Back in 2007, the U.S. and the world experienced a major recession. The GDP had fallen by 4.3 percent by the time economists called an end to the Great Recession. In the fourth quarter of 2007, unemployment was at 5-percent, and in the second quarter of 2009, it was at 9.5 percent. Every sector of the economy felt the effects of the longest recession since World War II. Looking back at how the government responded to the crisis, and putting those responses into today's perspective, one can't help but feel like it happened again.

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Are We There Yet?

After trying to respond to the crisis with traditional methods, including interest rate cuts, the Federal Reserve pivoted to a number of new tools.

Some analysts think that the ensuing recession was caused by some of these programs, which saw business productivity decline. The voices we heard back then were similar to the ones we hear today about the economy. In the past, regulators sought to allay fears of the business community with words like transitional, not entrenched, and temporary. There is nothing to be concerned about.

What Businesses Must Watch For

The pace of interest rate hikes, by the U.S. Fed and major central banks around the globe, indicates that regulators now see similar challenges as they did in 2007. It's a good idea to watch the signs and plan for the inevitable if it arrives. Businesses need to be prepared for a possible turn down of the economy.

Business leaders should watch for signs that the business cycle is about to go into a downturn.

There is growing recessionary chatter from government sources. Regulators have to say what they think. The Conference Board, a research and alternate policy advocate group consisting of large and small business members, expects businesses to feel a lot of pain in coming months. Consumer spending and business investment are likely to be curbed by these forces. Growth is expected to come in at 2.0 percent in 2022, and 0.6 percent in the following year.

Business leaders will know that a recession is imminent when they see some of the signs. It might be too late for some small and medium businesses to get ready. We are there yet. It seems like we are on that road. A bit of advance planning can make the trip more enjoyable.

Hope for the Best…Plan for the Worst

When private sector and government planners say that they are dealing with an unprecedented economic environment, they are not wrong. Business owners need to listen to consumers when planning for a downturn. Consumer sentiment can be used as a canary in the coal mine to predict bad times ahead.

The Conference Board Consumer Sentiment indicators predict bad times to come. With consumers growing more pessimistic about business conditions, labor markets, and their financial prospects, it is time for businesses to be prepared for a possible economic downturn.

We have gone through economic downturns before. The scale of what is coming may be more aggressive than in the past. It doesn't mean every business is going to go bankrupt, but it does mean that it will take foresight and planning to weather the crisis.

What can individuals and businesses do to prepare for the storm? There are some things to do.

1) Take Stock of Operational Plans

It's time to think about what you might see in the future. If you have plans to branch out into new markets, introduce additional product lines, or introduce a new service offering, you might want to revisit those plans. Will the demands stay the same? Suppliers are expected to support you. Are you still expecting to have access to the skills and expertise necessary to make those plans a success?

Take stock of business cycle forecasts and predictions to make sure they are still valid. Even if that means putting some of those plans on hold, revisit and revise where needed.

2) Review your Financial Plans

Cash is king in the best of times. Cash is a lifesaver when the economy is slowing. Review your financial plans from two different points of view.


Review your pricing structure to see if you can increase what you charge customers. In a downturn, everyone is looking to cut-down on spending. Don't give your customers an excuse to put your goods on the "don't need it" list.

If you have surplus assets or inventory, now is a good time to sell them and put the proceeds into your reserve fund. If you can convince customers to sign long-term deals, that will bring some certainty to your flows. If government relief programs are announced, apply for them as soon as possible.


It is said that a dollar saved is a dollar earned. Now is the time to scrutinize each line item in your budget to see if you can cut or curtail that which you can't. Business news subscriptions may be too much. Is it possible to do with one? Is it a good idea to switch to a cheaper business cell phone data plan? Make sure your suppliers have long-term contracts. You should trim your payroll.

It is possible to close unprofitable product lines or business locations if they are not sustainable. Landlords are desperate to keep their tenants. There is a chance to negotiate lower rental rates.

3) Review your Invoicing Strategy

It's time to review your invoicing policy if you experience long wait- times between invoices. You can use the funds more effectively if you collect your invoices quicker. It is time to review your credit terms if you are facing higher than usual bad debts or if you are experiencing slower collection cycles.

Invoice factoring is a way to make collections less stressed. This strategy requires a business to sell its invoice at a discounted rate to a professional factoring service. You get less than the invoice face value up-front and less than the service fee when the company collects the invoice.

In an economic downturn, if you get $4,000 of a $5,000 invoice immediately, you don't have to wait for 60 or 90 days to collect it. Once they collect the $1,000 balance, they will keep a portion of it as their fee and send the rest of it back as their fee. That is a good deal to make sure you have a steady flow of cash.

4) Pay Down Expensive Debt

Governments are expected to raise interest rates in order to tame inflation. Your debt servicing costs will go up as they follow the lead of the lender. Mortgages and credit card loans are expensive and should be paid attention to when diving into your outflows. To pay down some of your debt, use some of the savings from your trimmed-down expense and additional revenue from your Insturment Review.

It's important to keep in mind that expedited debt liquidation may not be the right strategy for every business. Is it possible to use that money to meet next month's payroll?

5) Review Your Marketing Plans

It is the perfect time to start embracing online marketing. Many of your competitors and peers have pivoted to an online only model and you might not be ready to do that. A hybrid marketing model is something that could be considered. If the economy turns around quickly, you have the option of reverting to the in-store model.

Customer profiles change a lot when there is a recession or economic down-turn. Are your marketing strategies still relevant? Given that they are also feeling the pinch of an economic downturn, are you marketing to the right prospective clients? If you're able to market yourself to your new audience, that's great.

Maintaining what you have is what survival is all about during challenging economic times. Instead of spreading your marketing dollars too thin, in the hope of capturing new customers, review who your current clients are, and offer them a value proposition for them to continue their loyalty to your brand Is there a reserved rate for long time clients? There are discounts for existing clients. It is good to see a slight increase in revenue.

6) Beef-up Your Cash Reserves

The last line of defense is a sufficient cash reserve. When you can't find other ways to meet your financial obligations, you use the war chest. Setting aside a portion of your monthly revenues for emergency funding is the most reliable way of building that reserve. The problem with building the reserve and maintaining it over the long-term is that the funds are off limits for other purposes.

To create an emergency fund, speak with your financial institution and see if you qualify for a business line of credit. If you have been a good business banking customer for a long time, you may not need an emergency fund. You can use your reserves more effectively if you have enough credit as a fall back.

Parting Thoughts

It's said that well- planned is better managed. Businesses in the SME range need to plan well for a possible economic downturn. Go through your income and expenditure plans and review your business operational plans. If possible, cut down on unwanted cash outflows.

It's a good idea to increase your emergency cash reserves by using innovative revenue-enhancement strategies such as invoice factoring. It's a good idea to get qualified for a BLOC. Even if you don't tap into your credit line, the fact that you have additional funding sources makes weathering a recession easier.

It is important to remember that planning and preparing for a possible business cycle slowdown doesn't mean putting a pause on all business activity. It doesn't mean that you shouldn't be looking for opportunities. If the competitor next door is liquidating their business for cents on the dollar, perhaps there is an opportunity for you to move in. One of those times where you can use your BLoC to make the most of a once-in-a-lifetime opportunity to expand your business and grow your revenues.

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