A recession is an economic downturn that is typically characterized by a decrease in the gross domestic product (GDP), an increase in unemployment, and a decrease in consumer spending.

It’s uncertain as to whether Australia is currently headed for a recession, but if you’re worried about your business being affected, there are some steps you can take to recession-proof it.

Invest in Existing Clients

It’s a lot cheaper to ensure that your existing clients remain happy with your products or services than it is to acquire new business. This approach will help you minimise the impact of any decrease in consumer spending and maintain a steady cash flow. Be sure to provide outstanding service and consider offering loyalty discounts or programs to keep your clients coming back. With some luck, it may also lead to them referring your business to others.

Monitor Cash Flow

During a recession, businesses can often be hit hard by a decrease in cash flow. This can be caused by a decrease in sales, an increase in costs or slow payment from debtors. It’s important to keep a close eye on your cash flow and ensure you have enough money to cover your outgoings. You may need to consider offering discounts for early payment, tightening up your credit control, or even reducing your costs.

Access Capital and Emergency Funds

It’s important to make sure you have access to capital and emergency funds before the recession hits. Lending rates often increase during a recession, making it more difficult and expensive to borrow money. Furthermore, you may not qualify for a loan if your business is seen as high-risk during a recession. By securing these funds, you’ll ensure that you have the cash you need to weather any storm and keep your business afloat.

Order Extra Inventory

It would be wise to talk to your suppliers about their own economic standing so that you can order extra inventory if necessary. This way, you’ll have the stock you need on hand in case there is an interruption in the supply chain. Additionally, it may be worth considering stockpiling raw materials so you can continue production even if there is a decrease in demand.

Achieve Specific Growth Plans

If you’re planning on incurring debt, it’s essential to have specific growth plans that you want to achieve with the funds. You can use an unsecured loan to finance them as it doesn’t require any collateral, making it a good option if you don’t have any assets to offer as security. However, you should be aware that the interest rates on unsecured loans are often higher than those on secured loans. Talk to your financial advisors about whether this is the right option for your business.

Create Flexibility in Staffing

Flexibility in your staffing structure will help you reduce costs and better match your staffing levels to your revenue. This may mean implementing a hiring freeze or reducing the hours of your staff. Alternatively, you may need to let go of some employees or convert some contracts to part-time.

If you’re concerned about whether your business will survive the recession, speak to a Business Finance advisor at Peel Finance Brokers. We have the expertise to offer tailor-made solutions that will ensure that you remain as profitable as possible through this tough period.