indicatorMoney and Financing

How to survive a recession as an entrepreneur

By ATB Financial 11 August 2020 5 min read

There’s no better time than right now for business owners to learn more about strategies that can help them weather a recession and thrive when it’s over. Make no mistake: recovering from a recession can be taxing. But the right strategies can make all the difference for your business.

Let’s explore how you can manage your cash flow effectively, update your business continuity plan, talk to your partners to help mitigate the crisis and communicate with your customers confidently.

Bolstering the business continuity plan

For a business owner, a recession is a bit like a house fire: it’s important to act fast. Your guide for this should be your business continuity plan or BCP, which you hopefully tabled when you launched your business.

A good BCP contains plans to reduce or modify services when an emergency strikes the company or the market.

“A business’s ability to recover during a crisis depends on how agile it can be, and adapting a business continuity plan to the current market is critical,” says Catherine Glambeck, entrepreneur strategist at the Calgary ATB Entrepreneur Centre.

She suggests being open to shifting your business model in a way that reflects current market trends during the crisis. The more rigid your model, the harder it will be to pivot strategically.

As ATB’s managing director of Alberta North Real Estate Bryan Rabik has noted elsewhere, “Your BCP has to be an evolving document that lives and breathes and has a cadence to it because it’s always being reviewed and adapted.”

In three Cs we trust: cash flow, community and contingency funds

Cash flow forecasting should be top-of-mind when a recession affects your business. That means laying out expectations for revenue, expenses (both variable and fixed) and assets, and then identifying costs that could be reduced or even axed. Cash flow forecasting usually covers a range of six months ahead up to two years.

Predicting your company's health over that span could help you decide if and how you can pivot. As Glambeck notes, “Understanding your core competencies and drilling down to what you do well can let you see what part of your business brings in money and customers, and which areas don’t bring you any cash flow.”

She adds that businesses that have established a sense of community with their customers can forecast a better financial future.

“In Alberta, we saw small to medium businesses with customers who wanted to support them during the tough times the pandemic brought to the economy, so the customers bought gift cards to use in the future, giving those businesses much-needed cash flow.”

Cultivating community can also help in other ways. Some restaurants, for example, have experimented with curbside delivery or meal kits, allowing them to reach out to their mailing list or social media channels in order to keep customers updated and engaged.

In addition, if you can set up a contingency fund before times of crisis, you won’t be so anxious when revenues take a hit.

“Having those kinds of funds allows you to be more agile and is one way to help you recession-proof your business,” says Glambeck.

Your financial plan has to include open communication with partners

When a recession disrupts your business model, don’t wait until the last minute to speak to the “holy trinity” of business partners working to empower your business: your accountant, lawyer and financial institution.

Recovering from a crisis asks you to manage many moving parts as quickly as possible, but you’re not in this alone. Along with your core staff, you also can talk openly and honestly with your accountant, lawyer and financial partner in order to fully understand the many implications of this slowdown for your business.

“If you wait until you’re fully delinquent and your credit score is ruined, it could be too late,” warns Glambeck. “Everyone is in the same boat together, so they can give you important advice when you need it most.”

She also recommends having that open discussion about your company’s financial health and shifting plans with any vendors you’ve partnered with recently. The fewer surprises they see, the better.

Turbulent times call for decisive action in many areas within your business, which means being proactive rather than reactive.

Five tips for pulling your business through a recession

  1. Attract cash flow by offering discounts to customers who make early payments.
  2. If you’re nimble and lean enough, pivot from one specialty to another. “I spoke to one geophysicist who worked in oil and gas, but when that industry’s recession struck Alberta,” Glambeck recalls. “He pivoted to open a math tutoring franchise, since he always had that skill set,”
  3. Don’t cut back too much on your marketing budget. Customers still want to know how you’re moving through the recession, and it’s important to keep connected to your community.
  4. Delegate duties so you don’t have everything on your plate, which occurs often for business owners who think they can tackle all the challenges a recession creates. “Maybe something like bookkeeping isn’t your strength or drives you crazy, so it could be smart to outsource that obligation to give you more time to do what you do best,” Glambeck adds.
  5. If your business is eligible, some government relief programs can help with short-term cash flow issues. Read more about provincial and federal government relief programs made available during the COVID-19 pandemic.

One last consideration for entrepreneurs is ensuring that battling the recession doesn’t take up so much of your life you have no time for yourself.

“I’m not talking about a three-week vacation but even just taking a break to go to the gym or blocking off Sunday from business calls,” Glambeck suggests. “You need creativity and strength to manage your business in the long run, and part of that means having a balance of personal and business hours.”

If you’re looking for a deep dive into everything you need to know around how to grow your business and make it more resilient, our ATB X Accelerator program might be just the place for you. Alternatively, feel free to reach out to one of our entrepreneur strategists to explore where you are with your business, where you want to be, and how to get there!

Like what you just read?

Subscribe to On the Money by ATB and get more helpful information sent straight to your inbox.

You might be interested in

Need help?

Our Business Support team will be happy to assist.