Before we dive in, let’s understand the context. How close is the UK to a recession?
Speaking in June 2022, Lord Hammond, the former chancellor claimed that the UK economy will slow down significantly in the autumn. Jumping to August, The Bank of England has forecast the UK will fall into recession (where an economy contracts in two consecutive quarters) towards the end of the year as energy costs soar.
In a lot of ways, it already feels as if we are living in a recession with the rise of inflation and so, unfortunately, it's almost certain that busineses will fall on even harder times towards the end of 2022.
However, its not all doom and gloom!
To help business owners navigate this, we’ve put together eight strategies for business survival during a recession. Business owners need to start preparing now to ensure their business and its staff are protected, and profitability can be maintained as much as possible.
We ourselves started up just after the 2008 recession, so we are experts in weathering an economic storm whilst still running a thriving business in the process.
The sooner you start preparing, the more likely your business is to not only survive, but also thrive through a recession or period of high inflation.
If you were in business in 2008, ask yourself: what did I learn from running a business during a recession last time? What did you do wrong? What did you do right?
Ask these same questions when thinking about the COVID pandemic, because the approaches to protecting your business during that time can be directly applied here too.
Once you’ve answered those questions, look to apply those learnings business-wide and tackle the rising costs of business head on.
If we do end up in a recession, you may have to think about cutting costs, and this could come in the form of redundancies. It’s every owner’s worst nightmare, but it’s often necessary for businesses to survive, and then build back up when the economy improves. So, ask yourself: are all our key processes and procedures documented? Or do they exist in people’s heads?
Putting together a business continuity plan and template will pay you back in dividends. It will mean that if you do have to let anyone go, you’ll have a plan in place, so it won’t affect your customers, and therefore your retention levels and your bottom line won’t be as affected as much either.
There are many ways you can look to improve your cash flow, but an important thing to do ahead of a recession is cash flow forecasting for next year.
Your cashflow forecast will let you know how healthy (or otherwise) your business is now and will be in the future. It is vital that you don’t see your cashflow forecast as a one-off exercise, but something that must be updated and maintained, to give you an ongoing understanding of your cash position.
There are some great software options such as Float, Sage and Agicap to automate your cashflow – some may already be available in the financial accounting package you use in your business. Either way, making use of automation here can save you time and effort.
You also need to factor price inflation and other cost increases into your forecast. This can have a major impact on your cashflow. The high inflation we’ve seen so far this year is set to continue into next, alongside the increases in the Minimum Wage and National Insurance contributions, all of which will impact cash as well as your bottom-line profit.
It’s time to take control of your cash flow forecasting with this free webinar from TAB.
You may have already started planning your budget for next year, but have you considered them with a potential recession in mind? Look at your budgets for the different operations in your business, and ask yourself: if money was tight, could you justify the assumptions you’ve made around your budget thus far?
It might be that you want to plan an alternative 2023 budget if costs start to get squeezed.
Conducting an effective SWOT analysis is important for any business in any context, but even more so in times of uncertainty.
A SWOT analysis is an important aspect of a company’s strategic plan. This will allow you to know your company’s strengths, weaknesses, opportunities, and threats. A key threat here being a recession. By going through this exercise, you won’t be ‘flying blind’ into the storm, but with your eyes wide open as to what could threaten your business and what strengths and opportunities you can utilise to ensure your business comes out strong.
There are many business growth strategies that exist, but one of the key ones, whatever economic circumstances we’re in, is to never stop marketing and selling your business. In times of high stress and uncertainty, business leaders can understandably become distracted by staffing issues, operations, and costs, and this pulls their focus away from doing business with customers or clients.
Like so many other things in business, having a written marketing plan is going to help you immensely.
Look at our marketing tips and advice for small business owners on how to create an effective marketing plan.
Additionally, having internal sales expertise is critically important to the growth and success of your business, so consider your sales and business development acumen. Think: have I got an established sales structure and team who can continue to win business during a recession?
As you prepare to protect your business ahead of a potential recession, don’t take your eye off possible pivoting opportunities. Are there any ways you could upgrade your product line or messaging to help support people in the current economic circumstances? Are there any ways you could diversify your offering? Such as switching to a subscription-based model or developing a strong e-commerce platform.
To inspire you, read how some of the leaders we work with pivoted their businesses during the pandemic.
Our final way to get recession ready is to make sure you find yourself some good business support.
There are several ways to find business support across the UK, but when it comes specifically tackling uncertain times like a recession, our members have found peer advisory boards invaluable.
What’s key is as they’re going through the storm, they have other business owners in the boat with them, all tackling very similar challenges.
An advisory board will give you access to the advice of your fellow business owners; the group serves as a community, with no vested interest in your business, they just want to help with your problem-solving and hold you accountable to keep you focused on the most important things.
If you’re preparing to get recession ready, it can be extremely valuable to run your strategies and concerns past other business owners, CEOs, managing directors and the like. Our advisory boards are one aspect of our business support and advisory services that have empowered business owners all over the world to confidently make quicker, better decisions and grow their businesses.