Trade wars. Inverted yield curves. Falling stock markets.
While there’s no certainty the U.S. is headed toward recession, there are enough storm clouds on the horizon to make investors and everyday consumers nervous.
For small businesses that may not have the financial reserves of a larger corporation, weathering an economic downturn could be particularly unnerving. But there are some steps entrepreneurs can take to prepare.
“There’s some things you can do that are just going to be good no matter what,” says Matt Baker, who helps small businesses manage their finances and also serves as vice president of corporate strategy and international expansion for FreshBooks, an accounting software company. “And some are very specifically helpful in a recessionary environment.”
Here are Baker’s five survival tips for entrepreneurs.
Broaden your offerings
You don’t have to be a jack of all trades, but it’s not a bad idea to have more than one skill you can offer clients.
“If you just do one thing, you’re at a little more of a risk,” Baker says, adding that having varied services is helpful even when the economy is strong. “I’m not saying you go from digital marketing to being a home contractor. But if you’re in digital marketing, (maybe) you branch out to social media. That diversification allows you to have a different offering if one offering dries up.”
Set up a line of credit
Just as homeowners might want to secure a home equity line of credit before they need it, small businesses might want to set up a line of credit, just in case.
Trim the fat
Is there a cheaper space where you can set up shop? Could you get a better deal from your internet provider? Instead of hastily slashing expenses when your finances are shaky, you might want to start evaluating your costs now. “Take a real hard look,” Baker says.
Speed up payments
You may typically give clients thirty or even sixty days to pay off their balance, but you may want to speed up those payments to make sure you can sock away cash and keep up to date paying bills if business suddenly slows.
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“Cut down the time you wait to get paid,” Baker says. For instance, you can offer clients a small discount if they pay for your services upfront. “Or you charge people a deposit to get started. There’s lots of ways you pull that income forward, and that will help with cash flow.’’
Hunt for more clients
More clients means more opportunities and potential sources of income.
“I always recommend to people who are self-employed to get better at word-of-mouth sales or marketing,” Baker says.
That doesn’t necessarily mean investing in formal ads. Seek out a co-working space where you’re around other entrepreneurs and can network and gather new leads. Or “ask for referrals from an existing client to get a new one.” Such strategies, Baker says, “require time and effort more than a big budget.”