44% of Small Business Owners Have Taken No Steps to Prepare for a Recession
As trade negotiations between the U.S. and China continue to intensify, the talk of recession is on the front burner. However, the U.S. economy still has strong fundamentals, and anxiety about money by consumers is considerably lower than the 50-year average.
But no matter how likely or unlikely a recession is about to hit the economy; it pays to be ready. By planning ahead and taking the necessary precautions, your small business can ride the recession with minimal impact.
A BlueVine survey was carried out to find out what small businesses are doing to prepare for a recession. Considering the last recession devastated the small business segment with 1.8 million closures between December 2008 and December 2010, there are many lessons to learn from.
Lifshitz goes on to say, “Small businesses should be taking time now to prepare their business while the economy is still strong, particularly when it comes to getting the right financing to withstand any economic condition.”
Preparing for a Recession
Small Business Trends asked Lifshitz, “How can small businesses prepare for the recession before and while it takes place so they can come out of it with minimal impact?”
When it comes to getting prepared before a recession, Lifshitz says:
“Whether we’ll experience an economic downturn in the coming months remains to be seen, however, now is the right time for small business owners to assess their current business strategies and make adjustments to ensure they’re prepared to weather the storm.”
“For example, having access to flexible capital can help offset slower sales periods that typically come with a declining economy. One thing I always stress to small business owners is to apply for and secure financing even when you don’t need it.”
According to Lifshitz, it is much easier to secure financing when the economy is strong. Securing a flexible line of credit can protect your business when the economy is struggling.
Lifshitz adds, “It’s in lenders’ best interest to make sure your business continues to perform well during tough times, so if you do find yourself in a pinch if/when a downturn occurs, make sure you reach out to them as soon as possible to figure out a solution.”
Another way a business can get ready is by finding new sources of revenue. According to Lifshitz, “small business owners should consider ways to diversify their revenue sources — like offering customers new products or services. It is also wise to take inventory of business-critical partners and vendors (and their contracts) to determine what a dip in their business would do to yours and seek out alternative vendors or take services in-house if needed.”
So, What do Small Business Owners Think?
BlueVine carried out the survey with the participation of 1,000 small business owners. The goal of the survey is to determine the concerns owners have about the recession. It also looks to find out what measures they are taking to prepare.
The majority or 80% say they worry about a possible recession. And even though the awareness is there, more than half of these (44%) haven’t taken any measures to prepare. And another 36% say they don’t plan on doing so in the next 12 to 24 months.
Of those who have taken steps to prepare, the top priorities are adding new products or services. Diversifying their product line is also another priority. Twenty-one percent say they have taken the necessary steps, and 28% will do so within 12 to 24 months.
Other measures include scaling back on large investments, seeking alternative/more affordable partners and suppliers, and slowing down/stopping hiring new employees.
The Importance of Financing
Funding is key to the long-term survival of any business. And being able to get the funding when you need it most is even more important.
But according to the BlueVine survey, financing doesn’t seem to be a high priority. Only 19% of small business owners worry about not being able to get the financing they need. And only 10% have applied or secured financing, and another 15% plan on doing so in the next 12-24 months.
Why is finding financing so important before a recession hits? Because if there is a downturn in the economy, it will be much more difficult to secure credit and capital.
Wisely, Lifshitz adds, “By thinking ahead and making a few adjustments to business strategy now, small business owners put themselves in the best position to face any economic condition.”
Lifshitz ends by saying small businesses should seriously consider the financial burdens of new hires or resigning contracts. If a recession should come to pass, these investments will further stress the financial health of your company.
The BlueVine infographic below provides some valuable insights on how you can get ready.
This article, “44% of Small Business Owners Have Taken No Steps to Prepare for a Recession” was first published on Small Business Trends