5 Ways Your Business Can Get Ahead of an Economic Slowdown Here are five things business owners can do now to help set themselves up for success during and after a recession or economic slowdown.
By Bob Bagga Edited by Chelsea Brown
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In Q2 of 2022, the U.S. economy contracted for a second straight quarter – a move that typically shows the U.S. is headed for a recession. Historically, small businesses are more likely to be hit harder during a recession. The budget constraints and reduced spending power that come with a recession hit small businesses harder, given the tightly controlled budgets they typically operate on.
While economists have varying views as to if, or when, the economy will hit an official recession, there are small steps business owners can take now to be ready, just in case.
A tale as old as time, increasing cash flow and reducing outflow are always critical steps for small businesses, especially in a recession. Here are five things business owners can do now to help set themselves up for success during and after a recession or other type of economic slowdown.
Related: How to Prepare Your Business For Economic Downturn
1. Make connections now
It is true what they say: It's all about who you know. Whether you focus on goods or services, your network can continually help you get in front of new customers and long-term clients. Check in with your online social network, regroup with business leaders you have not connected with in a while, or consider joining business networks to meet like-minded connections. Whether there is a pandemic, looming recession or supply shortage, your network keeps businesses thriving during tough times.
2. Preserve cash
Cash is king, and it's time to preserve and save where you can. Conduct a spending audit, and see where some costs can be saved over the next six months. For example, your business may be paying for apps, subscriptions, software or networking groups that are underutilized by the team. Once the audit is complete and necessary spending cuts are made, keep the extra cash in your back pocket. Now is the time to inflate your emergency cash fund — and these savings are the first place to start.
3. Leverage your inventory
Take stock of inventory and excess capacity to decide what may be of value to other businesses in your network, and reach out to them with ideas. Businesses may be able to negotiate with suppliers or neighboring businesses to offload any overstock or to negotiate a better price. Additionally, as supply chain woes continue, businesses can assess which items they may need to have on hand to avoid business disruptions. Another option is to limit the amount of stock on hand — opt for a three-month back supply rather than a typical six to 12-month supply outlook.
4. Be creative
From sudden closures to staffing issues and supply chain disruptions, businesses are getting creative. Now is the time to use those lessons and pivot creatively, again. From offering a limited menu of services to adjusting your business model to meet the needs of the communities, there are several innovative ways to keep going through challenging times.
During the height of the pandemic, restaurants sold their supplies of paper products and wholesale food items to meet their monetary needs and the needs of the communities they lived in. We don't know if, or when, a recession will bring a severe downturn, but we know that if businesses were able to pivot during the onset of the pandemic, getting creative with business offerings is nothing new.
5. Use the barter system
One great way to conserve cash is to barter. It can be a one-to-one agreement where both parties feel they are getting a fair deal, or you may consider a barter network.
A barter network allows participants to accumulate credit whenever they supply a good or service. Credits can then be used to buy other goods and services from businesses taking part in the network. Using a barter network also helps preserve cash — which is the ultimate business goal.
Related: 9 Smart Ways to Recession-Proof Your Business (Fast)
While we all continue to watch the economy and hope for the best, now is the time to act and prepare your business for the worst, just in case.
