The last few years have been tumultuous, and owners of small to mid-sized businesses have borne the brunt of the pain. Though few people could have predicted the effects of the pandemic, business owners with plans for a successful future tended to feel more comfortable confronting the challenges they faced.
As whispers about a recession grow louder, business owners are taking stock of what to do next.
Let’s examine three ways you can make your business more recession-resistant.
Defending What's Yours
As interest rates begin to rise, so do the costs of business. In this type of economic environment, protecting what’s yours—especially against the drain of taxes—takes on even more importance.
Nearly all business owners love paying as little in taxes as legally possible. But fewer owners actively take steps to minimize their tax obligations. While there may not be as many tangible effects to forgoing tax minimization when times are good, it can have different effects during a recession.
Business owners who can minimize their tax obligations could free up more money for business operations, investment, and even next-level management. Though many tax-minimization strategies can take years, savvy business owners start as soon as possible.
Handcuffing the Great Resignation
The Great Resignation is one of the most intriguing narratives surrounding the current market. More employees have resigned from their positions for greener pastures, putting the onus on employers to meet their demands more readily. Of course, this employment churn is a challenge under normal circumstances. But finding and retaining talent is even more challenging amid a potential recession.
However, business owners who have begun planning for a successful future typically have a built-in solution to issues like this. The answer is golden handcuffs.
The golden handcuff is a concept in which business owners incentivize next-level managers and key employees to stay with a company long-term. This is because these managers and employees have tangible effects on business performance, and their absence would have a noticeable negative impact.
Including golden handcuffs—in the forms of exceptional pay and benefits, opportunities for ownership, and other perks—is crucial to having a plan for a successful future. After all, these managers and employees will take your business to the next level, allowing you to one day leave it on your terms (or die at your desk on your terms).
It can also help you weather the storm of recession-based resignations. Your most essential employees are unlikely to leave for greener pastures if your pasture is indeed the greenest.
Diversifying Your (Client) Portfolio
When recessions hit, they affect most, if not all, of your clients. As a result, the recession can lead to lower demand and smaller margins. However, as is the case in so many other areas of business, diversification is vital to long-term success.
A diverse customer base is one of the most critical drivers of your company’s value. It’s also essential to planning for a successful future inside and outside your business.
If you rely on a handful of clients to guide your success, you may be boxing yourself in. Ask yourself: What would happen if I lost just one or two of my biggest clients?
If the answer makes you anxious or nervous, you aren’t alone. However, you may need to begin taking steps to widen your range in terms of clientele. There are a couple of ways to start doing so.
• Create a competitive advantage within your products and services
• Find and hire next-level management to break through to new prospects.
Time to Plan
Planning for a successful future and preparing for a potential recession overlap for business owners.
Taking steps toward planning for a successful business future can also have tangible effects on how your business weathers the storm of a possible recession.
The information contained in this article is general in nature and is not legal, tax or financial advice. Contact a lawyer or a tax or financial professional for information regarding your particular situation. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. Clients should consult their legal, accounting, tax or financial professional in specific cases. This article is not intended to give advice or represent our firm as qualified to advise on all areas of professional services. Master Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice you need.
Any examples provided are for illustrative purposes only. Examples may include fictitious names and may not represent any particular person or entity. This article has been sourced from a licence agreement with Business Enterprise Institute, Inc.
