As of 2022, more than 32.5 million small businesses exist in the US. Businesses like yours are vital to the economy and our local Rhode Island communities. With recession talk looming and many small business owners still recovering from the impact of COVID-19, you may be worried about the U.S. heading toward a recession.
We want to make sure you feel confident and optimistic approaching what could be a challenging year for small business owners nationwide. Here are four recession planning tips to help you prepare.
1. Get a handle on your finances
Small business owners need basic financial literacy knowledge, especially to guide their recession planning efforts. Basic financial literacy will help you know if your business is healthy, if there are any red flags on the horizon, or if you should consider bringing in an expert to support your planning needs.
Most importantly, understanding how your business’s cash flow works is essential because an economic shift will likely affect things like investing in your business through marketing, setting aside contingency funds, or paying your employees.
2. Explore ways to save money
Along with understanding your small business finances, you want to explore ways to save even more. This includes:
- Making budget cuts without compromising your business values
- Updating processes that support business functions while also reducing the number of required resources to perform them
- Evaluating any existing contracts to see if there is room to renegotiate rates based on your loyalty or market demand
3. Find ways to nurture your existing customer base
Small business owners rely on repeat and referral business. This reliable revenue stream is especially important to nurture as part of your recession planning tactics. Use this time to deepen your customer relationships and remind them how they can benefit from your business. Consider supporting your existing customers by:
- Making it easy for them to reach you through email, phone, or social media
- Asking for feedback to understand their pain points so you provide tailored services
- Working with an expert to help you develop customer relationship tools and strategies
4. Pay attention to your competitors
You will not be the only small business exploring recession planning tactics. During a recession, it can pay off to pay attention to your competitors, examining what they’re doing and if it’s working for them. For example, if you notice that your competitors are cutting back on their marketing, this could leave you with an opening to position your business ahead of them.
5. Keep investing in your business.
Investing in marketing for your small business might seem like an unexpected recession planning tactic. Still, promoting your business to sustain current revenue, encourage growth opportunities, and build long-term value is valuable.
Be sure to stick with the basics and avoid trying to overhaul your marketing strategy. This is not the time to spend dollars blindly. Be intentional with your marketing investment by budgeting for tactics that have proven value for your business model.
Start recession planning
Recession planning is an advantageous and proactive step for small business owners looking to minimize the potential impacts. During a recession, staying hopeful and focusing on what you can control is essential, like financial planning, customer satisfaction, competitor reviews, and marketing. Take the steps needed today to ensure your small business is ready to brace for what’s inevitable.
The Rhode Island Small Business Development Center at the University of Rhode Island employs a dedicated, experienced, and knowledgeable staff of business counselors and administrators who can assist you in growing your business. Register now for free, confidential business advice from our advisors here, call (401) 874-7232 to make a counseling appointment, or attend one of our free webinars.