December 2, 2022
Reading time: 5 mins

Small business owners are worried about the economy. In a recent survey by Nationwide, 70% of small business owners say they expect a recession within the next six months. If you feel unprepared, know that you’re not alone: 37% of owners also say their businesses are not ready for a recession. 

Nobody can predict the ebbs and flows of the economy. That said, recessions are inevitable - every business owner needs a strategy to deal with a downturn. This article covers the essential items you need on your checklist: cash flow management, cost cutting, customer strategies, financing options, and more…

What is a recession? 

The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity across the entire economy that lasts more than a few months. Economists are getting better at predicting the timing of recessions, but they still have difficulties predicting how bad they will be or how long they will last. 

Simply put, when aggregate statistics like personal income and personal consumption expenditures decline for several months, the economy is likely to enter a recession, which means you should expect fewer customers, less spending, and less revenue for your business.   

Cash is king

Always keep cash on hand, especially during a recession. It's easy to get complacent when money is flowing in steadily, but don't let that stop you from keeping a close eye on your cash accounts.

A lack of focus on cash flow can make tough times scary. According to a survey by JP Morgan Chase, the average small business holds 27 cash buffer days in reserve. That means an average business can continue to meet all its cash outflows (rent, labor, utilities, etc.) without earning any money for 27 days. 

Here is what you can do to build up cash reserves:

  • Rein in receivables: Minimize the number of customers who owe you money by creating and tracking a list of unpaid invoices (good accounting software can do that automatically). Follow up with anyone who falls behind, and collect what you're owed now. Consider adding late payment fees so that customers are incentivized to pay on time, and try setting up recurring payment plans so that cash inflows arrive automatically.
  • Check payables: Review all payables to confirm totals and payment due dates. If necessary, stretch out payments to their due dates. If you are paying your vendors upon receipt, ask if you can change the payment terms to net 30 or even net 60 for the next month or two. Your vendors might say no (since they are probably experiencing similar issues), but there is only one way to find out. 
  • Review your expenses: Take a close look at your business expenses and cut out anything unnecessary. This might include subscriptions to trade publications or stock photo library services. Be creative and challenge yourself to reduce costs without adversely affecting your business operations. Don't go overboard, but it is time to get rid of the excess fat in your budget.

Customer financing

You can’t control the economy, but you can make it easier for customers to spend their money. Consider partnering with a buy now pay later (BNPL) provider to offer customer financing. With BNPL, the customer puts up a percentage of the total purchase cost (e.g. 25%) as a down payment, and the financing provider covers the rest, allowing you to get paid upfront. 


This is a perfect opportunity to gain new customers, not just temporarily. With the economy still experiencing significant inflation (prices climbed 7.7% over the last twelve months through October), lowering your prices could drive more customers to your business, especially if your competitors keep their prices the same. Consider offering discounts for prepaid orders and bulk purchases. 

Also, don't rely on just one or two sources of income - try to diversify your revenue streams by offering new products or services. If one area of your business slows down, you'll still have other areas to fall back on. 


If your business is insured, now would be a good time to check your policy for specific details. One element you'll want to focus on is business interruption policy. Business interruption insurance protects businesses from the loss of income resulting from a disaster. Some policies may not cover economic losses caused by a virus or recession, so you should look at the fine print now rather than later when it is too late.

Business financing

Even if you are confident you can make it through this recession without borrowing, now is the time to search for financing providers and learn about lines of credit, loans, invoice factoring, and business credit cards. If you already have a line of credit, you should pursue a renewal soon. Not just because interest rates are rising but because it makes more sense to get an extension now when the credit is there versus waiting until your business is in bad shape six months from now. 

Get professional advice 

Creating a plan to protect your business can be difficult, especially if you are doing it on your own. Everyone’s business is different, and you may need personalized advice. 

Hansa is here to help. Reach out to for a free consultation at your earliest convenience. We can walk through your options in detail and, if necessary, connect you with financial providers to make sure you get the best loan for your business. 

Stay prepared, and you’ll be ready for any recession that comes your way!