If we are not already in a recession, we are very close. You feel it. I feel it. We all feel it. Unemployment, GDP, and Inflation are commonly used as measures of the health of an economy and all point to pain ahead.

Regarding Unemployment, the Sahm Rule which is a leading recession indicator was triggered in July 2024 meaning that the rate of unemployment increased over 0.5% from the prior year. Numerous companies have announced layoffs or bankruptcy since July so unemployment will likely increase further.

Regarding GDP, Real GDP increased 3.0% for Q2 2024 compared to the previous quarter which is good but if compared to pre-pandemic levels then it is flat which is confusing because the pre-pandemic economy was more robust and if adjusted to remove government spending then it is certainly negative. My point is that the private sector serving non-government customers is really hurting right now.

Regarding Inflation, it is not transitory, and it is here to stay. Yes, we crested the 30% grade incline of inflation from last year, but we have not reached the other side and might even have more climbing to go. This is the most challenging because it drives unemployment and confuses GDP.

I have worked with small businesses for over 20 years as a community banker and helped them during the 2008 Great Recession and the 2020 Pandemic.

Here are 5 things to do in a Recession to help your small business:

1. Prioritize Cash Flow

Literally stop and make a list of monthly expenses with their due dates. Rank them in order of importance. Rent and payroll will likely be #1 and #2, respectively. You probably already check your bank account daily with your bank app so this should be pretty easy to do.

2. Reduce Unnecessary Expenses

Use the list of monthly expenses you prepared and if there is an expense not on that list then it should be cancelled or deferred. Turn off auto-debit of expenses so that you control your cash flow a little better and hopefully identify more recurring expenses that can be cancelled. This is the hardest thing to do. But the little things really do add up and will make a difference if eliminated.

3. Over Communicate

Don’t be embarrassed or afraid if your cash flow declines during a hard time. Your creditors and vendors have helpful options, but most assume the worst if you don’t communicate with them. Write a summary of your situation and explain what you can do or will do to fulfill your obligation. This is commonly called a Hardship Letter or Alternative Business Plan. Be willing to share this with any party and do your best to follow it.

4. Maximize Your Productivity

In Texas, we call this grit. The survival of your business is on the line. You might have to start your day 1 hour earlier and end it 1 hour later. Exceed your customer’s expectations through extraordinary customer service. Make your main product or service the best in its class. People will always pay for quality and good service.

5. Sell Unused Assets

Just like reducing unnecessary expenses, selling unused assets is hard to do. Every dollar counts during a tough time and selling that unused equipment or stale inventory might just give you the dollar to make it through. Today there are a number of online markets and apps to help you sell items quickly.

Navigating a recession is undeniably tough, especially for small business owners. Yet, with strategic actions and a resilient mindset, it’s possible to weather the storm. By prioritizing cash flow, reducing unnecessary expenses, maintaining open communication with creditors, maximizing productivity, and selling unused assets, you can safeguard your business. Remember, every challenge presents an opportunity to emerge stronger and more resilient. Stay vigilant and proactive, and you’ll find your way through.