Prepare your small business for a potential downturn with a few strategic steps

Whether you’ve been in business for quite some time or your business is relatively new, being prepared for the ebb and flow of income is key to long-term profitability and growth.

For some industries, these cycles are expected and can be accommodated. However, for many small businesses, social and economic uncertainty can have a significant impact, as we’ve seen over the past few years with the onset of COVID-19 and now with inflation and higher interest rates increasing the chances of even more volatility.

Here’s how you can prepare your small business for an economic downturn now.

Build on past skills

If your small business has been affected—positively or negatively—by the pandemic, you’ve likely had to adjust your day-to-day operations, supplier management and relationships, and how you reach and deliver products and services to customers.

Carefully analyze the changes you’ve made and assess what might apply if a downturn similarly affects your business. Part of this review process should be to survey your employees and customers to get their input as well, and then make your adjustments based on their feedback.

Reengineer your business model

Take what you learn from your review and assessment and put strategic plans into action before your small business begins to feel the financial impact.

While you may not be able to predict exactly when and to what extent a downturn may affect your business, long-term prosperity may ultimately require anticipating and overhauling your business model.

Don’t wait for the consequences to hit you – use this time as a good mid-year review and act now.

Review past partnerships

Have you partnered with other small businesses during a pandemic or previous economic downturn to help you increase profits and retain customers?

Now is a great time to re-evaluate these relationships and collaborate to create a path to maintain or even increase revenue, cash flow and customer base.

Talk to your banker and accountant

Then have thorough conversations with both your small business banker and your accountant. Rely on their experience and knowledge of small business finance to put yourself and your business on solid ground during an economic downturn.

There may even be opportunities for your business to generate additional cash flow and a good ROI through small business or US Small Business Administration loans, cash management services and techniques, or reinvesting your cash reserves back into the business now.

Consider small business grants

Small business grants can also be a great way to inject money into your business, and there are several resources for identifying and applying for them. Check with local government agencies, small business incubators or chambers of commerce, as well as local and regional nonprofits to find out what grants you may be eligible for.

By taking a long-term view of your business’s success while preparing for a potential short-term downturn, you can not only help your business survive, but even thrive with a few deliberate strategic moves. Rely on your finance team to help determine a path based on your needs and type of business.

Anthony Ryan is Senior Vice President, Director of Retail Lending Strategy and Operations at WSFS Bank. He previously served as Senior Vice President, Director of Small Business Lending. Ryan joined WSFS in 2011 with over 30 years of retail and small business banking experience.