Top tips to prepare your small business for a recession


A recession may be on the horizon. We all, of course, hope that doesn’t happen, but the possibility exists. There are indicators of recession, GDP has contracted at an annual rate 1.6% in the first quarter and this year .6% in the second quarter.. GDP increased 2.6% in the third quarterHowever, so we are not yet in recession – still being the operative word.

As a business owner, you have a choice – you can try to run business as usual, or you can prepare your business to weather the storm.

Here we provide ways you can prepare your small business for a recession.

Protect your profit margin

You are already dealing with high prices for inventory for your business, which is likely to continue if we go into a recession. Even if you don’t want to, you obviously have to pass on at least some of that extra cost to your customers. you have to Calculate your markup percentage This will put you at a profit margin that will keep your doors open.

In doing so, you are walking a fine line. You need to come up with a price that will keep customers buying but not put you out of business.

lean in

As consumers step back, businesses must do the same. You need to analyze your expenses across the board to see what you can reduce or cut. This can involve increasing the efficiency of your process, which can reduce various costs, including labor costs.

A thorough examination of all your expenses will enable you to find expenses to trim. You can even shop around for less expensive vendors or service providers.

You should analyze and take cost reduction measures now. Don’t wait for a recession to hit.

Manage your cash

You need to have enough cash on hand to meet your obligations, so you need to manage your cash flow effectively. The goal is to have as much cash on hand as possible at any given time. You can do this by:

  • Accelerating the collection of accounts receivable.
  • Negotiating favorable terms on accounts payable. You want to delay accounts payable as long as possible without penalty
  • Manage your inventory.

Managing inventory is the most effective way to increase your cash on hand. Holding inventory means less cash in your pocket, so you need to find the optimal inventory level that allows you to fill orders but not overstock.

Build your cash reserves

Once you’ve reduced your spending and improved your cash management process, you should build cash reserves. You may even consider other ways to set aside cash, such as distributions, dividends or salary reductions to your owner.

A nest egg in stock can give you a lot of peace of mind when times get tough.

Focus on customer retention

You never want to lose customers, but during a recession, you can’t afford to. You need to ensure that your customers are having the best possible experience with your company. Your customer service and order fulfillment must be outstanding to help keep your customers loyal.

Now is a great time to start a rewards program if you don’t have one. According to a study by BOND in partnership with Visa, 71% are American Say that loyalty programs are a meaningful part of their brand relationship.

There are many software and apps on the market that enable you to set up a rewards program customized just for your business needs.

Consider a line of credit

The best way to look at getting a business line of credit is for a “just in case” situation. If cash gets tight during a recession, a line of credit can help you meet your other obligations. You just have to be careful not to overextend your business.

Lines of credit are intended for short-term cash flow needs, so if you use one, pay it off as soon as possible.

Put together a marketing plan

You still need to market your business during a recession to maintain your brand recognition and bring in new customers, but you should consider using a different approach. In difficult times, people are looking for compassion, so your marketing should have an empathetic tone.

You might consider campaigns that say, “We’re with you” or “We’re here with you.” You can do this in conjunction with advertising discount offers or your rewards program.

When developing your marketing plan, you must consider costs. Make affordable or free marketing strategies, such as social media, a major part of your plan.

Diversify your revenue stream

This can be a good time to look for new opportunities to diversify your products or services or add other revenue streams. How you do this depends on the nature of your business. If you have technology or relationships that can generate more revenue without increasing expenses, consider doing so now. Another option is to offer some type of subscription service related to your business.

The more ways you can bring in revenue, the more recession-proof your business will be. Don’t have all your eggs in one basket, so to speak.


Let’s hope a recession doesn’t happen, but you should do what you can to prepare your business for the worst. The time to start is now, or you could find yourself scrambling to keep your business alive. Use the tips provided to create a strategy and implement the strategy as quickly as possible. A well-developed and effective plan can help your business succeed during the recession and for many years to come.

Above all – don’t fear the worst. If we have a recession, it – like all things – will pass.

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