How Small Businesses Can Prepare for a Possible Recession

Where this economy will go in 2023 is pretty much anyone’s guess. It can achieve a “soft landing,” slide into recession, or end up somewhere in between. Add in uncertainty about another wave of COVID-19, and Russia’s war on Ukraine, and it’s suddenly really hard for business owners to make plans.

Small business optimism fell in December, according to the National Federation of Independent Business. The survey found that more business owners were pessimistic about business conditions over the next six months due to rising costs, difficulty finding workers and overall economic uncertainty.

For Bright Star Early Care and Preschool in Washington, D.C., the year ahead will largely depend on what happens in the labor market. Owner Marcia St. If more people enter the workforce, more people will need child care, Hilaire-Finn said. But if people lose their jobs, demand for child care falls. As a result, St. Hilaire-Finn said her strategy this year is to build cash reserves in case business slows.

However, she said she doesn’t have as many ways to cut costs. She can’t afford layoffs, and her rent is non-negotiable. So she instead focused on growing revenue by adding new floors to the building.

“We’re adding a third layer, increasing our capacity by 50 percent,” St. Hillel-Fenn said.

This means that Bright Star Early Care and Preschool will be able to receive 48 new children. British stone. Hilaire-Finn said her costs will increase, but her income will increase even more.

“Parenting is a numbers game,” says St. Hilaire-Fenn. “The more kids in the same building, the more income.”

Expanding isn’t always easy when customers are nervous about the economy.

“Normally, January is a time when a lot of new business starts,” said Madeleine Reeves, founder and chief executive of Fearless Foundry, a consulting firm that helps other businesses with marketing, business strategy, and design. Existing customers are working on a lot of projects, which is great, but we’re definitely seeing some hesitation.”

Instead of trying to add new clients, Reeves said her goal is to work more with existing clients.

“Just showing up and saying things like, ‘Oh, you know, we noticed that your social media presence isn’t where you want it to be. Is this something we can help you with?'” Reeves said.

The idea is to help ensure Reeves’ income keeps flowing in.

“Having a baseline monthly recurring revenue means I have the ability to continue to run my business,” Reeves said. “It really puts me in a stable position if there’s any downturn.”

Meanwhile, businesses that sell goods continue to face supply chain issues.

“In Europe, my factories are still underperforming,” said Cathrine Reynolds, who handles imports for Palmetto Tile Distributors in South Carolina. “I’m still seeing some factories closing and production slowing down.”

Reynolds said many of the factories where she buys tile keep announcing that they will raise prices. So she’s been trying a new strategy.

“When I get a price increase notice from a factory, I try to order deeply,” Reynolds said. “So my inventory is really healthy, so when prices go up, it doesn’t hit us nearly as quickly or as much.”

Maintaining healthy inventories now also ensures businesses can sell customers what they want first, said Greg Warwick, chief executive of equipment supplier TMB Baking near San Francisco.

“Let’s say we’re talking about a spiral mixer for mixing dough, and a customer breaks down,” Warwick said.[If] Others say, ‘Well, you can get it in three or four months,’ and we can say, ‘Well, you can get it in a week,’ and then we’ll be the option. “

Warwick said the company is also ramping up its marketing efforts to ensure customers are aware of the products it stocks. That’s because sales are what the company lives on, Warwick said.

“Sales are key to any healthy business,” says Warwick. “We haven’t made any fundamental changes to our business. We’re just trying to grow it.”

In the meantime, Warwick said he was in touch with his bank in case he needed to tap his line of credit. That helps him pay for all his inventory, he said.

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