25% of Businesses claim that Marketing & Advertising would be first cost cut if a recession hit.

Tech giants Meta, Stripe and Twitter have all laid off staff en masse recently – With 21% of businesses surveyed noting that they would cut staff & wages first, should there be a wider cause for concern?

The Situation Explained –”These tech businesses have forecasted growth and if your lead time for conversion is quite long then you tend to over hire in the short term as you’ll need to have staff in place, get them trained up and engaging in the process as it takes months to convert these B2B sales. They’ve forecasted growth for 2023 that they know now isn’t going to happen, so they’ve had to reduce their workforce.”

Where does that leave regular SMEs?
“It’s slightly different as SMEs do forecast but, they do not over hire in the short term as they don’t have the funds. Instead, they will wait for business to increase to such an extent that additional hires are necessary, but they will cut on overheads, usually staff & wages. The cost of sales will never suffer, apart from the business trying to negotiate the best price, however if something does not relate directly to a sale it is open to be cut – Admin staff, IT Support, Accountancy, Sales & Marketing, these can all be outsourced so are vulnerable. In our survey you see supply chain and inventory the lowest at 8% because that is the only one that is directly related to sales.”

Preparing for the Future – How do you Recession Proof a Business?

“If you’re in a type of business where you’re more susceptible to a recession you need to make sure that you can withstand the types of shocks we’re going to be facing, because they will come.” – Larissa Feeney, CEO, Accountant Online

The Core Message- time is of the essence. Every business should be making strides to prepare themselves now rather than later.

“There is always a recession coming, so whether it is next month, next year or in 10 years’ time there will always be a recession on the horizon.”

Phase 1 – Understand the Type of Business You Have
“Essential services – software, healthcare, home repairs, mechanics, pet services, childcare – they are not hugely impacted by a recession. These businesses should be able to withstand a shock to the economy better than most.

However,discretionary services like luxury goods, high end cars, designer clothes, handbags, foreign holidays. These businesses are the largest casualties during a period of recession as a household does not necessarily need to spend money on them.

There are always failures but there are also several stories of great businesses that have been started in a recession, where they have spotted a gap in the market for something that has only come about because of the recession in the first place. Accountant Online was formed during the last recession, huge companies like Uber and Airbnb spotted gaps in the market and capitalised.

Be nimble, be agile and be willing to embrace new ideas, it could breathe new life into your business”

Phase 2 – Stabilise your Base
“Youneedto be securing a strong base and a positive balance sheet.Cash is king, especially in a recession. If your business has a good cash cushion it will give you more time to make decisions. Always make sure you have as good a cash pile as possible.

In businesses that have secured funding, they may have cash but there is a run rate that dictates when money must be spent and an expectation that investment will give returns.

If you are a business that is cash hungry, and you do not have the sufficient cash to see you through 3 to 6 months of trading, then do seek funding immediately to ensure stability when the downturn happens.”

Phase 3 – Secure Additional Funding

“When a recession hits, it is harder to get money because uncertainty reigns. Regular funders like banks and investors tend to get a little bit nervous and so flexibility is key. Speak to your bank or investors about an overdraft, additional funding, or supplementary loan facilities

Phase 4 – Examine Costs

“Ask yourself – where is your money going on a weekly/monthly basis? If you had to make cuts right now, how much would you be able to save? Do this regularly even when times are good so that you have highlighted savings you can make easily. If you havelarge outlays or outgoing investments, it’s time to review these and ensure that you can sustain this should your incoming cash flow begin to decline.

What about Employees?

“An agile workforce is an invaluable asset. In times of recession, we often hear about having to do more with less, this also applies to your staff. If you can do so, move your leading personnel around, give them that experience of working across different departments.Identify key individualswho are essential to your business’s longevity and growth.

For those that are concerned about a growing wage bill, outsourcing offers a lifeline. By outsourcing distracting key tasks to a freelancer or agency you can give your business freedom, flexibility and in certain scenarios better results, without the concern of a large wage bill”