How to prepare your business to weather a recession
Get your business in good position to move forward through tough economic times with these helpful tips and strategies from BMO business experts.
With so much economic uncertainty right now and talk of recession, many business owners are understandably worried about what the future holds.
There are steps you can take to future-proof your business. For starters, you’ll want a good plan covering the next 12 to 24 months, a relentless sales push, a razor-sharp focus on cash flow, and a willingness to make some changes.
Here’s how you can prepare your small business for an economic downturn.
1. Watch for the signs of a business recession
There are a number of warning signs whenever a recession is approaching. You can get ahead of recession planning by watching for these key economic indicators:
Gross Domestic Product (GDP) declines over two consecutive quarters
Consumer confidence falls
Credit card and loan debt spikes
Factories slow down
Governments and news media talk more about recession
2. Prepare a financial cushion and recession strategy
You can survive an economic downtown by doing whatever you can to keep more cash flowing into your business than flows out.
Even a trickle of revenue will help to keep the lights on, pay essential employees and cover supplies. Don’t forget to factor in a monthly draw to cover your own personal costs.
Reduce cash going out
Review your monthly expenses and trim down as much as you can without harming the business in the long term
Explore better rates from suppliers (or find new ones)
Negotiate lower rent with your landlord (see if the Canada Emergency Commercial Rent Assistance program will work for your situation)
Trim payroll hours and look into Canada Emergency Wage Subsidy (CEWS) for financial assistance with payroll costs
Cancel unnecessary subscriptions
Put off any expensive purchases
Get access to additional cash
Sell unused assets
Raise money from investors or relatives
Secure long-term customer deals for a little less money
3. Get creative when selling
Revenue sources from sales may require some creativity and a change in the way you’ve always done things. Introduce new selling strategies alongside the ones you know work well.
Check your targets. Revisit your ideal customer profile and do a little research to make sure these buyers are still able to buy – an economic downturn may be affecting them too. You may need to reconsider your target customer.
Sell to your existing customers. The easiest sales are made to people or businesses that already buy from you. If you know there’s still opportunity with your existing customers, make a plan to reach out to them over time.
Offer something new to customers. It helps to know what else your customers may like to buy from you – so ask. There may be a new product or service they’d appreciate – like curbside pickup or home delivery.
Find new customers. Check how past customers have found you and replicate that advertising or promotional strategy. Get better at social media, capturing email addresses on your website (respecting Canada’s Anti-Spam Legislation), networking online and asking for referrals. You can also target neighbouring cities or towns for some new business opportunities.
Tap into emerging trends. New trends are emerging all the time – staying home is obviously one of them! You can pivot your business to catch a trend. Watch for changes in consumer spending patterns, stay current with leading business publications and monitor your competitors to spot any changes to the way they’re getting sales.
4. Double-down online
Most businesses are going to be doing a lot more online – selling online, managing remote teams, and moving business operations to the cloud.
Moving operations digitally has two main benefits: you’ll be able to sell to customers everywhere, and you’ll reduce costs because online apps are generally inexpensive.
Go digital by adding:
Cloud-based storage to safeguard your data and share files (such as Drobox, Box, Google Drive)
Marketing automation software (such as HubSpot)
Remote team collaboration (Slack, Microsoft Teams)
Email list management software (MailChimp or Campaign Monitor)
Online accounting software (QuickBooks)
Online banking for safe and easy access to your funds
Website platforms (like Wix or Squarespace)
Ecommerce storefront applications (like Shopify or eBay)
Payment gateways to accept customer payments (Moneris)
5. Ask for advice
Reach out to your trusted advisors (such as your accountant, lawyer, banker, financial advisor and business mentor) for input when preparing a recession strategy. They can look over your plans and make recommendations based on individual experience and expertise. Lean on your network during tough times for ongoing advice, support and inspiration.
6. Make a plan to handle stress
Running a small business is already stressful – and running one during tough times is even more stressful.
Be good to yourself along the way. Make a commitment to work a schedule and value your personal time off to get some exercise, connect with family and friends, and decompress.
No one knows how long a recession may last. While it could be short-lived, it helps to prepare for a longer haul. It may be wise to take a two or three-year outlook when making your plans and adjusting your business focus. If things pick up sooner, you’ll have more cash coming in than expected.
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