Alright, let’s get right back into it. So last week we discussed what a recession is. This week we will look at how we can best prepare for a recession.
I use the term ‘prepare for a recession’ very loosely because a recession isn’t a sudden event, like an earthquake or a fire. Instead, It’s a very slow, gradual process and often you will see little signs of it happening here and there. Signs can include a general slow-down in trade, a high amount of uncertainty in the marketplace and a sudden influx of financial bloggers writing about it (doom-saying prophets, all of us! mwaahahahaha).
As an employee, you don’t really feel the recession until you lose your job. As a small business owner you only feel the recession when suddenly you are struggling to pay your expenses. If you have gotten to that point and you aren’t prepared for it, well, I’m sorry to say but there’s not much I can do to help you. You might find the services of a financial counsellor useful (Google “Financial Counsellor – your region”).
Alright then, how do we prepare for the recession? It’s pretty simple. So simple that dozens of other finance writers have talked about it (most of them talk about it from an employee’s perspective, not a small business owner). What you need to do is:
Ensure that you have a reserve of funds set aside.
Ok this one is really common sense. If you sense a recession coming, you put money aside for a rainy day in case you lose your source of income. Put aside at least 3 to 6 months worth of household expenses in an easy to access savings account based on how much you can afford. If you are a small business owner, same thing, except you want to have at least 3 to 6 months worth of business expenses set aside. If your business is slowing down you don’t need to worry too much about taxes because, if you’re not making profits, you uh, don’t pay taxes (plus if you can weather the recession, you can use whatever losses you have made to offset your tax in the future! Woohoo!)
Be an invaluable employee!
This one is for the employees only obviously. Ask your employer if you can have a chat about your current performance. Be brave! Ask them what more can you do to add value to the business. Remember, your employment is your lifeline. Be creative! Live up to your organisation’s goals and values.
Be a compassionate employer
If you have a team working hard for you, this advice is for you. Often when the recession hits businesses, the first cost to get cut is employees, which leaves people unemployed and deepens the recession crisis. If you are a small business owner and you feel that the recession is going to affect you, it is best that you have a discussion with your team members and brainstorm ways to keep the business afloat without having to lay off workers. Offer them the possibility of working reduced hours or a lower hourly wage (as long as it is legal) to reduce costs while the business weathers the storm. As the business owner, think about paying yourself less so that you can retain your valuable team members. Work together to really drum up business and bring in sales. Ultimately it will be your team that lifts your business out of the recession. Whatever it is, laying off team members should always be a last resort.
Get income protection insurance
I’m no insurance expert, but there are plenty of insurance advisers out there who will recommend some really good income protection insurance for you if you lose your job and/or your main source of income. I don’t know what the best deals are out there for small business owners but talking to an insurance adviser would be your best bet. Having insurance gives you an added layer of financial security on top of your reserve of funds.
Hustle
Just keep hustling. Regardless if you are an employee or a business owner, you want to keep hustling. Keep networking regularly – get out there and talk to people, listen to them, figure out what they want and find a way to deliver on what they want. Keep marketing your business or your individual brand. Stay on top of social media and engage with the right communities to promote your product/services and your skills as an individual. Most importantly, never ever let the recession get you down. Stay positive and optimistic about the future. Hustle, and hustle hard!
There you go – some solid advice to face the recession! You will want to start thinking about all these options now, before the recession hits. Even if the recession doesn’t come right around the corner or it doesn’t affect your part of the world very seriously, putting this advice into action will guarantee a more financially stable future for you and/or your business!