Practical, Simple Tips on How to Survive a Recession
This party is over. Recently I was in Koh Pha Ngan, Thailand, home to the infamous Full Moon Party. It's a massive celebration on Haad Rin beach, where some say it's the best place to see the full moon. For the businesses there, they'd love to have a Full Moon Party every weekend. But, the moon is cyclical, like the economy, and disappears.
Recessions and the economic cycle are like the moon cycle. You know the bull markets and full moon can't last forever.
But, this recession is different. Instead of a slow winding down, many businesses came to a full stop. We aren't in an official recession yet, because it's a lagging measurement. It will take two quarterly GDP reports to confirm it. People are at home, non-essential businesses shut their doors, and millions lost their jobs, so we're probably in a recession.
So while this downturn is a bit extra, you still have certain powers to shape your outcome. One of these powers is financial management. Here are ways you can manage our businesses to help you survive the recession.
Financial Tips to Survive a Recession
The health authorities are saying test, test, test. I'm saying cash, cash, cash.
A 30-day down shutdown is a death sentence for many small businesses. According to JP Morgan Chase, roughly half can survive only 27 days without any income. The longer the shutdown lasts, the more companies will fail.
You need to focus on keeping any cash you have. No one can say how harsh this recession will be, so it's time to get creative and be frugal. You have many options, and I recommend starting with these three tips.
Cut out any non-essential purchases. Big purchases can wait until the economy rebounds. For instance, now is not the best time to rent a better studio or buy an expensive course (I know there are so many good ones out there, and you may have time to spare, but I still advise not to). You may have created an ambitious growth plan thinking 2020 was going to be your year. Now, you ought to reassess.
Review all your expenses to find where you can trim down. Ask yourself, does this item add value for my customers? Is it critical in running my business? Depending on how much your income has slowed, you may need to prioritize and trim the necessary expenses too. Essential costs include things like rent, labor, and the inputs to creating your products and services.
Chase down any payments you're owed. Give clients a call, send them a message, or ask next time you see them (from a socially safe distance, please!). If it's your policy to collect a deposit, continue to collect deposits. While many people are struggling, not everyone is. Don't be afraid to ask for payment.
You have many more options to conserve cash. If you're interested in hearing more, watch this free webinar I did with Arival. It's focused on tour operators, but the principles apply to most service-based businesses. In the webinar, I provide eight tips on how to manage finances during a recession.
Recession-Proof Your Business Mindset
You've got a fighting spirit - I know that because you're an entrepreneur. No one starts a business because it's easy. You're not afraid of a challenge. Now it's survival of the fittest, and you're going to earn your place.
Don't let this recession phase you. Instead, see it as an opportunity. The economy will come back in time, and you want to be ready when it does.
“A recession can tease out the best ideas. Get creative and build upon the opportunities you see in your little corner of the world.”
If sales are slow, work on time-intensive projects, not money-intensive ones. For example, get ahead on creating content or updating your workflows. If you want to create a new course or product, now is a great time to get started. It's not only productive; you're looking ahead and aspiring for a brighter future. It helps you stay positive, motivated, and innovative.
A recession can tease out the best ideas. Companies like Microsoft, Disney, Apple, and General Electric started up during a recession. Get creative and build upon the opportunities you see in your little corner of the world.
Finally, to grasp a recession-survival mindset, accept that it's uncomfortable. You don't know what's going to happen or when. Not even experts can say for sure (actually, you may want to ignore experts. They give some of the worst predictions). Enjoy the ride.
When you are reacting in fear, it's hard to make rational decisions. When you accept things as they are, you'll have clarity and can brainstorm what to do next
The economy is not in your control. But, you can control how you respond. Stressing out, panicking, and buying all the toilet paper in Kroger won't help.
Sometimes it’s comforting to be busy when we’re nervous. Like we're doing something to fix the problem or at least preoccupied. Instead, I recommend a calmer approach. Face the discomfort head-on. Try to sit with the feeling, meditate, or journal to release your worries.
If you don't know where to start, try a mindfulness practice. There are many apps, websites, and books. I'm sure you'll click with at least one after some trial and error.
COVID Business Help
Since the economy is on pause, all levels of government are stepping up to help small businesses. The new programs are beyond what we've ever seen, including the 2008 recession. Other for-profit companies, like Google and Bank of America, are offering relief too.
If you want this help, check out this blog. It covers the various government programs and links to long lists of resources. You have so many options that it's too much to include here!
Access the Relief Resources @ COVID Advice for Small Businesses
***
It's painful to watch as so many people are penniless and fearful for their safety. It's especially tough for entrepreneurs, as our incomes aren't guaranteed.
While this recession blindsided us, it will take longer for business to get back to normal. First, we must contain this virus before any real recovery can start. Remember to conserve cash, prepare for when the market comes back, and keep the faith. This too will pass.
The full moon will rise again, travelers will dance below it on Haad Rin, and we'll celebrate how we made it through the hard times together.