9 Ways Entrepreneurs Can Protect Their Business During a Recession

9 Ways Entrepreneurs Can Protect Their Business During a Recession


Though an imminent recession for America is not written in stone, there are red flags an economic downturn may come in the near future. That forecast could be daunting for entrepreneurs already battling to boost sales and trying to build sufficient capital to cover unforeseen contingencies.

Yet, there are actions small business owners can take to equip themselves for such a meltdown. Though some 80% of small business owners fear a potential recession, 44% have not taken steps to get ready for one and 36% are not planning any special actions to prepare within the next 12-24 months, a recent survey from small business lender BlueVine shows. But entrepreneurs may do well to apply such a strategy for multiple reasons.

In another report, some 69% of the economists surveyed by the National Association for Business Economics in September projected a U.S. recession will start by mid-2021, up from 60% in the June survey. A panel of 54 professional forecasters made projections.

The lingering trade war between America and China is a major reason why many investors are worried about a potential economic decline. Doubt about the aftermath of the U.S.-China trade war sparked volatile conditions to the stock market in recent weeks.

Further, how global monetary policy will pan out is raising some apprehension. The Federal Reserve Bank slashed interest rates for the first time in over 10 years in July amid worries about contraction in global growth and surging trade tensions. And other central banks worldwide have moved similarly by cutting rates.

For small business owners, the best time to prepare for potentially harder economic climates is when times are good. Here are nine actions entrepreneurs should consider to help offset any potential storms.

How to Protect Your Business in a Recession

1. Obtain working capital.

Observers say financial service providers such as lenders are more apt to provide funding before a recession arrives. They maintain the best time to pursue a loan or arrange for a line of credit is when your business and the economy are healthy. For instance, an apparel store and shoe store.

2. Boost your financial position.

Increase cash flow or financial reserves by adding more products and services that complement what you already sell. But analyze carefully how much it will cost to expand and make sure it doesn’t tarnish your firm’s notoriety or brand.

3. Increase your number of customers and upsell.

Instead of just focusing on gaining sales from your biggest clients, see if you can add some smaller clients as well. Ask yourself, “can my business survive if I lose my biggest client or clients during an economic slump?” By diversifying your firm to serve a larger variety of clients or even new industries, your reliance on generating sales just from larger clients will be less. Also, consider upselling products from your business to existing customers who are not currently using them. Perhaps offer a discount on unused goods or services they use since they are already buying from you.

4. Consider partnering with another business.

This option can offer many benefits, including expanding your footprint, sharing or cutting expenses, and generating new growth ideas. You can also share resources, contacts, customer lists, and marketing efforts.

5. Identify where you can cut costs.

Perhaps you can trim what you spend on office supplies, dining out, or travel. See if you can possibly lease space you’re not using to help offset the cost of bills you have to pay. See if you should cut gym memberships, subscriptions, or other discretionary items you’re no longer using.

6. Keep marketing your business.

This is an expense that many businesses chop during harder times. But be mindful that if consumers are not aware of your business, they might not conduct business with you or may look elsewhere for what they need. Tell clients what niche products you can offer to set your firm apart from rivals. Also, examine if social media or other Internet marketing options are less costly than other advertising channels. This approach might also bring you a broader mix of customers.

7. Erase credit card debt for your business.

It’s vital to pay down or get rid of business credit cards as quickly as possible. That’s especially true before a recession hits when it’s harder to make money. Consider merging credit cards into one credit card with a lower annual percentage rate, something that can also cut monthly expenses.

8. Create an emergency fund.

Fortify your business by establishing an emergency fund that could allow you to endure for a year or longer. That could be particularly important if your business suffers lower revenue generation during a downturn. Make sure the fund can cover key operating costs, including employee payroll.

9. Use online resources.

Check out online sites that offer tips to help you survive a recession. For instance, the Small Business Administration provides such information.


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