What is recession-proofing, and why should small businesses care?  

Dec 24, 2022

What is Recession-Proofing, and Why Should Small Businesses Care?

As a small business owner, you may be wondering what recession-proofing is and whether or not it’s something you should explore. Recession-proofing, as the name suggests, is seen as a means to counter the impact of the recession on your business. With the market being highly unpredictable and dependent on various macro and micro economic factors, you can leave your business open for a negative impact if you don’t prepare for it in advance. 

In short, recession-proofing is a term used to describe a strategy businesses use to help protect themselves from economic downturns. There are several things you can do to recession-proof your business, and it’s important to start preparing now so that you’re ready if the economy takes a turn for the worse. In this article, we’ll be sharing some tips on recession-proofing your small business.

Why Should Small Businesses Care?

As we mentioned earlier, small businesses are particularly vulnerable during recessions. This is because they don’t have the same resources as large corporations. They can’t weather the storm as easily and often end up shutting their doors for good. 

This is why it’s so important for small businesses to recession-proof their businesses before an economic downturn hits. By taking steps to protect your business now, you can increase your chances of surviving – and even thriving – during tough times. 

As per a survey conducted by Goldman Sachs in June 2022, 78% of small business owners say that the economy has plummeted in the past months. Businesses face challenges of inflationary pressures, supply chain issues, and workforce obstacles amidst fears of a looming recession. The survey also implies that 93% are worried about the US economy experiencing a recession in the next 12 months. 

Tips to Recession-proof your Business.

Keep an Eye on Your Cash Flow

One of the major issues brought upon by the recession is reduced cash flow. Small businesses typically function on a tightly controlled cash flow. They have to be extra careful in maintaining a healthy cash flow. One way to achieve this is by taking care of the account receivables. Customers may face difficulties in paying up or may delay purchases due to the impact of the recession. This could result in setting off a chain reaction that could jeopardize the business cycle. Businesses can hire a debt collection agency to keep up an active cash flow.

Multiple Revenue Options

Having a variety of sources from which you can bring in revenue is key to recession-proof your business. It provides more stability and security since it prevents overly relying on any one market, product or service.

Cutting back on Costs

Cutting back costs is an effective way to recession-proof one’s finances. Look closely at your spending and see where you can get lower rates on services, reduce personnel costs without cutting jobs and more. Furthermore, you can preserve your resources and cut short on labor-intensive work  by investing in a BPO company to take care of customer support, IT desk help and back-office accounting support

Tend to Your Employees

An unfamiliar but effective way, according to research by Great Place To Work, has insisted on engaging in employee relations – especially diversity and inclusion – to better help organizations weather the storm. Data shows that organizations that value diversity and inclusivity outperform other companies by 400%.

Secure Your Clients

Invest in the customers you already have instead of shelling out to entice new ones. Build a rapport with them that will last despite the effects of the recession. The first step to ensure this is by providing quality customer service. Securing client relationships also depends on having a customer retention strategy in place, as it helps in securing positive engagement.

If you’re thinking about recession-proofing your business and are considering a BPO to help cut costs or a Collection Agency to help with aging receivables, then consider FCS. FCS is a BPO company and an omnichannel debt collection agency providing services that are sure of easing the load on your shoulders during these challenging times. Choose us to see the difference!

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