Co-Founder and CEO of Upwise Capital, a leading small business financing marketplace specializing in the cannabis industry.
Small businesses have been facing an uncertain future for years. With the more recent rise of interest rates to combat sky-high inflation, coupled with an unstable marketplace, the probability of an economic recession is more likely. Just how likely? According to analysts, the predictions range from impending to moderately far-off.
According to a recent article in the New York Times, Pantheon Macroeconomics’ chief economist of the research house, Ian Shepherdson, said that its “base case remains that a recession is unlikely,” and that if there is one, it will be “brief and mild.” While Deutsche Bank’s Matthew Luzzetti, chief U.S. economist, can be quoted stating that the U.S. economy would tip into a recession by the end of 2023, but now they expect “an earlier and somewhat more severe recession.”
If you’re a small-business owner, even hearing the word “recession” can make your stomach uneasy. Luckily, there are a few strategies to make a small business recession-proof, no matter the likelihood.
Keep Your Ear To The Ground
Listen to the entrepreneurial word on the street. It’s important as a small-business owner to educate yourself on all things business. Stay up to date on the latest news, trends and strategies. This will allow you to remain ahead of the curve and avoid being caught completely off guard by the approaching threat of a recession or downturn. It will also help you to grow your business more effectively by being more knowledgeable on topics in your industry.
Make A Solid Business Plan
According to the Small Business Association (SBA), writing a business plan is the foundation of your business. It becomes the map you follow for success. Having a solid business plan can not only help you achieve your current goals but also forecast different “what if” scenarios for the future. Especially if the unfortunate recession or downturn becomes a likely reality. If your business model is particularly on-point and projects imminent growth, this can also attract potential investors who may believe in your business just as much as you do. After all, as Benjamin Franklin is rumored to have said, “If you fail to plan, you are planning to fail!”
Open A Business Line Of Credit
Exploring a business line of credit or “rainy day fund” can be an option for many small-business owners to use as a cushion for an approaching recession or dip in profits. Educate yourself on what exactly a business line of credit is and the different credit lenders that may be best for your small business. It’s also helpful to get prequalified and know your borrowing power. These types of credit lines can be used on an as-needed basis and help to ease your mind during a shaky economic period.
Diversify Your Small Business
While having a solid business plan is always a good start, it is also important to be flexible with your business model and create ways in which your business can still thrive or transform during an uncertain change of events. Experiment with different price points and models; focus on other target markets that are related to your business. Remaining fluid and shifting your focus while still maintaining the integrity of your business is vital to success. During Covid-19, many small businesses changed their business models to reflect the current crisis, and it’s because of that out-of-the-box thinking that they are still around today.
Make Technology Work For You
As a small-business owner, using the latest tech trends can drastically aid in your success, especially during a recession or crisis. The use of technology allows you to broaden your reach, stay connected with your client base, generate leads, grow and innovate your business, and create a secure platform for trades and transactions. Explore the latest technology trends, including social media, artificial intelligence, contactless shopping, 5G and more, and find out how they can work for you within your business model.
A recession can be a scary reality no matter how you look at it—but it doesn’t have to be. As a small-business owner, you can be prepared and ready for unwanted change. You can pivot your business model, implement new technology and plans, and still thrive with ever-changing ideas. The most successful businesses ebb and flow with the current economic climate and reformulate a plan that works for them even if it differs from the original vision.