Whether a recession is coming in the future or not, it’s always important for business owners to know how they can help recession-proof their business. Small businesses account for a large portion of the economic activity in the US—44% to be exact. A recession would negatively impact small businesses the most as ¼ of small businesses don’t have enough cash to get through a two-week downturn. Fortunately, there are ways businesses can gear up for a potential recession to help offset the negative effects. Keep reading to learn how small businesses can prepare for a recession.
Concentrate on Your Cash Flow
Cash flow is always important, but especially in the midst of a recession. During a recession, you should focus on making any cash reserves you have last as long as you can. This can include collecting receivables, checking payables, updating your books, and contacting lenders & vendors. During this time, you should also get creative in the ways you bring in revenue. Offer coupons or gift cards to encourage customers to shop with you, convert your physical services to additional virtual services, and more. For more specific information on how to prioritize your cash flow, contact us.
Review Your Financing Options
Even if you don’t think you need loans or lines of credit to get through a recession, you should still explore financing options. You never know when you’ll need a business line of credit or a US Small Business Administration (SBA)-backed loan, so it’s good to be aware of them.
Check Out Disaster Relief Options
Disaster relief is created especially for tough times like this that can hurt your business. Applying for disaster loans can help your small business stay afloat through a recession. SBA offers low-interest disaster loans to businesses and homeowners to assist in declared disaster recovery. You may also have access to other local disaster relief resources. Contact us for more information on your disaster relief options.
Utilize Your Insurance
A recession is the perfect opportunity to use your business insurance policy. Specifically, check for a business interruption policy, as business interruption insurance is designed to protect businesses from the loss of income as a result of a disaster. Check out what your plan can offer you during tough economic times–it could surprise you!
Rough economic times can be tough on not only you and your business, but your customers as well. Keeping up consistent, transparent communication is necessary in a recession. Don’t leave customers guessing because that will break their trust that you’ve worked so hard to gain. Tell them when you’re closing, and let them know your current and future plans. Remind them that you’re there to support them, and inform them how they can support you.
Although the hope is that a recession does not occur in the near future, the likelihood of it happening is prominent in this economy. Don’t wait until it’s too late to prepare your small business for a hard economic hit. Most of all, do not take on a recession alone. The financial advisors at U-Vest Financial® are more than happy to help you and your business weather any recession. Contact us or visit our website to learn more about how small businesses can prepare for a recession.
This article is meant to be general in nature and is not intended, and should not be construed as personal advice of any kind. Dustin Johnson, CFP®, ChFC® is a Financial Advisor with U-Vest Financial®, a separate entity from LPL Financial, and can be reached at (727) 343-4200. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.