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How to Prepare Yourself—and Your Business—for a Recession

    
Author: Jim Carr

How to Prepare Yourself—and Your Business—for a Recession

I’ve been in business for 41 years and I’ve never seen anything like this. Business is better than it’s ever been. But I haven’t been able to sleep at night. Why? I think about why we’ve been so busy. The majority of the reasons are positive:

  1. We’ve done a great job of identifying industries that are a good fit for what we do. 
  2. We’ve been focusing on creating a dynamic and authentic culture
  3. We’ve made big investments in our infrastructure, machinery, equipment, software, inspection equipment, and more. 

The most profound reason? The economy is experiencing more growth than it has in a long time coming out of the Covid-19 pandemic. But because of this explosive growth, I believe a correction is coming in the form of a recession. And I think it’s gonna be a doozy. So I want to share some tips to help you prepare yourself and your business for what’s ahead.

Learn about the common causes of recessions

Before I cover what you can do to prepare, I want to cover some of the common causes and warning signs that a recession is coming. What are they? 

  • High inflation or deflation
  • A sudden economic shock (COVID, anyone?)
  • Asset bubbles bursting
  • The stock market crashes
  • Excessive debt
  • Advances in technology
  • Post-war slowdowns

An increase in unemployment, a rise in credit card debt and late payments, poor stock performance, consumers losing confidence, and a drop in the leading economic index (LEI) are all warning signs that a correction is coming. 

The hard part is that these things tend to happen rapidly and it can be hard to catch unless you know what you’re looking for. That’s why you need to prepare right now so your business is in a good position when the next recession hits. 

Be smart with the buying decisions that you make

People are spending money like crazy. Why? Disposable income dropped off during the pandemic so the government gave everyone money. But people were saving it. Now that the pandemic is nearly over, people are spending record amounts of money.

But from a personal and business standpoint, you need to be wise with your purchases and invest your money wisely. We understand that most people take out loans for their business, but you have to be able to pay back those loans. 

If you can’t pay back your loans—or you’re unable to manage your business correctly—a bigger company will come in and buy you out and take over your business. That’s how Jason grew his business tremendously during times of recession. 

8 tips to prepare yourself for a recession

Here are some quick tips to prepare yourself for a recession: 

  • Reassess your budget monthly
  • Contribute more toward your emergency fund (have 3–6 times your monthly income in savings) 
  • Focus on paying off high-interest debt accounts
  • Keep up with your usual contributions to your 401k
  • Evaluate your investment choices and avoid making emotional money decisions
  • Build up your skills and update your resume
  • Brainstorm innovative ways to make extra cash
  • Prioritize online and in-person networking events

When you invest in these things, you reap the rewards later. Sometimes you have to make conservative moves to be in a better position for the future. To hear more of the conversation around the looming potential of a recession and how to help your business through it, listen to episode #289 of Making Chips! 

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