As highlighted in a recent Yahoo Finance article, it appears likely that we will experience a recession in 2023. This threat weighs heavily on the minds of many business owners, particularly as the difficulties of the COVID-19 pandemic linger close at hand. Compounding this unavoidable macroeconomic cycle, supply chain disruptions, the war in Ukraine, domestic and international political discord, inflation, higher borrowing costs, banking instability, market volatility and social inequity overshadow the global business climate. The ignition of any one of those powder kegs would substantially increase the length and severity of an economic downturn. Here are some tips for businesses to successfully navigate a recession.

Strengthen Customer Relationships (Protect Your Base).

Retaining and improving key customer relationships is crucial to surviving a recession. Business owners should identify their most loyal customers and find ways to keep them engaged. Talk to your customers and understand the challenges they are facing. Listen to them and address their needs. Try to personalize your offering to demonstrate your commitment to them. In addition, you may want to create or expand a loyalty program, a promotion, or other incentive. At the most basic level, providing excellent customer service is essential. 

Focus on Sustained Profitability.

Business owners need to have a solid financial plan, including understanding their cash flow. Focusing on the sources and uses of cash is fundamental to operating a sound business at any time, but especially when sales may be shrinking and the cost of capital is rising. Create a sound budget and identify expenses that can be reduced or deferred, such as on office refresh. This may be a good time to renegotiate terms with suppliers. Focus on making each dollar count by optimizing the effectiveness of each dollar spent. When reducing costs, be careful, however, not to sacrifice product quality or employee morale.

Optimize Your Workforce.

Your employees are your biggest and best resource – make sure they are part of the solution. A business’ employees are essential to building customer relationships, designing, marketing, and selling your products and services, and ensuring that the business runs efficiently. Have team members focus on their area of expertise and encourage new ideas. Communicate the business’ goals and objectives honestly and reward their commitment. Like your customers, listen to your employees and work to maintain morale even though tough decisions focused on the future might need to be made.

Remain Agile and Adaptable.

Businesses need to remain agile and adaptable. The input received from your customers and employees may highlight the need for change. Reassess your product offerings and ensure you are providing the products your customers demand now and in the future. Embrace innovation and technology. Identify how technology can help you do things faster and more efficiently to increase productivity and customer and employee satisfaction. Remaining agile may mean identifying new products or customers or implementing changes to the marketing, manufacturing, or sales processes. While managing your budget, investing in innovation may provide benefits to your company long after the recession is over.

Although business owners cannot control if or when a recession occurs, how severe it is, or how long it lasts, they can take action to insulate their business from its effects. By focusing on core customers, having a solid financial plan stressing profitability, optimizing your workforce, and remaining agile and adaptable, businesses can increase their chances of weathering the storm and coming out stronger on the other side.