For most business owners, the Great Recession that hit in 2008 was brutal. In fact, when Investopedia examined the impact the economic downturn had on small businesses a decade later, the figures were striking. Most notably, "the rate of business creation has not yet returned to pre-crisis levels"; around 1.8 million small businesses closed between December 2008 and December 2010.
While the economy has rebounded and business is good, the next recession is predicted to be right around the corner. Zillow Research surveyed a panel of more than 100 real estate and economic experts in July 2019 and found that they predict "the next recession to begin in 2020, with another third (35%) predicting the next recession to begin in 2021." Echoing a similar sentiment, 45% of the Fast Company Impact Council, which included 200 founders, executives and creatives, predicted in December 2019 "that the next 12 months would be worse for business."
Whether or not these predictions come to fruition, you shouldn't take a chance. It's better to be prepared for a possible recession rather than become another casualty. When you do, you'll not only survive the next financial crisis, but your company will also thrive.
Watch for red flags.
Recession or not, you should always be attentive to your financial numbers and projections -- specifically cash flow. If you're on top of this, you can take action, such as cutting back on discretionary spending. That might include canceling nonessential company subscriptions or having virtual meetings to reduce travel.
In addition to paying close attention to your cash, Brian Moran, the CEO of Small Business Edge, suggests on CNBC that you pay attention to other red flags, such as slow-paying receivables and tightening credit lines. He says it might be "even something happening upstream within the supply chains for your company." For example, he explains, "If one of your suppliers is adversely affected by the tariff wars with China, you should expect your costs to go up anywhere from 10-25% depending on the products they supply to you."
His solution is to establish alerts. One way is to build a relationship with a trusted advisor who will be in your corner and can flag you when something odd or worrisome crops up.
Build your own recession survival kit.
Before the you-know-what hits the fan, build your own recession survival kit. For example, you could begin diversifying revenue, strengthening current customer relationships or speeding up cash flow, like collecting receivables or renegotiating contracts.
Between being more budget-conscious and speeding up or increasing your cash flow, you should build a surplus. Instead of burning through that extra income, stock some of it away in an emergency fund so you have capital in case the economy takes a turn for the worse. Even better, pay off as much of your existing debt as possible so it's not carried over into the recession.
Don't hunker down -- pounce.
There's a common belief that you need to just "hunker down" and survive a recession. But that's missing something any entrepreneur worth her salt would notice: an opportunity.
An obvious opportunity to leverage a recession is through acquisitions. If banks are foreclosing on other businesses and selling the assets for next to nothing, you can get a leg up without making financial sacrifices. The kicker: You need to develop relationships with bankers and other lenders in advance to be top of mind when they're looking to unload these assets.
If you can swing it, you may also want to consider unveiling new products or services. This will diversify your income and help you stand out from your competitors. Ideally, this initiative should be recession-proof: These are things that people need or specialties in whatever your company does best.
You may also want to consider expanding internationally and hiring new talent. I know -- you should be tightening your belt. But with so many of your competitors laying off employees, a recession is actually a great opportunity to secure top talent. Don't put the brakes on marketing and networking.
Prioritize health and wellness.
This may sound obvious, but economic hardships can cause stress. That can do serious damage to your physical and mental health -- something you absolutely can't afford. That's why you should prioritize health and wellness during a recession. When you do, you and your team will remain healthy, happy and productive, regardless of what the economy's doing.
How can you maintain a healthy perspective? Launch an employee wellness program, offering healthy snacks and redesigning your workplace by adding plants and ergonomic furniture. Keep morale high by celebrating accomplishments, even if they don't end with a lavish happy hour. Recognition is always important.
Don't forget to look for more affordable options for building a healthy culture. Try standing or walking meetings, or help employees curb vices like smoking. Designate a room for relaxation, giving people a place to meditate or simply close their eyes for a few minutes.
You could also empower your team with more flexible work arrangements. If possible, let your employees work from home two or three days a week. Besides keeping your teammates happy, this can boost their creativity and productivity. As an added perk, this can reduce expenses like utilities and supplies.
Even though experts are predicting that a recession could strike within the next year or two, there's no need to panic. The future isn't written yet. But that doesn't mean you should sit back and do nothing -- take action right now. Not only will you survive, but you'll even thrive during the next economic crisis.