During such times a firm should take measures that have historically been thought to safeguard it, such as cutting costs, lowering goals, and keeping an eye on cash flow to weather the impending storm. Maintaining team morale during a bad economy is equally important. Share your strategy about how you would deal with the recession and give your team a sense of purpose.
We asked entrepreneurs to share how they will prepare for the bad economy and here is what they have to say.
#1- Make a budget
In my opinion, you should reconsider the way in which you spend your money by creating a transparent budget that enables you to put money away for the future. You can improve your long-term financial stability by reducing spending that isn't required for your lifestyle. You can save more money for an emergency fund if you use budgeting tools or create a spreadsheet to track your costs, both of which can help you identify expenses that aren't necessary and cut them out of your budget.
Thanks to Abdul Saboor, The Stock Dork!
#2- Create an emergency fund
In order to save ourselves from a shocking loss, it is important to create an emergency fund that can help one in clearing debts, and help one sustain themselves. The ideal amount is about 6 months' worth of expenses. Make a budget and keep a close watch on the finances, ensuring that there are no unnecessary expenses. Create multiple income streams, in order to maintain the cash flow from different directions, as a backup if you in case you may lose your primary source of income.
Thanks to Eva Tian, Mynd!
#3- Manage debts proactively
Don’t come into the recession with significant debts to pay. If possible, settle debts before being subject to inflationary costs for your business. Debts can be deadly to manage when costs and expenditures are already high. Protect your business from going under by managing debts proactively to stay mobile during the recession. Approach your investment conservatively to best handle market fluctuations. If you take on too much risk, your business may take the brunt of your decisions.
Thanks to Zach Goldstein, Public Rec!
#4- Investing in yourself
As a solo practitioner, I've learned to invest in myself. I've been able to spend more time on my current clients, win more cases, and attract new clientele. Though it took some effort and money to incorporate these outside resources into my business, it was well worth the expenditure. As I've taken the time to invest in companies and programs that can manage various facets of my business on my behalf, I've been able to increase my revenue and provide better financial insulation for my firm to help it withstand the negative effects of a recession.
Thanks to Shane McClelland, Law Office of Shane McClelland!
#5- Focus on team wellness
Our teams and employees are our biggest support during an economic downturn. Tighten up your business by focusing on team wellness and feedback before the recession hits. Using feedback implements or engagement initiatives, keep employee expenditures lower later on by investing in teams’ satisfaction and retention now. Professionals will stick out the tough times more often if you demonstrate your openness to invest in their experience.
Thanks to Kevin Miller, Kevin Miller
#6- Focus on cash flow
To prepare for a bad economy, businesses should focus on activities that produce the highest free cash flow. This will keep them sustainable should revenues take a dive. Activities that are cashflow intensive should be scaled back until they can possibly be optimized. For example, entering a new market that requires offering free trials of products /services to get a foothold requires does not produce cash flow and may even be negative, which should be scaled back.
Thanks to Corey Philip, Acumen Equity Advisors!
#7- Minimize experimentation
Some ways you can prepare for the impact of an upcoming recession are to minimize experimentation, stick to what works for the brand, and nurture relationships with current customers. While it doesn’t necessarily mean that you have to stop innovating, it’s best to carefully consider the pros and cons of each decision or expense made in order to survive in unpredictable times. That way, you can spend more time devising strategies that will continue to keep your current customers satisfied.
Thanks to Will Yang, Instrumentl!
#8- Track debt accounts
If you have any consistent loans or debts for your requirements, it is essential to track each debt account using different applications and pay it down. Analyze the interest rates and the investment amount that is under your name. When preparing for a recession, it is important to focus on contributing more of your existing income to the high-interest debts. Also, consider paying off any tax-deductible debt accounts such as educational loans and others.
Thanks to Sean Tolliver, C Trax!
#9- Stay transparent
Get ahead of your team’s collective anxiety and address it head-on to avoid an exodus. Your employees are smart. They can pick up on whether management is hiding bad news about trouble ahead. What do employees do when they pick up that scent? They search for a new job at a more stable company. Be the stable company any employee would want to stay by being transparent. Even if the horizon shows potentially bleak outcomes, being upfront about the actionable steps your company is taking to adjust to a bad economy goes a long way in convincing your employees to stick around
Thanks to Karden Rabin, CFS School!
#10- Reduce spending limit
When you’re unsure how much revenue a market will bear, the most important thing you can do is limit how much you’re spending. Every business will have some expenses, so it’s impossible to eliminate all of them. However, reducing how much inventory you bring in, your R&D budget, and your overtime allowance are all things you can do to make sure you can still make ends meet when income drops. During a bad economy, it’s reasonable to expect that your income will drop since your customers will also need to tighten their purse strings.
Thanks Shawn Plummer, The Annuity Expert!
#12- Gradualistic approach to things
We all know that the economy doesn’t ruin abruptly; it takes some time. We need to take advantage of that time to tweak things gradually according to the intensity of the situation we are in. For example, investing small amounts of money regularly to cope with an economic downturn. Reassess all the differentials based on demand, always prioritizing products and services with greater profitability and better cash generation.
Thanks to Liam Wilson, Lottery ‘n Go!
#13- Monitor macroeconomic changes
To prepare ourselves as a company, we have been closely monitoring macroeconomic changes in indicators such as GDP and inflation. In response to the changes, one of the plans is cut operating costs and focus on improving operating leverage. In practice, this means identifying deadweight suppliers and canceling contracts for services we do not need. We identify which services we can provide in-house or replace with more effective alternatives. Which solutions are most scalable for the future while being effective today.
Thanks to Faris Khatib, IdealTax!
#14- Have an emergency fund
One of the most important things you can do is to make sure you have an emergency savings fund in place. This will help you to cover unexpected expenses and to maintain your lifestyle even if you lose your job or suffer a decrease in income. Take steps to reduce expenses. This might involve cutting back on non-essential spending, negotiating for a raise at work, or looking for ways to earn extra money on the side. In addition, it can be helpful to diversify your investments and avoid putting all of your eggs in one basket.
Thanks to Percy Grunwald, Hosting Data!
#15- Improve pricing strategies
A prolonged period of considerable and widespread economic deterioration results in a downturn in the business which often lasts at least six months or more. The businesses should find the most profitable revenue channels using unit economics, then guard both the revenue sources and the profits they produce. This could entail changing the business model, improving the pricing strategies, and deciding to eliminate clients, goods, or services that do not produce significant profits for the company.
Thanks to Leona Bass, Loan Advisor!
#16- Develop your career
A solid CV could help you transition to a new profession or bounce back more easily if you lose your job as a result of a significant economic crisis. Make professional decisions on your own. Utilize free training opportunities to the fullest extent possible to keep your knowledge current. Update your LinkedIn profile to be job-ready at all times. Additionally, it is a wonderful time to ensure that you are being paid fairly while the employment market is strong. Investigate the going pay for your position and, if required, make a case for a raise.
Thanks to Sam Underwood, Bingo Card Creator!
#17- Keep an eye on the news
The best thing you can do is keep an eye on the news and be aware of what's happening in your industry. If you see something that might be a problem for your business, get ahead by strategizing now so you're ready when the time comes. If you're looking at starting a business or even just thinking about it, now may not be the best time—but if you have a solid idea and some good preparation behind it, there may never be a better time.
Thanks to Chris Humphrey, Easy Truck!
#18- Invest in an emergency fund
Invest more in your *emergency fund*. You can't cut down your regular expenses but you need to keep a sum of your income, be it little or more for your savings. It is always good to have a strong financial backup. Another thing I would suggest is building your work profile. The layoffs happening are not alien to anyone. You need to keep enhancing your own capabilities and expand your horizon. These two things are the beginners step and also the most important to prepare for any recession.
Thanks to Eva Decker, iDigic!
#19- Reconsidering recruiting and firing practices
It is a common practice for companies to fire their employees during economic downturns. While it can help to cut costs, it is crucial to do it responsibly. Most companies adopt the last-in, first-out approach when firing employees. However, laying off the most recent hires can erase a company's progress toward change and diversity. This is why I prefer to compare all the employees' contributions, efforts, and potentials equally to make the best decisions about whom to keep in the company and whom to bid farewell to.
Thanks to Theresa Raymod, TN Smoky Mtn Realty!
#20- Manage your liabilities
It’s good to repay debt while there’s some disposable income or liquid assets because the interest would be growing even more. You should think about switching loans from private ones to others like disaster relief and non-government grants. These provide better capital support compared to other mediums. For example, small businesses can take the help of Facebook for free funds or San Francisco’s local resources can pay up to $10,000 for keeping up with salaries and rental payments.
Thanks to Donald Shurts, Keller Williams Advisors Realty!
#21- Communicate with customers
Customers are key to your business, and their importance increases during a bad economy. Keep your customers happy than before and give them more importance. A great product or service is not enough to make your business stand out, but your reputation can be what convinces customers to pick you over your competition. At Bead Nova, we prioritize communicating and listening to their issues and resolving them.
Thanks to Nick Yu, Beadnova!
#22- Preparation is key
Preparation is key when it comes to facing a bad economy. To get ready, I make sure my business is in the best financial shape possible by taking steps such as reviewing our budget and cutting unnecessary costs. This allows us to be proactive and responsive when economic conditions worsen. I also make sure my team is informed, so they understand the potential risks and how best to prepare for them.
Thanks to E. L. Foresta, Find Black Therapist!
#23- Improve efficiencies
Preparation for a bad economy all comes down to good economic planning and improving efficiencies across the board, that is looking at things that often go under the radar including subscriptions or costings to work out what isn’t needed and also where savings can be made by signing into longer-term contracts or renegotiating current prices. You can also review overheads such as office space and expenditure to review if there are savings opportunities here or again opportunities for renegotiation.
Thanks to Amanda Walls, Cedarwood Digital Ltd!
#24- Stabilize inflow and outflow
Stabilize the inflow and outflow of your business before a recession occurs, as it will be the part that will be crucially affected by the poor economy you will encounter. The market will decrease as their purchasing power will be lessened. Once the recession has started, monitor the costs you spend in your enterprise, as they should be lower from the revenue coming in. Reduce recurring expenses and focus on gaining income to sustain optimum financial health.
Thanks to Jean Lopez, Lily Hair!
#25- Automate the resource-hungry work
To prepare for a bad economic outburst start leveraging the power of technology to cut down on labor costs. Create an automated workflow that will save you hours of work, and will eliminate the need to hire new people who can be replaced by software. This will help you free up more resources and keep you out of unnecessary spending. By automating processes such as data entry, customer service, and accounting, businesses can not only save money on labor costs but also increase accuracy and efficiency.
Thanks to James Fyfe, Portant!
#26- Developing relationships with other businesses
Make sure you have enough money in the reserve to cover any unexpected expenses that arise when people are less likely to spend money on goods or services. Another thing you should consider doing is developing relationships with other businesses who have been around longer than yours so that if one of them goes under during hard times, they'll be able to support yours until things get better again.
Thanks to Joel House, Xpand Digital!
#27- Reduce high-interest debt
The last thing you need during a downturn is a heavy load of high-interest debt. The availability of short-term loans like credit cards is affected by the current interest rate. This means that the interest on your credit card might go up much more, costing you hundreds, if not thousands, of dollars. You'll be able to devote more money toward building an emergency fund or offset rising consumer prices once you've paid off your debt.
Thanks to Jamie Miller, Treadmill Review!
#28- Be careful with your investments
Despite their negative connotation, recessions can actually present chances for investors in firms that have proven themselves able to weather economic storms in the past. Investing in businesses that provide necessities may pay off handsomely. Investing in the broadest sense should be done with an eye on the long haul. Keep in mind that the value of your money will decrease when interest rates climb. It may be wise to look into other investment opportunities if you have a sizable cash reserve at the moment.
Thanks to Jamie Penney, Shopping Foodie!
#29- Taking action consistently
I believe the main way to get through any uncertain time, is to be committed to taking action consistently. To prepare for that, it means you have to be clear on the direction you’re going in. Know your purpose and strategy and why that is important so that you have the focus and know what steps you need to take. If you have one, make sure your team sees the bigger picture and how they contribute to that so everyone is aligned and moving towards that same goal too.
Thanks to Kerryn Fields, Koola Comms!
#30- Have safe investments
Individuals should take steps to ensure they have enough savings in case their income suddenly drops or the cost of living increases. Additionally, individuals should consider making investments that are safe and secure so that their money is not at risk if the economy takes a turn for the worse. Finally, staying informed about economic news and developments can help individuals better prepare for any potential downturns and react accordingly to their finances.
Thanks to Linda Chavez, Seniors Life Insurance Finder!