Small business owners must be prepared for a recession at any time, said Matthew R. Meehan, Leading Finance Expert and Chief Executive Officer of Shield Advisory Group.
Meehan feels confident that a recession is coming. While there are warning signs to indicate a potential recession, such as high interest rates, stock market crashes, or rapid deflation, it is impossible to tell when, where, or how this disaster might happen. However, a survey from BlueVine shows that 44% of small business owners have not taken any steps to prepare for the inevitable recession.
The onus is on small business owners to take three critical steps toward protecting their business, Meehan told Forbes Magazine. They need to build up an emergency fund, have a loyal customer base, and secure capital to mitigate risk in a potential recession.
Business owners must keep at least three months of cash reserves in their bank accounts, Meehan said. To ensure that their businesses stay afloat, owners should have enough to pay employee payroll and operating expenses at the very least. Small business owners should also have a sense of what they’re spending so that if they’re low on cash, they aren’t losing money on low-priority items.
Securing capital is the next way small business owners can ensure that they’re ready for a recession. Meehan suggests finding investors, having lines of credit, applying for grants, or opening credit cards. It’s vital that small business owners have a good idea of what capital they have at their disposal. By having a solid sense of their finances, they'll know where they stand if the market collapses.
Lastly, small business owners must have a loyal customer base to survive a recession. While it’s always important to market for new business, remember that a steady stream of returning customers is more valuable than potential new clients. To keep customers, you should provide excellent customer service, incentivize returning customers with discounts and free items, and continually assess their expectations to cater to their needs specifically.