Talks of recession have been circulating for a while now, especially amongst business owners and entrepreneurs.
CEO of Sunwest Bank, Eric Hovde, states that it’s not a matter of if the US is in a recession or not, it’s a matter of how long it will last. His feeling is that the meteoric rise in asset values and the amount of money flowing into the economy via economic stimulus will cause the recession to last anywhere from 18 to 24 months as the money is drawn out of the economy.
Meanwhile, entrepreneurs need to stay flexible and nimble to keep ahead of the inflationary environment and avoid closing their doors. Here’s a look at some tips to handle the upcoming recession.
What Entrepreneurs Should do to Weather the Recession
A recession doesn’t mean the economy grinds to a halt, so much as spending slows down. Entrepreneurs can maintain profitability by taking proactive steps to get through tough times. Some of the actions include:
- Getting a line of credit
Opening up a line of credit from a business bank like Sunwest provides access to quick cash infusions for various business needs. A line of credit is especially helpful when customers are slow to pay, but your business still needs to pay its bills.
- Adjust employee hours
Keeping your talent employed during a recession is tricky. You need them to get work done in a timely manner, but it’s difficult to pay them when sales are slow. Be open with your employees and discuss adjusting hours worked to balance out reduced income and payroll.
- Don’t make drastic cuts to the advertising budget
You have a product to sell, and you need to get people’s eyes on it to make money. The worst thing you can do is to reduce your advertising efforts. You may wish to spend less, which is fine, but don’t cut too deeply into the budget, especially if you have a successful advertising strategy.
- Offer discounts or put a product on sale
The idea of reducing the price of a product during a recession may seem like a bad idea on the surface. The fact is, people often respond to discounts in a positive way and are more likely to buy more. This also gets buyers off the sidelines and encourages them to buy. In turn, you can get a short-term increase in sales to get you past a drop in sales.
- Don’t make big purchases even if they seem like a good deal
It’s tempting to buy a major asset such as real estate or equipment during a recession. Prices for these items can be lower than they would be during a normal economic environment, but they also reveal weaknesses that caused them to linger on the market prior to the recession and are being fire-sale after the recession began. Big-ticket items being sold cheaply can look like a good deal, but they can also be tough to sell later.