Small businesses are hurt the most when the economy suffers. Recently, the Covid 19 pandemic disrupted the supply chain and brought the economy to a standstill, resulting in business closure, job termination, and loss of revenue.
Things were just starting to get better when the war in Ukraine worsened them. As a result, the price of everything is rising, and the economy is hinting at an imminent recession. For a sister trying to maneuver the entrepreneurial world, there has never been a tougher time to run a business.
While predicting a recession is not easy, there are measures you can take to cushion your business when the signs appear.
We’re looking at what a recession means for small businesses and how female entrepreneurs can protect themselves from one…
What does a Recession Mean for Small Businesses?
Recessions usually last a short time, but the effects can stick around for a long time. Here are ways in which a recession affects small businesses…
When a recession strikes, the register gets quieter as orders or clients become scarce. Consumers become worried about the downward trend of the economy and spend less. As a result, businesses cut costs through layoffs and reduced investments.
Lenders also become more cautious about how they lend money in a recession. They go for clients with good reserves and power to serve the loan, which disadvantages small businesses. Additionally, interest rates skyrocket, and loan requirements become tighter.
Disrupted Supply Chain
Recessions affect businesses across the region. Suppliers also struggle to run business and deliver on orders. It means they might deliver late or poor quality products, affecting your ability to serve your customers. There creates a knock-on effect.
How Can You Protect Your Business from a Recession?
We know how detrimental a recession is to a business, so how do you protect yourself? Here are five actionable tips to help you recession-proof your business.
Secure Your Cash Flow
Did you know 82% of businesses fail due to cash flow issues?
Controlling your cash flow before times of distress can help you stay afloat. You’ll need to invest in a finance management system that sends out invoices promptly. As such, you can resolve any issues on time before things get out of control. There are also ways to brainstorm how you can increase and diversify your income. You could introduce a new product or service, rework an existing one, or pivot altogether. Staying motivated and agile in times like these may make all the difference.
Invest in Client Relationships
Good relationships determine whether your business will survive economic hardships. If you have built a strong brand community of dedicated customers, you’re assured of sales even during bad times. What’s more, retaining existing clients is an easier and more profitable investment than trying to attract new ones. Networking is also a great way to grow your potential circle of clients, customers, or partners.
Secure Funding before its too late
Waiting for a cash crunch before looking for funding is dangerous. Lenders usually predict recessions, and their first move always makes it harder to get a loan. As such, get your financial records in order and figure out your credit options in advance. If you sense that times are going to be bad, and you’re in the market for business funding, secure yourself a loan that will help keep you afloat. That being said, a business loan or funding may not be right for you or your business. It’s important to arm yourself with information before diving into debt. Chatting to a financial advisor could help you understand your options, risks, and opportunities.
Secure your Supply Chain
A healthy supplier and partner relationship are essential to any business. Suppliers help keep your business ticking and should be on your side during hardships. Therefore, a good relationship helps you plan for pitfalls or hardships amicably.
Be Indispensable and Build Multiple Revenue Streams
Putting your eggs in a single basket is never a good idea. Similarly, depending on a single source of income can hurt you during a recession. Therefore, you may want to think about building different revenue streams, or branching out to provide services and goods that are perceived to be essential. This way, people still buy from you, and you keep your accounts healthy.
Recessions can happen at any time, and small businesses are especially vulnerable to the impending storm. The good news is that you can prepare in advance to cushion your enterprise from its effects. Ensure you secure your cash flow and credit sources, build good relationships, and have several income streams, and you’ll weather the storm!
Remember, a forewarned sister is a forearmed one. Start now to avoid getting caught off guard.
We’re your sisterhood to help you overcome and become, and when one of us rises, we all do. Stick with us, we’re taking you to the top with us!