Find out the three challenges businesses often experience during economic downturns and how to best prepare for them.
It is never too early to recession-proof your business. In this short video we highlight three challenges businesses often experience during economic downturns and how to best prepare for them.
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Economic cycles are difficult to predict, so it’s never too early for business owners – especially small business owners – to have a plan to deal with a potential downturn. Here are three challenges your business may face, and what you can do to prepare for them.
During a recession, businesses may have less cash available as new sales soften, or clients are slower to pay. To ensure that you have enough cash on hand to continue to meet payroll and other vital expenses, it’s a good idea to build and maintain excess cash reserves when planning for a recession.
Many experts recommend having enough cash to cover three to six months of expenses. For a more accurate evaluation, speak with your accountant or financial adviser to determine the best course of action for your company.
It’s common for financial institutions to adopt more stringent lending criteria during a recession, making it more challenging for small business owners to access capital, just when it’s needed.
Consider applying for a business line of credit for your company ahead of any downturn in sales, so that it’s available to you when you need it. That way, you can reduce the likelihood of needing to ask for funding under less fortunate circumstances.
Remember that your suppliers and customers could also be impacted by a downturn. A supplier may have a difficult time weathering the recession – or could even go out of business – potentially creating a major disruption for your business.
It’s a good idea to check with your current suppliers regarding their recession planning. Consider lining up alternate suppliers, in the event your current relationships are disrupted.
Similarly, your customers may also be vulnerable to a recession. It’s always important, but especially in a downturn, to monitor your customers’ payments to ensure that they don’t fall too far behind. And, as with suppliers, broadening your customer base will reduce the impact on you if your customers feel the strain of a weakening economy.
Economic cycles are a part of doing business. To protect your interests, make sure you’re as prepared as possible for a potential recession.
For more ideas to help make your business successful, visit Santander Business First at businesshub.santanderbank.com.