How To Prepare For The Coming Recession

Over the past two years, small business owners have faced many obstacles. The COVID-19 pandemic forced businesses to shut down, pushing businesses to operate differently while facing labor shortages, a supply chain crisis, and increasing costs caused by inflation. This has left business owners questioning whether or not a recession will happen in the coming months. A recession is a significant, widespread, and prolonged downturn in economic activity. In a recent survey, 70% of small business owners dictated that they expect a recession within the next six months; however, significantly fewer respondents feel prepared to cope with it. The question of a recession is no longer if, but when.

As a business owner, it’s crucial to consider what you can do to survive this recession. While most business owners have reported cutting costs where they can, others are contemplating changes that could impact the jobs market. In addition, business owners have considered decreasing their current insurance coverage to reduce operational expenses. So, since there is now a 98% chance of a global recession within the next 12 months, what steps will you take to ensure your business is prepared?

Continue reading to learn how to prepare for a recession before it’s too late.

Steps You Should Take As A Small Business Owner

With the prediction of a recession coming in the next year, you must take every step possible to ensure the effects of a recession don’t blindside your business. The following are ways in which a recession could affect your business if you don’t take a proactive approach now:

Plummeting sales
Credit impairment
Bankruptcy
Employee layoffs
Benefits reductions
Decrease in asset prices

However, rest assured there are approaches you can take to safeguard your business.

Consider raising prices

Whether you’re a business that sells tangible goods or even intangible services, you can certainly raise the prices of your product or service. Businesses are implementing this tactic to compensate for the lost revenue they see instead of laying off employees.

Temporarily cut wages

Employees are your biggest asset so losing them during a recession is never a good idea. While some businesses may have to resort to laying off their employees, try reducing your employees’ salaries first. This is an excellent approach to reducing the number of employees you lay off.

Cut back on spending

You may think this is an obvious step in fighting the effects of a recession. However, many business owners don’t fully understand how to do that. As soon as you are made aware of a possible recession, it’s critical that you immediately review all expenditures and determine ways to reduce or eliminate unnecessary costs. The following are ways to cut back on spending:

Eliminate discretionary spending
Buy more strategically
Stop paying for equipment you don’t need
Renegotiate your lease or move elsewhere
Eliminate unnecessary perks
Cut business travel
Cut back on insurance expenses where applicable
Look for new vendors
Shop around for more competitive rates
Join a coworking space
Outsource business task

While this is essential amidst a recession, cutting costs shouldn’t just be a periodic exercise to improve your bottom line. Throughout the year, consider where you could be cutting expenses – with or without a recession, the opportunity to improve one’s bottom line is always welcomed.

Outsource Your HR Functions

At GMS, we understand the word recession is the last thing you want to hear. When you partner with GMS, you gain experts in all areas of your business, including HR, payroll, benefits, and risk management, to ensure your business doesn’t go awry during a recession. Our competitive rates, partnered with our streamlined approach, can save your business thousands. Let’s combat this recession together. Contact us today.