Recessions, hard times, and slow growth are all things no small business owner wants to hear. But the reality is you will have times like these in your business. How do you prepare as a business owner? What can you do right now to go confidently through a natural phase of your business life? Let’s jump into five ways you can prepare your business for a recession:

1. Build That Emergency Fund

We often talk about emergency funds on the personal side but we can’t forget about the business side. Set a goal to build a business emergency fund that would cover 3-6 months’ worth of business expenses (things like office supplies, payroll, rent, software subscriptions, etc.). There is always going to be something else you’d rather spend your business dollars on, but trust me when a recession hits you will feel so much better knowing your business essentials are taken care of.

2. Pay Down Debt

Do you have a business credit card or a business loan that has reoccurring balances? Now’s the time to try and minimize that debt - especially debts with a high-interest rate. Being tied to a lender is never a good feeling and it’s even more challenging when business is hurting due to the economic surroundings. Once you have an established business emergency fund, chip away at that debt. Your future self will thank you.

3. Look Ahead

All businesses have some seasons that are slower than others. Look ahead at your expected business activity in the months to come. Are they usually slower or perhaps you're coming up on your busiest time of the year? Taking a glance forward will help you know what to prepare in the now. If you know the slow months are quickly approaching, it might be time to build that extra cash reserve (maybe even slightly larger than normal) to tackle the slow months and weather a recession.

4. Revisit Your Marketing Plan

It’s always a good idea to review your current marketing plan every so often to know what’s working and what’s not. Both your time and your potential leads are valuable - we want those two things to complement each other. Carve out an hour or two out of your time to do a deep dive into your marketing streams. Where are you getting most of your business? How much are you spending and are the dollars coming back to you in the form of new business? What type of marketing takes the most of your time and is it worth it? Are there new streams you could be taking advantage of? If and when a recession comes, you can confidently know your marketing strategy is at its best.

5. Review Your Current Expenses

With subscriptions being at the click of a button nowadays, it can be easy to forget what services you are paying for and how much you are actually paying. There are some expenses that definitely are worth paying for and help your business tremendously but it’s a good habit to often review your current expenses to decipher that. Clean up your business budget and make the most of your business dollars by staying on top of your monthly costs. On the other hand, is there a service or product that, if purchased, will increase your productivity/your time/your leads/your quality/etc.? Then click that “checkout” button! This tip isn’t just to cut back on all your expenses but to help your business and your revenue be the most efficient possible.

As I mentioned at the beginning of this conversation, talk of recession is never something a small business owner wants to hear. But coming to terms with this natural economic wave and knowing how you can prepare will allow you to ride the wave with ease. So get to work on building your emergency fund, minimizing business debt, looking ahead at your business activity, revisiting your marketing plan, and reviewing your current expenses. The storm is a lot less fearful when you have shelter and an umbrella in hand.

Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

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