The economy is slowing can be felt. Many analysts believe that we may be heading into a recession. Venture capitalists and private equity firms have less capital available for 2022, and entrepreneurs are finding it more difficult to raise capital. As we all know, startups and small businesses have fundamentally different needs than larger corporations. Recessions can have a different effect on them.
Smaller businesses, unlike large corporations, don’t have as many revenue streams to keep them afloat in times of recession. They also don’t have the same annual and quarterly budgeting plans. Instead, they rely on monthly cash flow to feel the pinch faster than larger companies.
Small actions can be decisive in an economic slowdown
The good news is that small actions can have bigger impact on the company’s ability to reform and create resilience in the face adversity. Many small businesses are able to build strong relationships with their communities and customers, which can lead to loyal fans who might stay with the company through all of it.
We must remember that small businesses generally create between half- and three-quarters (or more) of all jobs in the U.S. So they are a significant economic driver overall. They may have to take difficult cost-cutting steps during times of economic uncertainty, but many of them will return to growth and investment when things improve. Smart business decisions are key.
Avoid short term strategies to be resilient
A McKinsey article dated September 16, 2022 states that companies must make necessary adjustments to their businesses as soon possible. The most common are pricing adjustments and managing the exposure to one-time or variable costs. Companies might only focus on the short-term, but this will not help them long-term. Companies should think about structural solutions to manage costs and build a company that can offer new business strategies for existing and potential customers if we see a longer-term inflation/recession.