2022 Survey: 80% of U.S. Small Businesses Are Concerned About An Upcoming Recession
Chances are, you’ve been alive long enough to have experienced at least one, if not two, of the most recent recessions in modern history. From the pandemic-induced 2020 economic instability back to the housing-market-driven financial crisis that took place from 2007 to 2008, the economy has been a rollercoaster over the last 20 years. You might even remember that the millennium began with the dot com crash in 2000 to 2001. As businesses have started to make progress extricating themselves from the financial nightmare that has characterized the last two years of the COVID-19 pandemic, there’s a dark cloud looming over the economy as high inflation has economists releasing forecasts showing that there is a growing fear of an impending recession.
With these concerns in mind, UpCity partnered with Pollfish to survey 600 U.S.-based small business owners and leaders to find out how they are preparing for the possibility of a recession. In exploring how small businesses are shifting staffing levels, project workflows, resource management, and financial coping strategies, we’ve organized the Pollfish data findings into the following sections:
- Small Business Recession Concerns
- Business Models and Sizes
- Small Business Finances
Beyond the data gathered through the Pollfish survey, we’ve also gathered the thoughts and advice of the wider global community of small business owners and financial experts and featured their insight throughout the discussion. They’ve shared their insight into how best to position your small business for the coming financial instability in the market in 2022 and beyond.
Small Business Recession Concerns
80% of small businesses are concerned about the possibility of an upcoming recession
There’s enough data and research on what caused recessions in the past that financial experts warning of an impending recession due to trends in the marketplace carry enough weight to concern all but 20% of the respondents to our Pollfish survey. The concerns have deepened over the last few months as more news outlets echo the concerns of an anticipated economic upheaval and financial experts enumerate the factors that have created the perfect storm for a recession, including rapidly expanding inflation driven by massive supply chain disruptions leading to shortages in supplies and products across multiple industries matched by the interest rate increases released by the Federal Reserve. The Fed tightening of the economic belt by more than a percentage point in the second quarter of 2022 shook stock market investors and threatens to stifle economic growth in the near term. Combined, these factors have business owners looking at their balance sheets and wondering how they can protect the profits they’ve banked during the boom of the last year.
20% – I’m not very concerned about a potential recession
42% – I’m somewhat concerned about a recession
38% – I’m highly concerned about a recession
When breaking it down further, 47% of B2B SMBs are somewhat worried about a recession, compared to 51% of B2C SMBs that are highly concerned
In the early stages of the pandemic, B2B service providers were impacted in ways that differed greatly from B2C services and brands, especially in the brick-and-mortar retail space. While a large proportion of B2B services are at least somewhat concerned about the impending recession, the still-reeling B2C industry is even more concerned, given how much damage continued economic volatility will cause in the next year. This is especially true, given the continued staffing challenges and supply line shortages B2C services are currently experiencing, leaving the industry vulnerable.
B2B vs B2C majority breakdown
|I’m not very concerned about a potential recession||24%||14%|
|I’m somewhat concerned about a recession||47%||35%|
|I’m highly concerned about a recession||29%||51%|
Concerns about the recession are rapidly spreading across industries and business sectors. We contacted business owners and financial experts directly to get a better indication of how concerned owners are about the chances of a recession. Many feel that the rhetoric about the possibility of a recession is doing more to drive the global economy closer to the brink, while others legitimately feel a recession is inevitable, but as with the pandemic period of economic instability, small businesses might be able to avail themselves of certain opportunities in ways larger corporations can’t.
“We’re definitely concerned about the possibility of an upcoming recession. We sell jigsaw puzzles, so the demand elasticity is high, no one has to buy our product, they only do so if they are feeling indulgent. All this talk of a recession is causing a recession as it makes everyone warier of spending and investing right now.”
—Maya Gupta, CEO, Artifact Puzzles
“As a B2B marketing consultant and content creator working mostly with smaller companies and solopreneurs my message is don’t worry too much. We can make a good living and in fact prosper off of the crumbs dropped by larger businesses. Due to the flexibility of smaller business entities, it is easier to pivot and adjust to the ups and downs in the broader market. If it is so bad that larger businesses begin to fail it can actually provide opportunities because many of their clients still need the services you are offering and they are looking for someone to help them.”
—Reno Lovison, Owner, Reno Lovison Marketing
“When most people think of a recession, they think of scaling back in hiring, marketing, and mass layoffs. Fortunately for my business, we are currently nimble enough with the size of our staff, and the cost of generating new customers is very low. Regarding recession fears, we do not anticipate losing much recurring revenue because our product is designed to be affordable to seniors who are already retired and living on a fixed income.”
—Jake Irving, Owner, Willamette Life Insurance
The uncertainty in the economy is a concern for all industries and business segments. Whether driven by actual inflation and other factors or a shift in consumer behaviors because of the exaggerated claims of experts and news outlets, a recession will have a sweeping impact on most businesses. We explore in the next section how businesses of different sizes and disciplines should prepare for the chance that the economy does take a turn before the end of 2022.
Business Models and Sizes
31% of SMBs don’t plan to change their current business model to prepare for a recession
There are several tactics businesses can take to lay the foundation for successfully navigating a recession. Most of our respondents have some plan in place, with tactics ranging from reducing costs and exposure by downsizing physical space or shifting scheduling and work arrangements to allow employees to work remotely or hybrid.
A third of survey respondents, however, claim that they don’t plan to or feel the need to change their existing business model. This is partly due to businesses that are somewhat insulated against a recession, such as small insurance sales practices and other service-based businesses that provide useful services to small businesses.
26% – We’re going to keep our physical office but downsize our office space
16% – We’re going to allow our employees to follow a hybrid schedule
28% – We’re going to operate the company from a fully-remote standpoint
31% – We don’t plan to change our current business model
However, 54% of hybrid businesses noted that they’re planning to transition to a fully-remote model
The pandemic transition to remote work put to rest many industry segments’ arguments that the work model could not support their workflow. Even as many business segments have recently called for a return to work, hybrid and remote work arrangements remain popular for businesses that understand the benefits. With the possibility of a recession looming, a transition to hybrid or fully-remote arrangements will be easier than in 2020 when a business that hadn’t adopted such strategies didn’t have the tools or expertise to execute the transition.
The combination with downsizing physical office space reduces the overhead for many businesses, providing the necessary buffer in cash flow to offset decreased revenues that will come with a recession. Remote and hybrid models also reduce the stress on employees dealing with the impact of the recession in other aspects of their lives, giving them the flexibility and savings necessary to remain afloat.
Majority breakdown by current models
23% – We’re going to keep our physical office but downsize our office space
30% – We’re going to allow our employees to follow a hybrid schedule
14% – We’re going to operate the company from a fully-remote standpoint
33% – We don’t plan to change our current business model
31% – We’re going to keep our physical office but downsize our office space
54% – We’re going to operate the company from a fully-remote standpoint
15% – We don’t plan to change our current business model
16% – We’re going to keep our physical office but downsize our office space
18% – We’re going to allow our employees to follow a hybrid schedule
66% – We don’t plan to change our current business model
The decision to change business models is driven by many factors, so we wanted to gain more insight into the decision process of business owners across the community.
“As a B2C business owner, I believe that it depends on every business what they think would work best for them in case of a recession when it comes to deciding about their business model. Personally, I think that remote work is a great option for businesses to save money while allowing employees flexibility and ease of working by cutting operational costs and transportation costs. So it will be a great idea to switch to completely remote work in case of a recession. The most important thing is that employees should be on board with whatever decision is taken at the company so their input is essential.”
—Candice Moses, CMO, Information
“Our B2B business has worked with over 150 other companies of all sizes over the years. I do believe that small businesses should change their models to fit the current market, whether a recession is underway or not. Small businesses should look to see what waste they have in their firms, what they can invest in that is going to give a return, etc. Pivoting and adapting are the best things to do while you are creating and/or maintaining a small business.”
—Phoenix Jackson, Founder & CEO, The Phoenix Affect
“I operate a B2C business, and I feel that the decision to change your business model depends on a number of factors, but generally, I feel that it is necessary. At the very least, you need to adapt your business model to prepare for a recession. Every small business needs to be prepared to change some things about its business model at the very least. One of the strategies we implement when facing an economic downturn is focusing our marketing budget on our existing customers and looking for free marketing opportunities, like social media, to keep the new customer funnel open.
It is around 6-10 times more expensive to win a new customer as opposed to upselling a current customer. I think change is inevitable during a recession if you want to survive as a business because, at the very least, you must change the way you communicate your value proposition to reflect the difficult economic situation that all of your customers are dealing with too. If you don’t, you risk alienating your customers, leaving them believing that you don’t understand them or what they are going through.”
—Viktor Holas, Founder, Wise Barber
45% of B2B SMBs plan to hire more employees in 2022 while 44% of B2C SMBs are considering downsizing their teams
The future staffing strategies in the face of the impending financial crisis from the perspective of B2B and B2C service providers is largely based on how each type of business views labor. With B2C services often allocating labor as a controllable cost, it follows that many are considering downsizing staffing, which will likely be spread across all tiers of the employee hierarchy. With reduced customer traffic expected, B2C will need less staff to handle daily demands for services, and with smaller teams, there won’t be as much need for mid-level management in the field.
For B2B service providers that will remain focused on new account creation to weather the storm, it makes sense that hiring more employees is the preferred tactic for insulating themselves from the recession. Larger sales teams and more staff focused on customer experience and retention, thus improving customer relationships, is one of the most powerful approaches to keep your business moving forward.
B2B vs B2C majority breakdown
|We intend to hire more employees this year||45%||20%|
|We’re considering downsizing our team||29%||44%|
|Unsure at this time||25%||36%|
54% of businesses who plan to downsize their team are going to outsource some of their tasks to third-party agencies
Downsizing isn’t typically for companies anticipating a downshift in business. Outsourcing is a powerful alternative to maintaining a full-time staff when revenue streams are unstable. Outsourcing gives your team flexibility to adapt to market demands while keeping overhead low since the outsourced staff doesn’t necessarily need an office space and often costs less to retain than full-time employees. While outsourcing lacks the advantages of an in-house team’s familiarity with your business and customers, the fiscal advantages and increased productivity and efficiencies outsourcing brings to the table in a time of financial uncertainty are crucial to long-term success.
25% – We’ll simply work with fewer internal employees
54% – We’ll outsource some of our tasks to third-party agencies
21% – We’ll hire temporary contractors or freelancers instead
0.5% – Other
When further examining responses by business size, 41% of SMBs with 26-50 employees stated that they’ll simply work with fewer employees. In contrast, 43% of SMBs with 101-250 employees will hire temporary contractors or freelancers instead
Small businesses adapted to redistributing the workload and adapting to changing demands, so businesses accustomed to maintaining smaller staff sizes will be less likely to leverage outsourcing and additional staffing resources. The workflows and project load in larger organizations can be greatly disrupted by staffing reductions, so if cost-reduction balanced against maintaining efficiencies is the goal, it makes sense they would lean heavier on contractors on a project-by-project basis to keep the workflow. Similarly, when companies maintain a small staff, alternative staffing methods such as outsourcing will allow them to meet inconsistent workflow demands without taking on the extra costs of bringing in long-term new staff.
Majority breakdown by employee size
|Majority breakdown by employee size|
|2-5 employees||52% – We will simply work with fewer internal employees|
|6-10 employees||71% – We’ll outsource some of our tasks to third-party agencies|
|11-25 employees||72% – We’ll outsource some of our tasks to third-party agencies|
|26-50 employees||41% – We will simply work with fewer internal employees|
|51-100 employees||52% – We’ll outsource some of our tasks to third-party agencies|
|101-250 employees||43% – We’ll hire temporary contractors or freelancers instead|
Outsourcing tactics are largely based on the types of projects and the volume of projects a business expects to take on in the short- and long-term. We asked our community of business owners to weigh in on the methods of outsourcing they prefer to leverage.
“For outsourcing business processes, we use a third-party agency. The agency helps us save time that we can in turn invest in other important customer-facing tasks. Outsourcing gives us the assurance that work our team may not have the expertise to execute is being performed by professionals, avoiding any chances of mistakes.”
—Vijay Patel, CEO, AlphaHealingCenter
“I outsource my business processes by hiring a freelancer. I have learned the hard way that I can’t do everything alone. Also, I can’t dump it on my employees. Hence, it was a wise decision to lower the workload of my workforce.”
—Erin Neumann, Founder, Sacred Space Organizing
14% of B2B businesses who plan to partner with third-party agencies will outsource either their customer service, marketing and advertising, or IT services tasks. Meanwhile, 24% of B2C businesses will mostly outsource either their marketing and advertising or accounting and finance efforts
The outsourcing strategies outlined by our B2C respondents follow the common B2C strategy of maintaining enough staff to meet consumer demand on the frontlines while remaining extremely lean on the back-end and administrative side of the business. Given their focus and expertise in customer engagement and service, it follows that marketing and accounting top the list of tasks outsourced by them.
For B2B businesses, business process outsourcing tactics run the gambit, often geared towards where each small business’ staff lacks the expertise to bolster their ability to meet the demands of different clients. Outsourcing also largely depends upon the services the business offers so that the business can remain lean and agile in the long term and more responsive to immediate business needs.
B2B vs B2C majority breakdown
|Marketing and advertising||14%||24%|
|Accounting and finance||10%||24%|
|Development and design||12%||23%|
The methods of outsourcing we discussed in the section above are largely informed by what business processes need to be outsourced, according to the company’s expertise and the demands of current projects. We asked business owners what tasks they farmed out to freelancers or third-party agencies, and what the resulting advantages or disadvantages might be.
“In every competition and expense, not to mention economic downturns, I feel as though it all comes down to one thing, and that is expertise! Companies should put their efforts into developing their most valuable skills and delegate less important responsibilities to third-party contractors (who are experts in that core field). This will not only make it possible for senior executives to focus on growing and improving the company rather than being involved in every element of the organization, which would bring about a decrease in productivity.
In addition, the way things are done is undergoing a rapid transformation as a result of the continuously shifting nature of the business environment, in particular the speedy development and growth of information technology. You are no longer capable of keeping up with the most recent information in any discipline other than your area of expertise. As a result, I would highly recommend contracting out the management of non-core business operations so that the top executives can focus on keeping up with the latest developments in their respective fields of specialization.”
—Steve Elliott, Franchise Owner, Restoration1
“As an eCommerce B2B marketing company, we often outsource to freelancers and agencies outside of the U.S. We’ve determined that data tasks are the best for outsourcing because numbers are a universal language. Language-related tasks like content marketing are difficult because if their English is perfect, there are cultural contexts that can be lost in translation. Business process outsourcing (BPO) reduces overhead and improves margin.
The costs can be significantly less than a U.S.-based employee, sometimes on the order of 20% of U.S. costs. That’s a massive saving for U.S.-based small businesses. One disadvantage of hiring offshore is inconsistent results, which we try to mitigate by doing a trial period. In addition, most offshore hires are in Southeast Asia and the time difference makes communication difficult as they are working at the opposite time as you.”
—Joshua Rawe, Co-Founder, eSpark
“We outsource many of our business processes. As a media company, we put out tons of content every day on various publications and across multiple social media accounts on multiple platforms. We are a B2B company, so maintaining quality is still on top of mind for us even when outsourcing. It is for this reason that we prefer building an offshore team instead of employing a third-party agency. Since we’re still halfway through the process of doing the former, we rely on freelancers to take care of our backend. Most of the tasks we outsource revolve around creating, editing, and publishing content. We also have freelancers taking on PR roles, like reaching out to media outlets for posting or placement opportunities.
The greatest advantage with outsourcing, particularly to freelancers, is the total control you have over who you employ to take on specific tasks. There is no shortage of talent for practically everything you need, and most times, these skilled contractors will exceed your expectations. The main disadvantage is the extra precaution you have to take when vetting and hiring freelancers. There are a lot of freelancers out there who aren’t necessarily who they say they are or who don’t have the skills they say they have, so you have to be careful when selecting contractors. Luckily, it is not difficult to discontinue a working relationship with a freelancer. They wouldn’t resent you for doing so because they already expect that possibility, given the transient nature of their job.”
—Derek Warburton, CEO, Mr. Warburton Media
There are many tactics for preparing your business to weather the impact of a recession, but even the best plans will fail if your finances aren’t insulated from the instability in your revenue stream that a recession will bring. In the final section of our discussion, we’ll go over tactics small businesses should leverage to protect and stabilize their financial foundations.
Small Business Finances
34% of small businesses overall plan to explore local small business grants as their preferred disaster relief option
There are several loan and grant programs that are designed to help small businesses during a crisis event that destabilizes the economy on a grand scale.
SBA Disaster Relief Loans
The Small Business Administration (SBA), is the government agency that provides support for small business owners navigating the challenges of ownership. The agency offers disaster loans in the event of a declared disaster in specific areas to nonprofit organizations, businesses of all sizes, and even homeowners and renters. They are intended to cover losses not otherwise covered by other insurance measures or funding from the Federal Emergency Management Agency (FEMA). The loan can also be used to offset losses towards expenses that would have otherwise been paid for if the disaster hadn’t taken place. Disaster Loans can come in the form of physical damage loans, mitigation assistance, military reservist loans, and, most relevant to the discussion at hand, economic injury disaster loans.
Local Small Business Grants
Small business grants, the money given to your business that does not need to be paid back, can be sourced from several sources, such as the SBA mentioned above. At the local level, your chamber of commerce has grant programs designed to support small local businesses to survive and recover in the event of economic hardship.
Facebook Small Business Grants
The Facebook Small Business Grants program has provided $100 million in cash grants and ad credits to businesses internationally through this program. The program isn’t currently accepting applications but provides extensive information on the linked page about how the ad credits can be used, and what to expect in the application process.
Out of these options, local business grants are largely based on your company’s location and how actively your local chamber of commerce supports small businesses. SBA Disaster Relief loans are accessible but do carry the cost of repayment. While Facebook’s small business grant program is robust, the limited windows in which the grants are offered add a layer of difficulty in the grant process that many businesses might not be able to wait out in the event of a crisis.
29% – SBA disaster relief loans
34% – Local small business grants
28% – Facebook small business grants
7% – None of the above
1% – Other
32% of SMBs with annual revenue of less than $500,000 are mostly considering local small business grants. However, 33% of businesses with $10M+ annual revenue will prioritize Facebook small business grants
Respondents to our Pollfish survey revealed that revenue and business volume plays a significant role in the types of aid or grant businesses will seek out. While businesses with smaller revenue streams rely on local resources, larger revenue streams lead businesses to seek out larger grant programs that provide other benefits and assistance such as the ad credits found in the Facebook grant program.
Majority breakdown by annual revenue
|Majority breakdown by annual revenue|
|Less than $500,000||32% – Local small business grants|
|$500,000-$2M||35% – Local small business grants|
|$3M-$5M||38% – Local small business grants|
|$6M-$9M||37% – Local small business grants|
|$10M+||33% – Local small business grants|
35% of small businesses are considering business credit cards as their top financing option during a recession
Beyond business loans and grants, the recession will force many businesses to leverage financing options to stabilize cash flow and mitigate the shortfall from reduced revenue streams to remain fluid and able to pay expenses. Respondents to our survey plan to primarily leverage three major forms of financing in the event of a recession.
Business Credit Cards
Business credit accounts extend a business’s spending power with a dedicated credit line and often come with perks such as flexible repayment options, special interest rates, and other benefits that help a business manage its finances through difficult times.
Invoice Financing or Factoring
There are several tactics that fall under invoice financing, including discounting, selective discounting, invoice factoring, and spot factoring. Collectively, these tactics are leveraged by selling invoices to a third party, thus receiving some percentage of the invoice value in cash up-front to increase liquidity, at the cost of a percentage of each invoice on the back-end. By reducing your accounts receivable pay cycle, you increase your immediate spending power and ability to generate additional income.
Another product provided by the SBA, CAPLines are fixed or revolving lines of credit up to $5 million designed to assist businesses with long- and short-term working capital needs. The program has four different types of credit lines, each with its requirements.
These types of credit lines are project-specific methods of covering the cost of contracts, subcontracts, or purchase orders. They also can be used to cover costs when carrying out a contract.
Seasonal Line of Credit
These financing tools are used to cover very specific seasonal costs related to accounts receivable, inventory, and labor costs. They are not able to be used during slow periods.
Builders Line of Credit
This CAPLine product is specific to building expenses, including labor costs, materials, and supplies, permitting and inspection costs, connecting utilities, construction equipment rental, and other initial construction and build-out costs. This product has the requirement that the land cost cannot exceed 20% of the project’s total cost.
Working Capital Line of Credit
This is a solution-focused product that helps with operating expenses and short-term business needs. There are extra fees in this revolving line of credit. It cannot be used to obtain fixed assets, nor can it be used to pay delinquent taxes, state taxes, or sales taxes.
Because of the ease in the application process and qualifying for the products, business credit cards understandably topped the list of preferred credit solutions of our respondents. Invoice financing tactics are interesting solutions that increase liquidity but also come at a cost over time. SBA CAPLines are powerful business tools, but come with heavy costs and can only be accessed through several requirements and complex application procedures.
35% – Business credit cards
32% – Invoice financing or factoring
25% – SBA CAPLines
6% – None of the above
2% – Other
When analyzing SMBs by annual revenue, 37% of businesses with annual revenue of less than $500,000 are considering business credits cards. In comparison, 35% of respondents with $500,000-$2M in annual revenue are leaning towards invoice financing or factoring
Invoice financing involves a degree of risk and comes at a cost that some smaller businesses with limited revenue cannot absorb, but it can be a powerful tool for businesses with larger revenue streams that depend on the ability to maintain and replenish inventory levels quickly. The tactic also comes with the benefit in some cases of freeing up staff that would otherwise be tasked with and tied down by having to manage account receivables by offloading the task to the third party that purchased the invoices. For smaller organizations, credit cards are a fast and easy way to expand your cash flow with very few limitations or requirements on their use.
Majority breakdown by annual revenue
|Majority breakdown by annual revenue|
|Less than $500,000||37% – Business credit cards|
|$500,000-$2M||35% – Invoice financing or factoring|
|$3M-$5M||37% – Invoice financing or factoring|
|$6M-$9M||39% – Invoice financing or factoring|
|$10M+||36% – Business credit cards|
A majority of SMB respondents rated determining new products/services to potentially create as the number one way that they’re preparing for a potential recession
If we do experience a recession before the end of 2023, many businesses will likely revert to the same strategies that worked for them in surviving the initial phases of the pandemic. With the looming recession stepping on the heels of the COVID-19 business closures and quarantine lockdowns from the first quarter of 2020 and the recovery over the last year, the transition back to remote work arrangements and the necessary business pivots and product enhancements will be easier to execute. A review of the current budget and discretionary spending cuts are natural responses to economic instability.
The fact that we’re getting some warning in the form of economic analysis and commentary by experts, businesses will better be able to prepare for a recession by focusing on building sales and new accounts and using current increased revenue levels to pay off existing debt or save toward an emergency fund. With some companies viewing service and product expansion as potential solutions in the future, they are now focusing on helping employees expand and enhance their skill sets.
(On a scale of 1-9, 1 being the most important)
Determine new products/services to potentially create
Re-evaluate the current business budget
Cut back on discretionary spending
Increase sales and marketing leads
Pay off outstanding debt
Increase my businesses’ emergency fund
Evaluate my business’s risk tolerance
Work with employees to expand upon their existing skillsets
Raise the prices of our existing product/service offerings
Most small businesses that have been operating from less than one year to 5 years are focusing on creating new products/services. Alternatively, a majority of 6-10+-year-old small businesses are either paying off outstanding debt or cutting back on discretionary spending
Smaller businesses that have only been in business for less than five years and survived through 2020 now understand that without a large revenue stream, they have to become more diverse in their services and products to build sales. More established businesses tend to have more complex debt loads and long-term operational goals. By paying down debt and reviewing and reducing discretionary consumer spending on short-term projects, older businesses regain the degree of agility necessary to navigate the difficulties of a recession.
Majority breakdown by years in business
|Majority breakdown by years in business|
|Less than 1 year||Determine new products/services to potentially create|
|1-2 years||Determine new products/services to potentially create|
|3-5 years||Determine new products/services to potentially create|
|6-9 years||Pay off outstanding debt|
|10+ years||Cut back on discretionary spending|
Navigating the uncertainty of the months ahead without advice from peers and experts can be a dangerous strategy; no business owner should face the recession ahead unprepared. We’ve gathered some additional insight from business owners as to the advice they might offer any of their peers concerned with the chances of a recession.
“This is the time to pull statements for the last three months and start reviewing and cutting expenses. Cancel subscriptions to various services that are half used, reduce headcount if possible, and reduce the number of projects. The key to surviving and thriving during a recession is the focus. That means that most of the projects you were undertaking are no longer going to be necessary. On the income side, take a look at your clients and see which ones you believe are most likely to stick around. Estimate what portion of your revenue this is then have a plan for what you would do if those customers left tomorrow to keep the business running.
This advice is important because major recurring expenses reduce the cash position of your business and make it more difficult. Many contracts have terms that require 90 days or longer to cancel and in some cases, early cancellation can mean months of additional runway for your business. On the income side, planning for expenses when there is no urgency leads to much better decisions when there is a need. Instead of worrying about what to do or panicking if the worst happens, you already have a plan to execute on that you’ve refined and are prepared to carry out.”
—Dennis Shirshikov, Strategist, Awning.com
“There are two things small business owners can do to prepare. First, it’s time to invest in your existing clients. This is the best advice I can give to small businesses anticipating a future economic downturn. Getting new clients is more expensive than keeping the ones you already have. When things are going well, this remains true. People tend to cut back on their spending during a recession, making it even more difficult to attract new customers. Investing in your current consumers becomes even more critical. Building true ties with your customers is essential now. Take the time to show them that you’re there for them. Show them that you appreciate their business by treating them with decency.
The second strategy I suggest is to prepare a financial plan. It may be beneficial to have a well-thought-out financial plan in times of adversity. To establish your requirements and the current state of your assets, you must first assess your existing financial situation. It is critical that you have a grasp on your personal finances before the economy suffers a slump. Not only can good financial management help you prevent losses, but it can also be a driving factor behind your company’s growth. Your financial management approach should include a budget, adequate savings, investments in a variety of financial products, and profit targets.”
—Adam Garcia, Owner, The Stock Dork
“This is the best advice I can give to small businesses anticipating a future economic downturn. You need to start delegating to prepare for a recession. Check to see if there are any cost-effective automated solutions that can execute repetitive chores more quickly and effectively than you or your personnel. Prioritize delegating the most time-consuming and financially ineffective jobs. Try to get rid of everything that isn’t in your wheelhouse or doesn’t bring in much money. As a business leader, your time is a precious commodity.
Keep it for the projects that will have the greatest influence on the company’s bottom line. A recession poses unique challenges for small business owners. A recession, on the other hand, does not necessarily mean the end. As your small business adapts to its new reality, it will need agility and flexibility. If you prepare, execute, and retain your focus, you can weather the storm and emerge stronger than before.”
—Tim Parker, Director of Marketing, Syntax
Small business owners often operate in extremely competitive industry segments, and often themselves remember the struggles of getting their businesses up and running, so when the chance to support other like-minded entrepreneurs arises, they are often willing to share their own best practices and tactics. Knowing that much of success lies in the ability to execute, small business owners and entrepreneurs understand that innovation and success only come out of a healthy economy.
Tackle Your Concerns About the Looming Recession Strategically
As we conclude our discussion of the Pollfish survey focused on how small business owners should be preparing for the looming recession, the key takeaway that we would like our readers to focus on is to be proactive. Though the concerns about the coming recession are valid and conditions do seem to be leading to some level of economic instability, business owners have to shake off the shock of the pandemic that has built up since 2020 and lay a solid financial and operational foundation to survive the coming challenges. With the U.S. economy being rocked by rate hikes, an unstable labor market, and conflict between Russia and Ukraine impacting oil prices and financial markets alike and resulting in higher prices across the economy, the economic outlook for the coming year is uncertain at best.
According to Wall Street and financial experts, it is unlikely that we will see a return to pre-pandemic levels of stability any time soon. The rocketing market that resulted from the recovery period from COVID-19 over the last year has pushed supply lines to the limit, resulting in commodity prices skyrocketing. In the absence of a natural slowdown, policymakers have shifted monetary policy in the hopes that it will eventually lead to economic recovery, but before we see that happen, we have to accept that it’s more likely we’ll see conditions worsen.
If you feel your in-house team lacks the strategic vision to prepare for a recession, consider partnering with a business consultant in the UpCity B2B marketplace.
UpCity’s Survey Method
UpCity used Pollfish to survey 600 U.S. small business owners on how they plan to prepare their business for the possibility of an upcoming recession.
Fifty-nine percent of the respondents own B2B small businesses while forty-one percent own B2C small businesses
Forty-three percent of respondents have been in business for 3-5 years with an annual business revenue of $6M-$9M (32%).
Forty-six percent of the respondents are male and fifty-four percent are female.