If you’re a small business owner and all the talk of a possible recession has you panicking, you are not alone.
Small businesses have been through a lot over the past few years, from the pandemic to supply chain disruptions, and the prospect of another upheaval can be overwhelming.
In reality, however, there may not be a reason to panic just yet. The economy still has significant tailwinds from pent up demand and a strong labor market. And even if the markets experience a recession, there are a lot of ways to gear up for a shift in the business landscape.
Here are five tips for small business owners stressed out about a potential recession:
1. Strengthen your decision making skills
Mindfulness is a powerful tool when it comes to making sense of what is happening in the world today. Small business owners can enhance their mindfulness with mental models – these are models of how we perceive our environment, how we navigate complexity and ultimately how we simplify and solve challenges. Some of the world’s most successful entrepreneurs, investors, athletes, coaches, scholars and CEOs rely on systems thinking or architected frameworks for interpreting reality.
Check out The Great Mental Models by Rhiannon Beaubien and Shane Parrish or Super Thinking Super Thinking by Gabriel Weinberg and Lauren McCann. Or reread the classic Thinking, Fast and Slow by Daniel Kahneman.
2. Go back to core metrics
It is easy for small business owners to get distracted in this environment. Every time you open your phone or turn on the news you’re faced with reports of market fluctuation, supply chain issues, turmoil in Europe and more.
Times like these call for a back-to-the-basics approach. Focus on your core metrics. Revisit your business plan and work with a financial expert to understand the health and outlook of your business. Then dive into your metrics and KPIs. Are you tracking performance? How efficient are your people and processes? What about quality and quantity of output? Getting your core metrics right is key to staying nimble in challenging environments.
3. Open up the lines of communication
Navigating disruption – or even perceived disruption – is a team effort. One of the best steps concerned small business owners can take is to be more communicative.
This is when you really want to lean into client relationships. Check in on what’s going on with them. How are the current conditions impacting their business? And, even more importantly, how can you help them be successful in this environment?
This extends to vendors as well. If you’re regularly communicating with your vendors, you’ll be the first to know if there are going to be delays or price changes that you should prepare for.
4. Diversify your vendors and client base
Diversifying your suppliers and client base is a great strategy to recession-proof your business. To do this, start by reviewing the profitability of your clients and increasing business development. For less profitable clients, strategize ways to reduce your servicing costs. Lean into technology to shore up inefficient systems.
And for vendors, consider implementing a rating system like a scorecard to assess performance and identify where you might need to find new partners.
5. Demonstrate empathy with your employees
Be sure not to forget about your employees. Your people are your greatest resource and play an inextricable role in the success or failure of your business. Be empathetic and aware that they too are worried about a possible recession.
Acknowledge their concerns. Provide reassurances around what they can count on to remain the same and be up front and honest about what could change in the coming months.
The bottom line
The prospect of a recession can be a daunting one, but – in reality – concerns may be overblown or a year or two down the road. Regardless of what’s ahead, the goal is to take action.
Small business owners face a never ending churn of new scenarios to discover and test. The key is to stay nimble and embrace an always-learning mindset. The simplest and best answers may be right in front of you.
Jeanne Hardy is the CEO and founder of Creative Business Inc., a New York City-based business services and financial advisory firm that specializes in serving elite entrepreneurs and growing small businesses across the full spectrum of creative industries.