The chances of a recession have been top of mind for bankers, economists, and small business owners. For countries around the world, the recession will likely be hard to avoid—it’s just a matter of time and how to prepare for it.
Experts are predicting that the next financial recession could be coming soon.
This global economic slowdown can be credited largely to the COVID-19 pandemic, and it was only magnified by the Russian invasion of Ukraine. We’ve reached record-high levels of inflation, and we’ve seen the U.S. Economy shrink for the first time since the first quarter of 2020.
The chances of a recession have been top of mind for bankers, economists, and small business owners. For countries around the world, the recession will likely be hard to avoid—it’s just a matter of time and how to prepare for it.
From many in the financial markets, it appears a recession is imminent with threats of the return of “stagflation,” which happened last in the1970s and occurs when economic growth goes through a significant slowdown while inflation and the cost of goods still remain high.
For small to mid-sized businesses, it’s not the time to panic—not all economists know when a recession will happen—but it is time for your business to prepare.
HERE ARE SOME STEPS YOUR BUSINESS SHOULD TAKE TO PREPARE FOR A RECESSION.
- Prepare to make hires: Hiring can actually get easier during an economic slowdown because people will need additional work. This could be a time to look to fill vacant spots on staff with part-time employees or freelancers. You don’t want to lose the quality of your business’s service during a recession, so this is a way to make sure you can still provide the best service to your customers.
- Reduce expenses that aren’t essential: Revenues fall for businesses during a recession and this means you will have to take necessary steps to cut costs. This could mean reducing operational costs. Business owners need to be prudent in how they cut costs. They should be able to identify what can potentially cut into profits and recognize the difference between what’s essential to spend money on and what’s discretionary.
- Maintain relationships with customers: Take care of your customers and keep them happy. Use this time to strengthen relationships with existing customers. Offer them reassurances and consider discounts or loyalty benefits for repeat purchases.
- Maintain relationships with your employees: Now is also the time to do what you can to take care of your employees. They’re feeling the weight of this recession on your business, too. Businesses will need to get creative to do this during a recession. Make employees aware of any financial assistance available for them, examine ways to lower costs on things like health care and consider offering perks like professional development and other training opportunities.
- Don’t look immediately at layoffs: Some layoffs are inevitable in a downturn. But layoffs are harmful to employees and costly to companies. Hiring and training are very expensive and laying off employees can hurt the morale of those who remain. Look to cut labor costs in other ways like hour reductions or furloughs.
- Continue to market your business: Marketing expenditures are often cut during a recession, and this could be a mistake. You’re looking to retain customers and attract new ones. Understand your customer needs and don’t completely slash your marketing budget. Instead, adjust your strategies because you need to do whatever you can to stay top of mind for your customers.
As the threat of recession looms, you can still prepare your business to endure it. Running a small business is challenging—period— but a recession doesn’t mean your business’s end. You can be flexible and adapt to changes, but you need to make sure you are prepared to face them head-on.
