Here’s a harsh reality for small to medium-sized business (SMB) owners: even if they do everything right, factors beyond their control can still disrupt their business plans. Whether it’s a sudden economic downturn, regulatory changes, or supply chain disruptions, unexpected macroeconomic and logistical challenges can significantly impact a small business’s success. This is especially true for SMBs operating internationally, as cross-border revenue streams are more vulnerable to shifts in both local and global economies.
However, SMBs are not entirely powerless in the face of external forces. There are several strategies small business leaders can follow to help insulate themselves against macroeconomic pressures. Whether a global business is just starting or is fully operational and profitable, it’s never too early or too late to start recession-proofing. Here are four of the best ways SMB owners can instill more resilience into their businesses:
1. Diversifying Revenue Streams
Diversification is a powerful strategy for building resilience by spreading risk across multiple geographies, products, or customer bases. For example, a small business that currently operates in just two markets might look to reduce its vulnerability to economic fluctuations by expanding into additional countries. Diversifying may also involve developing new product lines or services that cater to different customer needs or market segments, or exploring complementary offerings that appeal to existing customers in new ways. That way, if demand for one product falls dramatically, the business doesn’t immediately fall into hot water.
Small businesses that expand into new markets and introduce new products also build a more diverse customer base. In turn, this creates more opportunities for cross-selling and upselling between parts or products offered by the business. It also offers greater potential to tap into different consumers’ trends and preferences, further insulating businesses from sector-specific downturns and unexpected macroeconomic shocks.
2. Understanding and Avoiding Hidden Fees
Beyond seeking new ways to diversify revenue, SMBs should also be equally focused on maximizing the value of what they earn. SMBs typically operate on razor-thin margins, and small business owners know all too well how difficult it can be to maintain a healthy cash flow. This is made even more difficult for international SMBs, who face additional and unnecessary financial pressures like hidden fees on international payments.
Hidden fees on international payments occur when financial providers claim to offer “no” or “low-fee” international transactions while surreptitiously marking up the exchange rate they provide. In other words, they bake the fee into the exchange rate so businesses won’t see exactly what they’re paying for a transaction. The impact is severe — US-based SMBs lost a shocking $43 billion to hidden fees on international payments last year alone. These hidden fees act as a “growth tax,” limiting small businesses’ ability to plan ahead and protect their margins.
To avoid being hit by unexpected charges, businesses should scrutinize financial transactions carefully to root out hidden fees. The best way to do this is to compare the exchange rates being offered by financial providers against the mid-market exchange rate (the rate you see on Google). If the difference is significant, that spread is likely a hidden fee. SMBs must consistently and actively monitor exchange rate discrepancies when sending money internationally and reject providers who are being deceptive in favor of those offering transparent rates from the jump. By proactively identifying and addressing unnecessary expenses, businesses ensure they’re not paying more than necessary for essential international payments.
3. Strategic Resource Management
Alongside financial management, it’s also important for international SMBs to build operational practices that are robust and adaptable in case of major disruptions to demand.
For businesses selling physical products, accurately predicting sales is more crucial than it is for a purely digital business. Overstocking inventory can tie up valuable capital, increase carrying costs, and lead to potential obsolescence if appetite shifts. Conversely, understocking can result in lost sales and customer dissatisfaction. This is further complicated by longer supply chains, shipping delays, and currency fluctuations, as well as uncertainty surrounding tariffs.
Leveraging strong data analytics tools can be a game changer, allowing SMBs to accurately forecast demand for products and services while mitigating potential waste or shortages of products. It’s also worth considering “just-in-time” inventory strategies—ordering goods only when needed—or drop-shipping models, where a business’s suppliers ship directly to customers without the SMB stocking inventory themselves.
Lastly, cultivating strong relationships with multiple suppliers can help SMBs manage risk by enabling them to quickly switch to alternative sources if one supplier encounters issues. This enhances resilience, ensures consistent product availability, and ultimately supports smoother operations and greater customer satisfaction.
4. Fostering a Culture of Adaptability
Finally, SMBs aiming to thrive in uncertain times must look beyond financial and logistical strategies and towards their people. Recession-proofing also means building an organizational environment where change is not only accepted but also embraced. Employees at all levels need to identify potential challenges and propose innovative solutions. By cultivating a mindset that values flexibility and responsiveness, businesses can better align their operations with evolving market trends.
One way to do this is by encouraging skill diversification among employees. For example, SMB leaders might set up informal knowledge-sharing sessions that focus on the latest industry trends and technological advancements. These sessions could focus on data literacy, teaching employees how to identify emerging patterns in consumer behaviors how teams can leverage AI to work more efficiently during turbulent times. Whatever this looks like, by holding these sessions, SMBs are encouraging employees to be receptive to change and enhancing their ability to pivot quickly in response to shifting demands.
Lastly, SMB leaders should consider maintaining open communication about the business’s financial health and strategic goals with their employees. While it might feel uncomfortable, this can foster increased trust and transparency among colleagues. And when employees are informed and engaged, they are more likely to take ownership of their roles and contribute to collective problem-solving efforts.
Building resilience in the face of economic uncertainty requires a multifaceted approach for international SMBs. By diversifying revenue streams, managing finances carefully, optimizing inventory management, and fostering a culture of adaptability, SMBs can position themselves to navigate obstacles with confidence. These strategies not only protect the business’s bottom line but also enable it to seize new opportunities and maintain a competitive edge in a volatile global market. By proactively preparing for potential disruptions, small business leaders can anticipate sustained success and growth, regardless of the economic climate.
June Yuan is the business product lead at Wise, a tool for sending, spending, and receiving money internationally.
Photo courtesy Christine Roy agent_illustrateur
