The bond market is sending a recession signal. It’s a warning sign that has forecasted almost every recession over the last six decades. An inversion of the yield curve happens when short-term Treasury bond yields are higher than long-term Treasury bond yields.
Here’s the bad news: the yield curve briefly inverted last March 29, 2022, the first time since 2019. While it doesn’t mean stocks will crash, it indicates that a recession is coming. To most of us, the recession is a scary word.
It conjures up images of unemployment lines, people losing their homes, and businesses going bankrupt. The good news is that rescission can sometimes take years to arrive after the yield curve inverts. So, small businesses still have time to prepare. Here’s how entrepreneurs can mitigate risk during a recession.
Secure Capital
No one can predict when the next recession will hit, but it’s essential to be prepared. One way to help protect your small business is to secure some capital.
There are a few different ways to go about this. For example, you could approach a bank for a loan or look into alternative online credit loan providers. By securing capital, you’ll be able to ride out the tough times and keep your business afloat during the recession.
It’s imperative to secure capital before the recession hits, so don’t wait until the last minute. Instead, start planning now, and your business will be in good shape.
Have A Strategic Marketing In Place
Unfortunately, when businesses face monetary difficulties, the first thing they cut off is the advertising budget. Since marketing doesn’t always have an immediate return on investment, it can be an easy target for budget cuts. But marketing is essential to the long-term success of a business.
Even in a recession, businesses need to keep their competitive edge by having a strategic marketing plan. People tend to spend less during such hard times. However, when they do, they are far more selective and discerning.
That’s why businesses need to get their name out there. They need to be on the top of mind when people are ready to purchase. They need to be seen as an authority in their industry.
There are many ways to market your business, even during a recession. You can advertise online, in newspapers, on television, or radio. You can sponsor events or donate products to charity auctions.
You can also offer special deals and discounts to customers. Or you can reward customers for referring their friends. No matter what marketing strategy you choose, make sure it reaches your target market. And make sure it’s one that you can afford.
Get Real With Your Spending Habits
When an economic slump hits, many businesses are forced to tighten their belts. It might mean renegotiating contracts, freezing salaries, or letting people go. One way to weather the storm is to get honest about your spending habits.
Identify where you can cut on spending without too much pain. For example, your small business could cancel its subscription to a business magazine or stop buying coffee every day.
If you’re strapped for cash, take a look at your fixed expenses and see where you can make some changes. For example, you can downgrade your cell phone plan or car insurance policy.
The most important thing is to be proactive and honest with yourself about where you can save money. Otherwise, you may find yourself in a worse financial situation.
Establish Customer Loyalty
When the recession hits, it’s tempting to focus exclusively on new customers and neglect your current ones. But it’s a big mistake. It can be much more expensive to acquire a new customer than retain an existing one. It can cost up to five times as much!
That’s why it’s essential to focus on customer loyalty and retention. A loyal customer base is more likely to stick with you during tough times and is more likely to refer your business to others.
There are many things you can do to foster customer loyalty, including:
- Offering rewards for repeat purchases
- Sending special offers or discounts to customers who have been loyal to your business
- Creating a customer referral program
- Thanking them for their business
- Making it easy for customers to contact you with questions or problems
Conclusion
Now that we know a recession is on the horizon – don’t wait until you take action to protect your business. It’s time to start thinking about what you can do to weather the storm—it’s time to prepare your business for a recession.
You can do the things we mentioned above to help your business, but you can also do other things to help ensure your business’ success during an economic slump. So, keep an open mind and be proactive in your preparations.
Interesting Related Article: “What is a Recession?“