7 Tips for Facing a Potential Recession
Economists are forecasting a recession soon
With the economy entering stagnation and inflation is increasing at an exponential rate, it’s important for businesses in Canada to understand the impact a potential recession can have. There are clear signs that the economy is slowing down with stock markets falling and decreasing real estate prices while inflation and interest rates are soaring high. The official definition of a recession is when there are two consecutive quarters of negative growth with the gross domestic product (GDP).
A recession is a difficult time for any business – while a business owner will feel the need to make cuts and sacrifices within the company, employees will feel the pressure to find stability because of the increase in layoffs during a recession. Small businesses especially may feel a significant impact from a recession, due to the lack of cash reserves and capital assets needed to support them. It’ll be more difficult getting financing and they would be less customers looking for their products or services.
If you’re a small business owner and worried about the upcoming recession, don’t stress too much! Here are 7 tips that may be useful:
- Understand liquidity and which potential sources of capital you could utilize.
- Create an emergency business fund, if you have not already.
- Do a risk assessment to check how much your business can take on before insolvency.
- Try your best to cut back any operating expenses or reducing overhead costs.
- Prioritize paying back any debts that your business has.
- Create an action and contingency plan.
- Consider downsizing inventory to match lower consumer demands.
Overall, a recession is a scary thing for businesses of any size. But, as long as you do your research and have preventative measures in place, you may be able to reduce the impact of a recession on your business.