There has been much talk about the issue of recession and particularly the detriment it will have on businesses in 2023. But what really is recession, what does it mean for your business and how can you prepare for it? This Entrepreneur Weekly post will address these considerations and help your business to stay afloat during these times.
What Really Is a Recession?
Recession is an interesting word to define but the National Bureau of Economic Research defined it as “deep, sustained and widespread declines in economic activity, though it makes exceptions for short and particularly sharp downturns like the one at the start of the pandemic.” What usually characterises these periods is a reduction in the demand for goods and services as people become uncertain and thus apprehensive of purchases. Recessions are usually two consecutive quarters of negative economic growth and they are usually sparked by economic disruptions such as spike in oil prices and financial panic.
How Recession Affects Small Businesses
As small business owners, this might be something you have realised, that no matter how prudent and efficient you are, there are still external factors that impact your business. Recession is one such outside force that can affect the state of your business. Business News Daily noted “75% of small businesses report feeling the pressures of current inflation, according to a 2022 study by Kabbage.” Small businesses are often hardest hit especially those in manufacturing businesses that require bulk shipping and luxury businesses also suffer as customers become careful of how they spend their money. Staffing and marketing efforts also become a problem in these times as budget cuts often have to be made.
How to Prepare and Hurdle
A big part of preparing and hurdling a recession for small business is ensuring the health of your cash flow. Business News Daily shared, “Having cash reserves and other financing options to fall back on once a recession hits is a great tool to stay afloat.” This is an integral part of managing the tides of recession and Business.com said “One way to protect your cash flow is to send out invoices and review your receivables promptly.” Continuing, they added “In doing so, you might notice that some clients consistently make late payments or are flagrantly overdue. Resolve these issues before they become lingering problems.”
Having a good handle on the costs within your business is an excellent way to prepare for recession. Stephen King Forbes Council Member said “Do everything you can now to evaluate your operations and trim the fat so you can strengthen your cash position and enter the next recession with operating procedures that are already lean and mean, so to speak.”
Another way to prepare and hurdle periods of recession is by ensuring that you check on inventory processes. Business.com shared “While you’re reviewing your receivables, spend time examining your inventory practices. Are you ordering excessive quantities of certain items? Could you perhaps buy certain products at better prices from different vendors?” Asking yourself these important questions before the heights of the recession will help you to make the necessary adjustments now that can secure you in the difficult times.
During these uncertain times, Forbes Magazine encourages entrepreneurs to make data-driven decisions. Because of how vulnerable your business is within these periods, it is wise to make moves that have been weighed diligently. In their article, How To Prepare Your Small Business For A Recession, they said “When times are tough, it’s crucial that you make strategically sound decisions. When cash is tight, the slightest misstep could mean the difference between success and failure. Even if your instincts as a business owner are good, you need to consult your numbers, look at your company’s financial trends and evaluate forecasts before you make any changes in your business.”
JBDC Helping Small Businesses
Through the Business Advisory Services Unit at the Jamaica Business Development Corporation (JBDC), clients are provided with business development support that help them wherever they are on their journey. With the realities of a looming recession, the Business Advisory Services Unit can assist your business with Opportunity and Business Assessments as well as Funding referrals to equip you with the knowledge, skills and resources to do business. Become a JBDC client: www.jbdc.net.
How To Prepare Your Small Business For A Recession (forbes.com)