Safeguarding Businesses Against Recession

by Rachel Shepard

Business owners were required to adapt quickly during pandemic-related lockdowns, supply shortages, labor shortages, and inflation.

Now, business owners face the risk of a recession.

In response to inflation, the Federal Reserve has implemented quantitative tightening which involves increasing the Fed funds rate. This is making it more expensive to borrow money and it has the potential of slowing the economy.

Over the past few months, several chief executive officers of publicly traded companies have warned of an upcoming recession. While hoping for the best, also prepare for the worst.

There are steps that can be taken to help recession-proof businesses by being mindful of customers and financials.

It is imperative to achieve the right mindset and to be willing to pivot when necessary.

Customers can be cared for by understanding what is important to them and rewarding the best customers. It is beneficial to reach customers through stories and connect with them emotionally. Flexible service agreements and payment plans can help to increase sales.

As businesses and households cut back, it is important for customers to consider businesses and their goods and services as essential.

Being mindful of business financials means paying attention to cash flow, profitability and balance sheets.

It is wise to reduce spending, reduce inventory levels, and review current contracts, such as those related to supplies and rent.

Implement clever marketing strategies that do not require a huge budget. When possible, track marketing key performance indicators. Which campaigns are achieving the desired results?

Look for ways to improve cash flow, increase cash position and reduce debt. Access to capital via traditional banks often dries up during a recession.

Business owners should consider strategic partnerships with other businesses which may help to reduce expenses and gain exposure to new markets.

Other ways to recession-proof a business include creating multiple streams of income, adjusting prices to improve profit margins, diversifying suppliers, understanding the drivers of growth, and becoming a market leader in your industry.

Some of the most successful businesses were started and/or expanded during a recession.

Recessions are exciting because they present opportunity. Look for opportunities to thrive!

Rachel Shepard is the founder of LonaRock, LLC, and a Medina County resident. She specializes in helping businesses understand financials and access capital. Learn more about Shepard at https://bit.ly/3h0LFEY Shepard can be reached by email at rshepard@lonarock.com