We Hate To Say It... But Are You Ready for A Recession?
Are you prepared for another recession? A recent survey conducted by BlueVine suggests that if you’re a small business, you probably are not ready. Of the 1,000 businesses questioned for the survey, nearly half of them admitted to not doing anything to prepare for a prolonged economic downturn. Don’t let this be you.
We know that this information is scary. But as a business owner, it’s important that you do your best to be prepared. Of the businesses that did say they had done something to help them in the event we head into another recession, most reported taking relatively small steps, like slowing down or stopping new hiring.
What’s even more disheartening is that an overwhelming number of the small businesses questioned agreed that another recession is on the horizon. So, if most small businesses agree that the economy will likely slow down and slump into a recession, why have so many of them decided to sit on their hands?
A potential reason (or perhaps, a potential saving grace) is that despite the many indications that we are heading into a recession, consumer confidence remains relatively high.
According to behavioral economic Dr. Dan Geller, the spending and mindset of consumers has remained relatively unaffected by all the recession talk. If consumers are still willing to spend, then small businesses will likely still be able to earn, and ultimately, ride out an economic downturn.
Dr. Geller developed something called the Money Anxiety Index. In short, it determines how concerned consumers are about economic conditions based on whether they choose to spend or save. A high Money Anxiety Index number, the more money people are saving and the less they are spending.
The opposite is true, as well. This index accurately predicted the Great Recession of 2007 more than a year before it hit - and right now, while relative anxiety levels have increased, they are stable enough to suggest that perhaps a recession will be manageable, or even negligible for most small businesses.
All that being said, if you’re a small business owner, you probably shouldn’t stick your head in the sand. As encouraging as this particular sign is, there are more than enough warning signs to suggest you should look into getting your business ready for a difficult stretch economically.
Right now, with spending still stable and the possibility of a recession still some time away, would be as good a time as any to crack open your accounting books and see what your budget is like.
See if there are unnecessary expenses that can be cut back, and try to optimize spending going forward. Consider your hiring practices. Maybe instead of hiring more full-timers, consider bumps in pay to existing team members, while outsourcing some potential part-time work to freelancers and virtual assistants.
They say the best time to look for work is when you have a job - a similar sentiment is true for securing funding. The best and easiest time to get access to funding is when you don’t need it. Lock down some emergency funds and get access to credit lines, too.
While there’s nothing scarier than an economy that is entirely out of your control, make sure you do what you can to prepare yourself now, before it’s too late.