Recessions are a natural result of a free market economy. Many businesses have weathered them before, and the last 15 years have seen both the shortest (two months in 2020) and the longest (18 months in 2008) of the 13 recessions the United States has experienced since 1945.
This recent experience doesn’t mean recessions are easy for a B2B business to navigate, though. The current economic climate is unique in several ways, with record low unemployment and record high inflation, the single most significant concern for 26% of business owners surveyed for the NFIB Small Business Optimism Index.
The good news is, there are a few simple steps that business owners can take to minimize the impact of a recession on their business. Here are some top strategies B2B companies can use to stay on track during periods of economic uncertainty.
What does it mean to be recession-proof?
No type of business is truly untouched by sweeping economic change like a recession. Even organizations in industries commonly cited as recession-proof, like healthcare and grocery stores, can feel the pinch of high inflation and changing consumer habits. Being recession-proof doesn’t mean a company is unaffected by economic shifts and trends, but rather that they’re able to maintain a stable revenue regardless of these conditions.
One way for B2B businesses to achieve this is by providing a service or product that the businesses they work with can’t easily eliminate. The more value your company provides its clients, the less likely you’ll be on the chopping block when they’re looking for places to cut back. Here are three other ways you can maintain your company’s health through economic turmoil.
3 ways to keep your B2B business growing during a recession
1. Evaluate your cash flow and liquidity.
Cash flow is always something business owners need to track, and it’s even more crucial during a recession. The first step is to look at your current balances, income, and expenses by implementing a rolling forecast of your cash flow for the upcoming quarter. With this information in front of you, you can verify if you’re operating within your budget and identify places you can make proactive, strategic cuts.
Having more cash available can also help businesses get through a recession. Higher liquidity enables more flexibility and ensures you’ll be able to cover your baseline expenses, even if prices increase or your clients’ spending habits change. Identifying potential sources of capital before you need them gives you a back-up plan to cover worst-case scenarios. Evaluate your current cash reserves and consider what loans, private equity, government resources, or other alternative financing you can access if you need it.
2. Increase your team’s value through automation and upskilling.
The businesses that fare best during a recession are often those who find creative ways to do more with less. Technology can help maximize the value you get from your team, letting them focus their time and attention on the tasks that will make the biggest impact on your business.
Hiring is expensive in any economy, and in the current climate of low unemployment and high turnover that’s more true than ever. Between inflation and the tight job market, salaries are continuing to rise, adding to the expense of hiring. Automating manual and low-value tasks reduces the overall workload for your team, while upskilling expands the types of work each employee is equipped to perform.
The best part about this adjustment is that it doesn’t only help you navigate a recession but makes your team more efficient and agile. That means you’ll be more resillient overall and better equipped to face whatever challenges come your way in the future, even beyond the current economic downturn.
3. Analyze your supply chain and client demand.
Every business faces challenges during a recession, and that includes the ones your company interacts with both upstream and downstream in your supply chain.
Proactively assessing supplier risk can prevent sudden shortages, interruptions, or delays that can further strain your budget and operations. One way to do this is to map your current supply chain and rank your suppliers based on their risk to identify areas where you can benefit the most from diversification.
You can perform a similar analysis on your customers and target market to determine how a recession might change client needs and what adjustments you can make to keep that business coming in. For example, offering long-term clients more flexibility in order volume, payment terms, or other areas can enable them to continue using your products or services despite their economic challenges. This has the double benefit of building stronger customer loyalty at the same time it keeps money coming in, minimizing the impact of the recession on your bottom line.
Ultimately, while every business is to some extent at the whims of the broader economy, a recession doesn’t need to mean disaster for B2B businesses. While it may be harder to make sales during economic downturns, preparing for that eventuality before you start to feel the pinch can help you weather the storm so you’re still standing and poised for growth once the recession ends.
