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Earlier this month, the Office for National Statistics (ONS) confirmed that the UK has entered a recession - the UK’s first recession since 2020.

A recession, put simply, is when a country sees its gross domestic product (GDP) decline for two consecutive quarters. And GDP is used to measure the economic health of a country as it tracks both performance and output. 

Being in a recession, then, is bad news. It means the economy isn’t growing. It means productivity is low. It means unemployment rises, making people worse off. 

Put short - it can make for particularly challenging conditions in which to run a business. 

And while there’s no single measure you can take to shield your business entirely from the effects of a recession - there are things you can do to help get your business in a stronger position. 

1. Maintain a strong cash reserve

A strong cash reserve starts with effective budgeting, as this focuses your mind on cash flow - and understanding cash flow is crucial. 

The fundamental question to answer (and understand) is: are you making sure that you’re not spending more than you have coming in? Budget and bookkeeping tools like Xero can help with working out the answer. 

Once you’ve got your head around your budget, it’s then all about sticking to it. Controlling your expenses can help with this. Products like a business credit card can help separate expenses - and that includes employee expenses too - but it’s important not to take on debt you can’t afford to repay.

Other ways to maintain a strong cash reserve can start at the beginning of your business chain - have you negotiated the best terms with your suppliers, for example? Have you implemented efficient invoicing processes? 

Protecting your business can be every bit as important as having reserve funds too - so making sure you’re covered for a range of risks with relevant business insurance policies is worth taking the time to read about too. 

There are many ways you can maintain (and protect) a strong cash reserve, and what works best for you will depend on the type of business you run. 

2. Diversify revenue streams

This might be easier said than done - but it’s worth giving it some thought. Is there a way you can offer additional products or services? If you own a hair salon, can you offer other treatments? If you deliver furniture, can you offer to build it too? 

Subscription models can be a great way to guarantee consistent income, even during tough times. If the product or service you offer can implement a subscription model then it’s well worth considering. 

The main thing to think about here is: what can you plan and implement to get your business away from relying on a single income source. This will help you ride out difficult times and the wider your business income streams are, the less you’re likely to feel the pain if something goes wrong with one of them.

3. Build strong customer relationships

You can’t beat customer loyalty when it comes to protecting your businesses revenue. And you can’t get customer loyalty without providing excellent customer service. Take a look at what you’re already doing and see if there are ways you can improve. 

Maybe you could offer your customers a loyalty programme? The shape that programme takes can range from a loyalty points app to a card you stamp. It might be spend-based, or a refer-a-friend type initiative. Programmes like these can set you apart from your competitors while making your customers feel good. This leads to trust and (hopefully) those all important long-term connections. 

4. Monitor and control operating costs

It’s hard to talk about this point without sounding especially businessy. But regularly reviewing expenses and seeking to optimise any processes for efficiency can make a difference.

Of course any changes here shouldn’t be to the overall detriment of how your business is run or how your staff feel. But if there are things you’re doing (or aren’t doing) that can be improved - then that can save you money. 

If you find that making tweaks to processes here and there frees up cash - then you could think about banking that extra money in a business savings account - that way you could earn interest on any money you don’t necessarily need right away. 

This once again boils down to understanding your business’s cash flow. Whatever you can do to track and manage it will always help - but it’s of significant importance when times are tough. 

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If you’re running a successful business already - then you’ll be no stranger to the importance of adapting to the unexpected. 

There are so many things you can do to stay up to date with changing market conditions while also horizon scanning. Subscribing to industry publications is a good starting point - are you signed up to my monthly newsletter for example?

If your business generates data - and it probably will, even if you aren’t actively mining it - then use that data to leverage insights. This can help spot trends - is this a quiet time because it’s always a quiet time, or is something else happening? 

Always engage with any customer feedback - not only does this make them feel heard but you might be blind to something you’re doing that can easily be rectified with a small tweak. 

And there are conferences you could attend, with many occurring every month up and down the land (another benefit of my monthly newsletter - I tell you in advance about which ones are coming up). These are great for networking, hearing industry insights from the mouths of some of the biggest business owners in the country and chatting with like minded entrepreneurs who will be in a similar situation.