Prepping your Business for a Recession

Many experts suggest that a recession is headed our way. With inflation and interest rates on the rise and consumer spending trending down, companies are scrambling to create a strategy to mitigate the impact of an economic downturn on their businesses.

But how can a business brace for impact while holding true to its mission and vision? Below, you’ll find seven strategies to ensure a successful transition into these challenging economic times.

#1 Take Inventory of Your Business’s Financial Health

What do the numbers say? Using data to assess your business’s financial health is the first step in creating an effective plan. Look at your day-to-day metrics to find what areas need an overhaul or just a few simple changes. Be honest about what you find, and determine the best course of action that keeps your company aligned with the mission or vision.

#2 Communicate the Company’s Financial Position

When employees are made aware of where the company stands financially, they become engaged in the fight. Leaders must guide employees in money-saving and profit-increasing measures to “reduce the need for layoffs,” according to SHRM. Your employees should know the challenges and see their actions making a difference.

However, communication doesn’t always have to come from the top down. Leadership should encourage employees to ask questions, and the answers to those questions should be clear and honest. Make sure it’s safe for employees to talk about the current and future challenges and provide avenues for them to offer solutions.

#3 Retain Top Talent

It’s important to provide staff development opportunities sooner rather than later, which will “help enable good decision-making when selecting positions to eliminate.” It can also increase a business’s chances of retaining top talent amidst chaos (SHRM). You may have to restructure your organizational chart or cross-train for critical roles, but be sure to recognize your top performers and respect their needs concerning these changes.

#4 Develop a Plan for Potential Downsizing

If layoffs seem unavoidable, “HR staff should bring its top leadership team together to clarify each position (executive and senior leadership positions as well), workers’ roles, and the reason each position exists.” Although this work is difficult, it is necessary to ensure that every role in the company has a defined and measurable purpose (SHRM).

Business leaders can get creative when it seems like downsizing is their only option. For example, if some of your employees are nearing retirement, “consider offering incentives before layoffs.” Or you may consider offering part-time positions instead of eliminating the role (SHRM).

Either way, communicate about layoffs long before they become a reality. Employees will appreciate the transparency and, despite their disappointment, the time you’ve allowed them to find a new position elsewhere.

#5 Cut Wasteful Spending

Take a look at any non-payroll spending. Are you surprised by how much the company is spending outside of payroll? Do your expenditures add value, or are they wasteful? One way to ensure you’re not bleeding money through unexpected expenses is to monitor this area closely. Determine who can spend on behalf of the company, realign on and enforce measures against frivolous purchasing, and determine what is a priority and what is unnecessary.

#6 Outsource Where it Makes Sense

There may be services that your business needs but cannot afford during a recession. When it comes to these services — payroll, benefits administration, HR administration, or recruiting — consider outsourcing instead of hiring for in-house positions. These services can help you meet demand and focus on navigating the financial pressure of a recession.

#7 Don’t Lose Sight of the Mission

There’s no question that recessions challenge the effectiveness and vitality of a business. And in tough times, it’s easy to lose sight of why you got into this business in the first place. Take some time to determine how you can change your business in alignment with your values. Resist the urge to compromise these values in times of panic.