85% of small business owners are concerned about economic slowdown or potential recession, the U.S. Chamber of Commerce reveals. Nevertheless, as many as 43% of small businesses have reported increased revenue in 2023.
Although the debate about whether the U.S. is headed for recession or not rages on, it’s important business owners act now to prepare for potential economic difficulties. By working to recession-proof your business, you can remain strong in the face of financial challenges.
Are We Headed For A Recession?
The short answer? It’s unclear. The U.S. economy grew by 2.6% in 2022, although some experts predict growth to fall sharply this year – meaning a recession would potentially be imminent. This and increasing inflation have created a confusing economic landscape for businesses.
Nevertheless, it’s essential to focus on what the current landscape means for your business. Inflation, in particular, has a significant influence on your business decisions. Rising prices and interest rates may, for example, may stop you from taking on debt or expanding. But, on the other hand, you may also find it easier to pay off small debts as your money is now worth less.
Strengthen Your Cash Reserves
Boosting your cash reserves now is one of the best ways to help your business withstand a recession when sales can dry up fast. So, work on saving six months of business expenses at a minimum to help keep operations running smoothly during future tough times. This may involve spreading and deferring any debt. If you don’t qualify for a traditional loan, invoice factoring can be a useful tool to strengthen cash reserves.
With invoice factoring, you can instantly access cash from unpaid invoices rather than waiting 30-90 days for customers to make payments. Instead, you sell outstanding invoices to a lender, who immediately pays you around 80%-90% of the value of the invoice.
Manage Your Cash Flow
Staying on top of your cash flow is always a priority, especially in a recession. So, check your incomings and outgoings sync up. Remember that it becomes harder to collect money owed to you during tough economic times. And if you can’t pay employees, suppliers, or partners, this can be disastrous to your operations. So, negotiate payment plans with more realistic timescales if needed. Also, do the same with your overdue customers to ensure a continual cash stream.
Recessions are challenging for everyone. By working to recession-proof your business now, you’ll be in the best position to weather economic difficulties.