How to Prepare Your Small Business for a Recession

You know that scout’s motto: “Always Be Prepared”? If you’re thinking that a recession is on the horizon, that means today is best time to enter preparation mode. 

That’s why we’re re-running these tips from our friends at Expansion Capital Group about how to prepare your small business for a recession. Full disclosure: they wrote these back in early 2019. And while in internet time, 3+ years ago may seem like an eternity, the tips definitely still work today. They come with a bonus, too: they’re all smart business moves, even if we don’t enter a recession.

Reevaluate your suppliers

If a recession hits, suppliers will feel it too. And the last thing you need is an interruption to the steady supply of products and services you depend on for your operations. Check-in with key vendors to assess their ability to withstand an economic rough patch. Ideally, you should be able to place them in 1 of 2 broad imaginary buckets: financially stable and unstable.

The first group is the one you may need to count on. Reinforce your relationship with them. If appropriate, assure them of your continued desire to do business — even a peek at your strategy for recession-proofing your business — because they’ll have the same concerns about you.

For the second group, those likely to suffer under a recession, pursue a similar strategy while also scouting alternatives in case you need to deploy a Plan B.

Check-in with your most reliable customers and clients

Assess and nurture client relationships as you would with suppliers, but with some variation. You need a steady flow of sales even more than a steady flow of goods and services from your vendors. Let them know you’re in it for long term gains and will weather any uncertainty with minimal disruption. You might also explore whether you’re paying their invoices faster than necessary. For many businesses, for example, net 45 is the new net 30. Paying regularly but a little more slowly could give you an important cushion. For customers with questionable stability, explore the opposite approach.

Shore up your workforce

If you have employees, now’s a good time to circle the wagons. Cement the mutually rewarding relationships you have with your workforce — whether it’s a part-time assistant or a whole crew of workers. Do some bonding and reinforce how valued they are to your success. Reassure them that their continued presence is a priority for you. You don’t want people deserting you out of fear they may be pink-slipped soon. At the same time, though, curtail any discretionary hiring activities. When the volatility passes, you can invest in more headcount. 

Have access to capital

Ensure you have a line of credit — just in case — and make sure your credit lines are robust enough to sustain you. Best part? If you don’t need to use the line of credit, there’s nothing to pay back. You can get started by applying today.

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