During the pandemic, businesses in certain sectors were hit hardest, such as restaurants and companies in the tourism and hospitality industry.\nBut in a recession, many more could be affected as a weakened economy hits on a broad front. <\/p>\n\n
– Small business owners should prepare for a tough economic time. We risk fooling ourselves if we think that everyone else but ourselves will be affected. A recession risks affecting all industries, albeit to varying degrees, says Sara Thorgren, researcher at Norrlandsnavet and professor of entrepreneurship and innovation at Lule\u00e5 University of Technology. <\/p>\n\n
She urges small businesses to put all their efforts into taking control of their finances now.\nHere are Thorgren’s top six tips for small business owners who want to prepare for tough times: <\/p>\n\n
If you manage the finances of your company yourself, it is essential to keep a close eye on your company’s finances.\nIf someone manages your finances for you, keep in close contact with them. <\/p>\n\n
Look at what the cash flow has looked like historically.\nOnce you have an answer to this, you can also analyze the future: at what times of the year is cash flow usually particularly poor?\nBased on the answer, you can ask yourself what can be done now to prevent it from being the same period in the future.\nWork on the basis of three possible scenarios – the worst, the most likely and the best scenario. <\/p>\n\n
Review all costs and analyze which ones are “necessary” and which ones are “nice”.\nConsider cutting the ‘nice to have’ costs to build a buffer.\nExamine whether it is possible to renegotiate different contracts.\nNow is also not the time to invest in the business – so postpone those plans until there is less uncertainty. <\/p>\n\n
During a recession, some business customers are likely to fall behind on payments.\nIf customers go bankrupt, it can hit your business very hard.\nCarry out a risk analysis on existing customers and, if possible, renegotiate payment terms on new contracts with high-risk customers.\nIn small towns, it is worth having big ears.\nBe sensitive to whether any company you do business with is lagging behind with payments. <\/p>\n\n
Keep any profits in the company instead of distributing them to the owners.\nBy saving money in the company, you are preparing the company for bad times. <\/p>\n\n
Your business is not the only one struggling in a recession.\nFind out what challenges your customers and suppliers are facing and contribute as much as you can without major sacrifice or risk to your business.\nIn uncertain times, it is particularly important that all decisions are businesslike.\nMaybe someone needs help promoting their products or services through your company?\nIf your customers and suppliers survive the recession, your business will also benefit. <\/p>\n\n