How to prepare your business or startup for a recession in 2022 and beyond
There are a ton of things you could do to try to get your business or business proposal ready for the upcoming recession which economists are saying is more and more likely as inflation spikes, and the fed raises interest rates. Businesses like yours will have to adapt and we have put a few thoughts together.
1) watch your cash flow and start preparing cash reserves
Cash is king, and you need to keep enough of it on hand to keep your company running. There are many factors that influence how much cash you need, but the average recommended amount is between 6-12 months of operating expenses. So how do you know how much to keep? The best way is to run a cash flow projection and see where your company's earnings come from; this will help you determine how much money you should have saved up at any given time
2) Get rid of any operating expenses you dont need
The best way to survive a recession is to avoid it. That being said, there are several ways to cut your costs in advance of a recession so that you’ll be in the best position possible when the winds start blowing more fiercely. Start by renegotiating your lease for office space, then find less expensive office supplies, and reevaluate the services your business really needs to survive. Next, examine your staff. If any employees need to leave, make that happen before a recession, not during. Make sure any layoffs are done with lots of thought—you don’t want to damage company morale or shrink your staff so much you won’t be able to properly provide for your customers.
3) Make sure to talk to your investors in order to secure financing if you need it
If you are a growing company, having a good relationship with your current and potential future lenders is critical to your success. As a small business owner, having several lines of credit available can provide flexibility in case of an economic downturn or unexpected opportunity. Your banker should know your business inside and out so loans are paid back on time and the relationship fosters success for both parties.
4) DO not stop marketing
Continue to find ways to reduce your marketing costs and try to optimise boostrapped ways. As a small business owner, it's important to have a good relationship with your banker because that can mean the difference between success and failure. A strong lending relationship can help you access the capital necessary to grow your business, while keeping you on track with paying back loans.
5) If you are hardware and have inventory manage it carefully!
Make sure you use your data to try to predict customers orders and talk to them about next years plans to try to adapt your inventory accodingly.
Below is a great example of what YC was telling their founders to adopt