News reports continue to discuss the success of the U.S. economy. From a relatively stable GDP to unemployment that is the lowest it’s been since 1969, things are looking great for small businesses and the professionals they employ. However, even amid this positive news, the sobering reality is that our economy is cyclical. Economies typically experience growth for approximately three years before undergoing a natural downturn.
Our last recession was ten years ago, and today we are almost 4.5 years overdue for another one. In response to the potential for an upcoming recession, Bluevine, a small business funding company, partnered with a market research firm, Researchscape to survey 1,000 small businesses. The survey reveals how many small business owners are worried about an upcoming recession and what these individuals are doing to address it.
Below are critical takeaways from the survey, insights on what small business owners are doing, and tips for protecting yourself and your business:
The Worry is There
While small business confidence has only slightly fallen in August 2019 when compared to the previous month, many of the small business owners in this survey feel differently. According to the survey, 80 percent of small business owners are worried about a recession. This statistic is understandable, as the possibility of losing sales or business is always a looming concern. However, this shows that most small business owners are specifically worried about the impact of another economic downturn. Many might already be seeing signs of this event at their businesses.
Many are Not Prepared
The survey revealed that 44 percent of those surveyed had not done anything to prepare for a possible recession. So, while the majority of respondents are concerned about a downturn, many are not ready for the impact. Also, when asked, “What steps do you plan to take within the next 12 to 24 months to prepare for a recession?” Thirty-six percent of respondents said they did not plan to take any special steps to prepare for a possible downturn. This answer could be due to several factors, but the fact remains that many are not ready.
Some are Recession-Proofing Their Businesses
While some were going to take their chances with the market, several respondents did plan to alter their business dealings to prepare. The three most popular tactics were adding new products or services and diversifying offerings, scaling back on significant investments, and seeking more affordable partners and suppliers. Many had already started to put these plans into action or were planning to do so within one to two years.
So, what are some things you can do today to prepare?
Secure Financing Now
According to Bluevine, only 10 percent of those surveyed had applied for additional financing. During recessions, credit and financing are challenging to obtain. Banks do not want businesses to default on loans during a downturn, so many will more heavily scrutinize those looking for credit, and may even flat out deny companies asking for financing. So, don’t wait until an economic downtown occurs. Take the time to secure the funding now before you need it.
Have a List of Alternative Vendors and Suppliers
Begin cultivating relationships with other vendors and suppliers before you need to. You may be in an industry where your business doesn’t take as much of a hit from a recession, but your vendors or suppliers could be at risk themselves. You don’t want to have to deal with your potential financial burdens during this time while also figuring out how you will fill orders if a supplier experiences economic hardship. So, begin to develop a list of alternative vendors to work with who may offer more favorable pricing and logistical terms in the event of a recession.
Build Up Your Cash Reserves
This step may seem like a no-brainer, but as mentioned above, almost half of the respondents had done nothing to prepare for a recession. So, if you have not started increasing your cash reserves, you should immediately begin doing so. Look into the budget and see what you can cut to start ramping up your savings. There is a ton of advice out there urging individuals to build up their savings, and businesses would do well to do the same.
Experiment with Alternative Hiring Solutions
Again, diversifying your services and being cautious with significant investments are crucial. So, be sure to add these steps to your recession-proofing plan. However, there are other ways to save money and ensure you have the personnel to help manage your business. Outsourcing and freelancing have grown thanks to the ease of hiring workers using freelance marketplaces. So, wherever you can, see if you can outsource specific tasks. This step will not only diminish your costs since you are only paying for services you need at that time, but it will also allow you to be more strategic about hiring people full-time for more long-term projects.
Three out of four economists are predicting that a recession is right around the corner. For many, the thought of having to deal with an economy that mirrors the one ten years ago is unpleasant and troubling. However, you can use your experiences from that time, along with the information above to create a strategic plan that helps you keep your business afloat as you ride out another economic downturn. If you begin preparing now, you are much likelier to ensure you and your business not only survives but thrives.
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