A financial downturn can occur at any moment, which is why business owners need to be prepared for it.
Recessions can strike at any time, and there's no real way to avoid it. Especially as a small business owner, you have to come to terms with the fact that you're going to be affected by this one way or another. However, you can definitely prepare yourself better for a situation like this to ensure that you can glide through this time with minimal impact to your operations. Surviving a recession as a small company is all a matter of knowing what your options are, and using them wisely.
1. Know your situation.
The most important thing in this kind of situation is to understand how things work on your end. There are many ways to get a detailed overview of your current operations, and it's important to use modern technology to its full potential in this regard. If you're still relying on old-school analytical methods, you're likely missing out on a lot. This is especially true if you have more complex financial operations spanning across multiple areas. Yes, this can be valid even for a small business nowadays, so be careful and make sure you understand your current situation properly.
2. Expect further decline.
It's not reasonable to expect that the market will start to stabilize immediately. In fact, when you're going through a recession, it's very important to pay attention to how the market is shifting, and assume that it will move in a worse direction at every step. This is quite normal in situations like these, and there's unfortunately not much you can do to protect yourself against the impact of the recession on your business in the long run. However, by simply assuming that things are going to be bad in the future, you will be able to stay on the safe side.
3. Dip into emergency savings.
Having a nice pile of savings is always a good idea in any case, but especially when you're running a small business. It's important to keep your savings in check at all times and know where you stand in this regard. Don't be afraid to use them, but make sure you can recover what you've taken out as quickly as possible. The whole point of savings is to have them always available, and dipping into them too much is a major mistake that some beginners tend to make. You should have a plan for restoring the money immediately, and that should be your top priority – don’t postpone this in any way, because that can cost you a lot in the long run. You never know if you might need those savings for something even more important tomorrow.
4. Consider taking out a loan.
A loan is another good option if you want to get through the situation quickly. Of course, a loan also has to be used responsibly, because it can put you in an even tougher spot if you're not careful. Some loans are specifically designed for the needs of small businesses, but you don't necessarily have to use those in your situation. A personal loan can sometimes be easier to obtain, and it can still help you bridge the gap. The important things are that you have a solid plan for repaying the loan and that you actually stick to it. If you notice that you're falling behind, make sure to talk to your lender and explain the situation. These things happen, but it's important to alert the lender as early as possible so that they can take any steps they deem necessary to prevent the situation from deteriorating further.
5. Cut corners in the right places.
It's a good idea to start thinking about how you can save some money by optimizing your expenses. There are many things you could do in this regard, and some of them are not immediately obvious. You should consider scaling things down a bit and moving your office into your own home, at least temporarily. This can allow you to save on a lot of things and can make the whole process smoother and more streamlined for you during the recession period. This is also something that will help you save on things like business utilities and other related costs. Generally speaking, you have no shortage of options in this area.
6. Look at outsourcing.
On the note of downscaling, you should also look into outsourcing some of your work. This is something that should be approached with a lot of caution, as it has a strong potential to mess things up for you if you're not careful. But at the same time, outsourcing can be one of the best ways to improve your current financial situation. Fill the gaps by hiring remote freelance employees can bring a lot of extra money to the table if you play your cards right. You'll be able to pay your workers far less than you're paying now, especially when you consider things like healthcare and other types of insurance. Of course, this is not something with infinite potential – there are some things that you'll want to observe here to ensure you don't go too far.
There is definitely a possibility to overdo your outsourcing and find yourself in a difficult situation with regards to getting the job done. But as long as you do this carefully and in coordination with an experienced outsourcing company, you should be able to see good results that will bring down your bottom line significantly. Just make sure that you can recover your workforce afterward because that can be a challenge when coming out of a recession.
7. Consider long-term solutions.
Now is a good time to think about long-term solutions to this problem. This is something that will likely happen again at some point in the future, and it's important to be prepared for that moment. Study the market, know how your company reacts to different developments, and make sure to keep an eye on the possibility to integrate new solutions into your business that can reduce some of these problems significantly. In some cases, you may be able to spend a little more money to ensure that you'll be in a much better situation financially later on, and it's a good idea to look into that as early as possible.
8. Analyze your progress.
You also want to make sure you have an objective overview of where you stand. When you're going through a recession, it can be very easy to get the wrong idea and believe you're doing worse than you actually are. This often happens because you keep seeing other companies on the market performing poorly, and it's easy to get the same impression about your own. But as long as you keep track of your operations through some objective analytical tools, this doesn't have to be the case. You can develop a good sense of how well you’re doing and what else needs to be done, and you’ll have a precise list of actions that you can take to improve your situation in the future.
9. Prepare for recovery.
When the market does recover, you want to make sure that you're ready to hit the ground running. Make no mistake, things are going to get back to normal sooner or later – and it's important to be in a good position to take advantage of the market’s recovery when it does happen. There are many things that play into that, including the grasp of your current finances and the plans you will make for the future. Have a system that you're going to follow during your company's recovery, and make sure all of your employees are on the same page with regards to what needs to be done in the near future. Because in some cases, there will be certain sacrifices required, and it's important to ensure that everyone is aware of that situation.
10. Control your growth.
Last but not least, remember that growth can be a dangerous factor for a company, just as much as a recession can. Sometimes uncontrolled growth is the main factor that kills the progress of a business, and this tends to happen more often than you might think. And when you suddenly find yourself in possession of a significant amount of resources that you've been lacking in the last months or years, it can be even easier to fall into the trap of growing too fast without any good control over the situation.
What this inevitably leads to are lots of problems with your organization's general structure. Of course, growth is exactly what you should be striving for when running your business, but at the same time, too much of it can be just as problematic. It's not rare to see companies go under because they are incapable of getting a good grip on their own situation in this regard.
All things considered, you should not be afraid of a recession. After all, the whole market is going through the exact same issues as you, and other companies have to align to that situation as well. If you play your cards right, you can come out a much stronger business after this is all said and done. But it's going to take a while until you've recovered, and you have to make it a point to keep moving in the right direction through the whole ordeal. Little by little, you're going to rebuild your company's standing on the market.