Every other week, it seems, someone is predicting that another recession is right around the corner. So far, the economy has managed to hang on, but there are dire predictions about what could be next, what with the European debt situation spiraling out of control, China slowing down, and the U.S. stagnating.
In truth, it doesn’t hurt to be ready for the next economic setback. It’s always a good idea to shore up your business finances, and be prepared for whatever might come your way. So, as you try to avoid falling into panic, here are some things to consider:
Pay Down High Interest Debt and Borrow Smart
Now is a good time to pay down high interest debt, or refinance it to a lower rate. If you can reduce your liabilities without endangering your business, do so. The fewer liabilities and obligations you have during a recession, the better off you’ll be.
However, as you know, chances are that you need to borrow to some degree. You should borrow smart, though. In the current environment, you should be able to get access to low cost loans. Figure out your needs, and only borrow what you need. Going in to a possible recession is no time to borrow extravagantly.
Work on Your Business Credit
A credit crunch usually goes along with a recession. How does your business credit look? You can register your business with one of the reporting agencies (like Dun & Bradstreet) that specialize in business credit. Then, ask the people you do business with to report your behaviors. Get a business credit card. Build up your business credit, and you will be more likely to weather a credit crunch, able to access the capital you need.
Understand Your Priorities
Take some time to understand your business priorities. During a recession, hard choices have to be made. If you know your priorities, though, you can make those choices a little easier. Figure out which products, and which relationships, are most important. Know that the marketing budget needs to remain constant — or even increase — during a recession. Do a review, and figure out which (less important) costs could be cut. Start cutting now, and you’ll be in an even better position when a recession rolls around.
Keep Your Key People
During a recession (and any other time) you want talented people working with you in your business. Evaluate your employees, and decide which are likely to help you through the recession. Then figure out what you can do to keep them. It isn’t always about salary, either. Find out what motivates your talented employees, and what perks they would prefer. Do your best to make the work environment desirable so that your talented employees will stick with you and help you keep your business going.
Develop Good Customer Relationships
You want strong customer relationships and loyalty even in good times, but it’s especially important to be able to rely on repeat customers during a recession. Work now to improve your customer service and enhance your customer experience. Then, when you are faced with a recession, you are more likely to retain those customers.