There are plenty of words or phrases that will immediately inspire terror, sweat, and shudders for small business owners. Unpaid invoice. Nightmare client. Customer complaint.
But a recession? Oof, that one might be the worst of all.
Unfortunately, it's top of mind for a lot of entrepreneurs (and people in general) right now. The World Bank's latest report predicts that we'll see global growth slump from 5.7% in 2021 to 2.9% in 2022. Bloomberg Economics states that there's a 72% chance of a recession before the first quarter of 2024.
Yikes. But don't start huffing and puffing into a paper bag quite yet—it's not all doom and gloom. Many economic experts maintain that we'll see a slowdown or a downturn, but not a sudden halt to the global economy.
"Most of the firms that I serve will notice it and will be forced to tighten their belts, but will not be forced out of business because of it," explains David C. Baker, President of Recourses, Inc. who works with independent firms in the marketing space.
Even so, the potential for an economic decline—whether it's a slight dip or a sudden nosedive—is something that business owners want to be prepared for.
But how can you brace your business for that impact, regardless of what it is? If you're worried about how to survive a recession, here are 10 smart steps to take.
As much as you might want to cover your ears, bury your head in the sand, and pretend everything is business as usual, ignorance isn't necessarily bliss in this case.
"I didn't really pay attention to the economy as much back in the 2000s, which was a mistake," admits Michelle Garrett, a public relations consultant who launched her business in 1999 and has since made it through two recessions or economic slumps.
"The 2008-09 [recession] was long-lasting and impactful—and it affected me in a way I can't describe, other than to say I will never allow that to happen to my business again," she continues.
"I was forced to take projects and clients that I otherwise wouldn't in order to build my book of business back up from the losses that the recession brought."
But, the experience taught Garrett a valuable lesson: "I think as a business owner, it's important to remember that you always need to be prepared and paying attention to economic conditions that could impact your business," she says.
That vigilance helped her when the economy started to slide during the early days of the pandemic. As soon as she saw the early warning signs, she prepared by building up her client roster as much as she could.
The result? Her business wasn't negatively impacted—in fact, she had one of her best months ever in April 2020.
If you're wondering how to survive a recession, the word "survive" is a crucial one. In tough times, you probably won't be thriving (unless you're really, really lucky). More than anything, you're in maintenance mode.
This likely isn't when you'll be doing a lot of experimenting or pursuing an ambitious business idea. You're probably not going to be on a hiring binge or resting easy with financial security. You might not see record revenue or be closing deal after deal.
Keep your eye on the end goal: Making it through a recession with your business intact. If you can stay afloat and pay your bills on time, you're winning.
Do you notice that you're starting to lose some of your current customers or clients—even long-standing ones? Have you had to dip into your cash savings to cover your expenses?
It's tempting to tell yourself that you don't want to jump the gun. Maybe you should give it another couple of months and see if things even out on their own.
In reality, you want to "act very quickly" when you see a slowdown in your business, warns Baker.
Whether that means cutting costs (including labour costs, which always stings) or building up more of an emergency reserve, you want to get out ahead of a potential recession as much as you can.
Plus, as counterintuitive as it might seem, those swift decisions can actually be easier on your staff. "One big workforce reduction is much better than a series of small ones, which will feel like cutting someone's leg off one inch at a time," Baker adds.
Did your grandma tell you to save for a rainy day? As it turns out, that advice holds up (thanks, gran). One of the best ways to get ready for tough economic times is to stash away some cash when things are good.
While you still want to prioritise your mental health and avoid burnout or majorly overworking, Garrett says she tries to "make hay when the sun shines" and work as much as she can when business is booming.
"Put away money for the times when your business may be in a downward spiral," she adds. That emergency reserve is invaluable for staying afloat when things start to take a turn.
Of course, preparing for a potential recession isn't only about saving—it's also about tightening your belt where you can. Are there any expenses you could completely cut or significantly reduce?
Here are a few areas you could evaluate:
That's not an exhaustive list, but it's enough to get the wheels turning on how you could trim your expenses and lighten your load at least a little bit.
Conventional wisdom would tell you to focus on debt repayments ahead of a recession. In some ways, it makes sense to get that major burden out of the way.
But, Baker recommends a different approach. He thinks it's smarter to continue making minimum payments on existing debts.
It allows you to preserve cash and keep that money liquid for any upcoming difficult times. Plus, you can likely take advantage of the lower interest rates when you took on the debt.
With that said, Baker says it's best to avoid taking on new debt too. Digging that hole only masks the tough decisions that you'll probably need to make eventually anyway. As Baker says, it "allows you to paper over a leak in the ceiling."
If you do need to take on any debt, Baker says that it should be to gain market share and not to cover your operating expenditures.
When you notice things heading in a scary direction in your business, that might be when you decide to pound the pavement, slide into people's inboxes, and aggressively chase new business.
That mad scramble is not only stressful for you—it also appears inauthentic (and maybe even frantic) to everybody else.
A better strategy is to consistently prioritise marketing and networking. "Don't go silent, even if you're busy with client work," says Garrett. "Always be talking to people, meeting people (yes, online too), and keeping your funnel full."
Retention is another pressing issue for business owners who are riding the waves of a recession. How can they inspire their best employees to stick around when the business feels rocky and they might not have the same financial resources?
Baker says it's worth considering offering bonuses rather than permanent salary increases for the time being, as they're often more affordable in the long-run.
Beyond that, think through some other cost-effective perks that you could provide. For example, you could give employees more control over their work hours.
It's not doable for every business, but when 95% of global employees say they want schedule flexibility, it's sure to be an attractive benefit for your workers.
While this might not be a time when you're investing heavily in completely new business ventures, it is worth testing out some creative ideas with your existing products and offerings.
"I will start offering packages and monthly memberships," explains Kelli Sager, a licenced massage and craniosacral therapist who owns a studio in Maine. "I will also go back to offering a sliding scale rate for craniosacral sessions."
She's hopeful those steps will make massage more affordable and accessible for her clients, especially at a time when people tend to cut down on discretionary spending and stop prioritising their own self-care.
You can follow suit. Brainstorm new ways that you can package, present, or tweak your products and services to make them more appealing to your customers or even more cost-effective for you.
Recessions are scary and "stay positive" can seem like trite advice when you feel like your business could be teetering on the brink of its own downfall.
But try your best to stay calm and confident. "I work on reminding myself that I have enough right now and that I have always managed to figure it out, even when times are incredibly challenging," says Sager.
And though a recession might feel like the end of the road, Baker says that there's room for optimism. "A recession, if it comes, will remove the weaker competition," he concludes. "This is the time for a steady, forward-looking leadership perspective."
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