June 2019 marked 10 years since the economy began expanding again after the recession of the late 2000s. That makes it the longest economic expansion in history. Unfortunately, some top economists see indications of a new recession cropping up within the next 12 months. Whether this comes to pass or not, it’s a good idea for all small business owners to prepare as though a recession was a definite. Below are several tips on how to prepare for and ride out the next recession with ease.
Start by Paying Off Debts
Difficulty finding new clients and receiving slower payment of invoices are two common problems small businesses face during a recession. Paying off as many debts as possible now can help prepare for recession as well as leave more cash available for meeting the daily operating needs of the business. Paying off the smallest debts first will leave you with fewer bills to pay while attacking the ones with the largest interest rates will reduce the amount your small business pays each month for financing.
Contacting your creditors to see if they would accept lower payments for paying accounts in full is another way to get your business debts paid down faster. After paying off some debts, you might also consider applying for a business credit card with a lower rate and then setting it aside until you need it during the next recession.
Establish a Cash Reserve
Some economists feel so strongly about small business owners building a cash reserve that they state it’s impossible to survive a recession without one. You can start now by putting money into a business savings account or money market account each time revenue comes in and you’re certain you have paid all the bills.
Small business financial professionals recommend saving enough to cover expenses for three to six months if possible. If you can’t do that because you need access to the money to operate your business, consider applying for a revolving line of credit to meet expenses. Of course, you will need to weigh the cost of doing so against the funds you must live without while building your cash reserve.
Cut Overhead Wherever Possible
During a recession, the things you consider everyday items in better financial times can become a luxury. Look around your office to see if you could cut some expenses now such as heating and cooling, electricity, or new computers. It’s also beneficial to look at your processes to determine if they’re as efficient as they could be. If not, now is the ideal time to eliminate or improve them.
Recession-Proof Your Business with Help from Aura Wealth Management
The above are just three basic steps you can take to better prepare your small business for the next recession. We invite you to schedule an appointment with an advisor at Aura Wealth Management to explore this and other business management topics in greater depth.