going to be tough when clients are cutting back. Instead, focus on customer retention until things start to return to normal.
Preparing for recession and the possible effects of it is important in building your company’s success in the future. As an entrepreneur who has faced both highs and lows, here are a few tips that should be considered by every other business out there.
1. Explore expansion to recession proof businesses. While it’s important that your brand stays, it’s safe to find an array of services and products that won’t be affected even with recession, and incorporate it into your brand. What products or services are recession proof in the first place? Your products should be a necessity and if you aren’t offering products as such, it’s high time you start expanding your offerings, or make your products a necessity to your customers. Expanding your services will create more equity for your brand as well.
2. Protect your cash flow. Put yourself on the pedestal in times of recession by equipping the company with cash flow surpluses. Collect your receivables and do not let any invoice fall past due, as it’s important that you get a grasp of more cash as much as possible. Cash reserves will help you get past a recession and allow you more room to help the business thrive during the hard times. Back then, we made sure we were always paid in cash, and on time to increase our cash flow and help us preserve our company in times of recession.
Title: Senior editor
Pet Shops Really Feel Recessions As soon as we launched our pet help services website, we noticed that things aren’t going in the right direction inflation-wise, which would really hit our ability to make any profits, especially in a niche that is so saturated.
We had to figure out a way to switch from the normal e-commerce model and went for something more brokerage-inclined. We chose to fight this recession by going for services that don’t cost us anything and would get us commissions from brokerage, like pet hotels and pet training classes, instead of the usual shop with toys and pet food. In this way, We won’t have to deal with the ever-increasing prices for pet products that even now, before the official start of the recession, are around 60% higher than when we launched the website, two years ago.
Title: Founder, Sadaka Associates LLC
As a business owner, I plan to combat recession by relaying my focus towards core competencies.
When we focus on a particular product, it will make us the market leaders in the specific niche, which would help us fight the recession. We would much likely scale back our SKUs and focus on products that bring in the most profit margin. The increased revenue stream would provide us with much-needed financial flexibility during tough economic times.
Another way that we plan to combat inflation would be to protect our cash flow. We aim to cut back on any unnecessary expenses through thorough auditing. Our aim is to cut back on subscriptions that we rarely use and aren’t necessary for our operations. It would provide us with a cushion during the recession period.
As the saying goes, “a recession is when your neighbor loses their job; a depression is when you lose your job.”
While that may be a bit of an exaggeration, it’s nevertheless true that recessions can be difficult times for everyone involved. But just because a recession is coming doesn’t mean that you have to sit idly by and watch your business suffer.
There are things that you can do to prepare yourself and your company for a successful recession. First, take a close look at your expenses and see where you can cut back. This will help to free up cash flow and give you some breathing room when sales start to drop. Next, make sure that your marketing efforts are focused on value. During a recession, people are still looking to buy things, but they’re also looking for deals.
By adjusting your marketing accordingly, you can show potential customers that you’re the company that can provide them with what they need without breaking the bank. Finally, stay positive and remain flexible. A recession doesn’t have to spell doom for your business; with the right preparation, it can actually be an opportunity to come out ahead of your competition.
Generally speaking, recession is very hard to predict, so businesses need to ensure they are fully prepared when it arrives.
In this regard, one of the best things you can do is nurture your existing business relationships. Your relationships with stakeholders – including customers, suppliers, employees and creditors – form the backbone of your business.
Whether individually or collectively, these relationships can help make a huge difference to your business when a recession strikes. For instance, if you provide good enough services to have many loyal customers, they will likely keep buying from your business even during tough economic climates and even if prices are low elsewhere. Similarly, your suppliers and creditors might be willing to give you access to lines of credit or raw materials during recession.