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Pink Blossom

Why Wait for the Recession? Recession-Proof Your Small Business Now


Spring 2022



The rumblings have started. It has been fourteen (14) years since the horrible start of the Great Recession which torpedoed jobs, small businesses, stock markets, and currencies alike. Given low unemployment, high inflation not seen since the Reagan Administration, and a record-setting stock market in 2021, there are some who believe that a recession is in the offing for 2023. These doomsayers point to the alleged usual signs: world conflict, rising oil prices, a volatile stock market, and political instability in the United States. If there is going to be a recession, then small business owners should prepare for it now. Yes, now, because the doomsayers are right; it’s going to happen at some point.

What must a small business owner do to prepare for the next recession? There is a mantra in small business from years ago that states simply – when in good economic times, act as if the recession is around the corner, and in bad economic times, market and do more marketing. There are two concepts to be evaluated within this mantra.


Good economic times can foster feelings of comfort, ease, predictability, and especially a false belief that the economy will continue to hum along. This is a trap. The Great Recession started with low unemployment, a booming stock market, and declining oil prices (after oil reached highs not seen in 30 years in 2007). Boom! One of the largest sectors in the economy collapsed – the housing sector- after heightened concerns about the “housing bubble” two years into the making between 2006 and 2008. Once the Housing Bubble burst, the rest of the US economy tanked.


One sector of the economy was all it took, and it eliminated numerous small businesses with it – real estate firms, mortgage companies, banks, law firms, accounting firms, builders, construction tradespeople, and other companies, large and small, tied to the housing market. The painful recovery began after stabilization efforts by government officials in late 2008 and early 2009. The four percent (4%) or more annualized growth that drove expansions under the Reagan, Bush and Clinton administrations have not appeared as yet. “Slow growth” has become the norm, which legitimately leads to concerns about another recessionary period.


Predicting a recession is like predicting a volcanic eruption. Scientists know the signs of a volcanic eruption, but they never can offer a date for an eruption or even the extent of an eruption for the most part. Some volcanic eruptions are a literal dud with lots of smoke and not much else. Other eruptions have the explosive effect and all the concomitant events expected in an eruption like Pompeii in 79 A.D. Of course, those near a volcano must “evacuate” when the scientists issue alerts or face the possibility of death in pyroclastic flows. In like effect, economists cannot accurately predict a recession. The funny thing that economists will tell you is that they only know that a recession has occurred after the recession has happened and the economic data reviewed. Small business owners should not wait on data confirmation from economists.


First, small business owners should be defining their customers, expanding their customer base, and constantly reaching out to current and new customers. Customers are the life blood of any business and provide critical cash flow to keep the business running. An effective customer relations management (CRM) system can help a small business owner achieve this objective. A focus on customers keeps the doors open. A small business owner should be an expert on its customers – who are they, how does the business attract them, and what are the customers’ needs that lead them to come through the small business’ door?


Second, the small business owner should have a “rainy day” fund consisting of business reserves. A rainy-day fund not only applies to individuals but small businesses as well. In business, this fund is simply called a reserve fund. After all the bills are paid each month, the small business should allocate funds to the reserve fund. This should be a consistent practice because, magically, the small business will use these same funds to survive a recession.


Third, the small business owner should also shore up efficiencies in the business. If a department or sector of a small business operates inefficiently, then make the correction now. If the secretary must also do the marketing, then the secretary is not just an administrator. The secretary has now become a utility person – a person with good skills for a variety of things and a master of none. Make sure the masters are operating the critical aspects of the small business, not the utility persons. There are other numerous inefficiencies that could be listed here, but here is a guidepost. The small business owner will know an inefficiency because the owner repeatedly says to themselves “I need to get around to ________.” Address your task list.


Finally, if the small business owner senses a slowdown in the business, it is time to deploy the marketing strategy. If the small business owner has saved its reserves, then those reserves can be used on a viable marketing strategy that gives the small business owner a distinct advantage over its competitors. Why? The competitors will likely have not addressed their reserve funds and/or inefficiencies during the good economic times. Quite frankly, the competitors cannot afford to market their businesses. The competitors are scrambling to stay afloat.


Thus, the small business owner who recession-proofed their business is prepared to capture available customers and is able to thrive, not just survive, in a recession. Yes, there are businesses that thrive in a recession. A recession is not a cauldron of misery for all. For those who did not plan, it just feels that way.


-- JER

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