Are We Entering a Recession? My Advice.
Does this sound familiar? You're a female entrepreneur who hustled hard to get your business off the ground and then the 2020 pandemic hits. You faced some big struggles but were able to pivot and make the most of the tough situation. Your business is back on its feet and flourishing!
But just when you thought we were starting to come back from the craziness of the COVID-19…
BAM! A recession!
I know, right? What’s next—Godzilla?
But don’t worry! With the right plan in place, your business can see this through, too. In this article, I’ll answer the big questions you may have for your accountant:
“What is a recession?”
“Are we in a recession right now?”
“What would a recession mean for my product-based business?”
“What can I do to prepare?”
Keep reading and I’ll give you my best advice on handling your business while entering a recession.
What even is a recession?
A recession is a business cycle where there is low economic activity throughout the country for longer than a few months. Economists take many factors into consideration when deciding if the economy is in a recession—inflation, unemployment stats, and interest rates to name a few.
But in more simple terms, it means that a lot less people than usual are spending their money all over the USA. And you may have felt we might be in one based on how your product-based business has been doing in 2022 so far.
Are we in a recession right now?
The National Bureau of Economic Research (NBER) is the watchdog that declares whether or not the US is in a recession.
And good news—we aren’t!
But that doesn’t mean we are out of the woods just yet.
What would a recession mean for my business?
Even though we aren’t in a textbook recession, the economy is still not doing too hot. The unemployment rate is low, but lots of major companies are undergoing layoffs. Inflation and the cost of living are both high.
I know I’m not the only one gawking at the gas pumps!
We may be entering a recession soon.
As a female entrepreneur running a product-based business, you may run into the following hurdles if we enter a recession:
Inflation may hike up the costs on your materials
Stressed supply chains may mean you receive shipments later than normal
High cost of living means your customers may not spend as much as they would
What can I do to prepare for entering a recession?
As your accountant, I’d advise you to follow five simple steps to safeguard your business should things take a turn for the worse.
1) Limit Your Expenses
This one seems like a no-brainer, right? Coming down on hard times means don’t splurge! But diving a little bit deeper means taking a thorough look at your finances. Check out your expenses and see if any can be cut out.
Maybe you do all the design work for your product-based business using a subscription-based design software like Photoshop. By switching to a free cloud-based software like Canva or Photopea, you can cut that monthly expense out of your budget. Who doesn’t like free?
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2) Diversify Your Income
The savvy female entrepreneur knows that diversifying your income plays a key role in the success of your business. You don’t want to rely too heavily on one product or service to do all the heavy lifting for your revenue. But it’s often hard to come up with new ways to get the cash rolling in when everyone’s purse strings are pulled tight.
Take a look at the products and services you currently offer and brainstorm ways to riff off of them!
Add a smaller version of a current product at a lower price point. This will bring in a new customer base who may be priced-out of your large items.
Change up your materials by offering a current product in a different colorway or pattern.
Come up with some value-add services to supplement your current services to boost revenue from current clients.
3) Save for Emergencies
Recessions can be unpredictable and expensive for small business owners. And so can emergencies!
Build up a decent-sized emergency fund. A good rule of thumb for how much to save is to put away three to six months worth of expenses. This way you can cover the important things like rent and salaries should revenues tank.
4) Make a Budget Plan
After you’ve looked at your expenses, revenues, and savings, it’s time to budget.
A little advice as an accountant and female entrepreneur—this is one of the best ways you can make sure you are hitting your goals!
Figure out where your cash inflows and outflows should be each month. And then stick to those budgets! Working within your budget and not stepping over those spending limits will keep your business healthy.
5) Reach Out for Help
It’s always okay to ask for help! You don’t have to go it alone.
As your accountant, I can help you craft a plan to tackle the big economic ups and downs. Entering a recession doesn’t have to feel like doomsday if you have the right safeguards in place.
Book a one-on-one consultation with me today!
