How Prepare For A Recession As A Small Business Owner

If you’re someone who really wants to make a difference as a small business owner, balancing making money and doing something big and worthwhile, especially in a recession, are not always easy things to juggle.

Don’t trust what the movies tells you.

You have plans and ideas to grow your small business. They race around your head like go-carts on a track.

The excitement always bubbles when you think about changing the lives of the people you hope to impact, maybe you even have thoughts of influencing in the world. 

And then…

Well, the elephant walks into the room.

 How do you follow through on all of your plans? Where will you find the money?

Can you meet your revenue goals from month to month? Will your small business ever grow and can you do extraordinary things and still make money?

Real-world questions, right?

You want to create products and services that matter.

You want to serve others without a titled somebody looking over your shoulders. It’s why you left your stable 9:5 and started on this path in the first place.

But you also want money, in some cases lots of it. 

And can I tell you something? It is perfectly ok for you to make that freedom number BIG. ***Men do not have a monopoly on monetary ambitions.***

It’s also perfectly fine to be aware of what’s happening in the world and think: “What do I need to shift to make it in a recession?” 

Here is what I’ve come to realize.

coffee drink

1| If it’s one thing I know tiptoeing out of a pandemic

We’re all struggling with the same things, and chief among them is money: how to have it, make it, grow it, scale it, and invest it.

And we don’t talk about it enough to each other.

I mean when we get together with our tribe, we talk about our families, friends, maybe the war in Ukraine, the climate catastrophe occurring practically everywhere, food insecurity, and the way we reach for things in the supermarket and put them back down again.

But we don’t talk about the ‘other’ hard stuff: like: “Do you have enough to get by?” or ” How are you REALLY doing ?”

In a recession, particularly in a recession, maybe all of it boils down to the same thing: fear. We worry about making money. We wonder if people will still have cash or credit to buy what we serve. 

We think about the fulfillment we feel when we work in and on our businesses, but we worry how it can all be eradicated when cash does not flow in the way we’d like.

I was talking to one of my best friends yesterday. She’s in Singapore and I shared with her the spirals of self-doubt and overthinking that I’ve been having as I get ready to release my reinvented business model that has all been automated and digitized. 

“It’s like being a yo-yo, ” I said to her. “At times I feel super confident and then I worry that I don’t have what it takes.”

I call it recession syndrome and the more I open up about it, the more other people express similar sentiments because the real thing that keeps us up at night is this awareness:

2| Money drives the engine of what we do

If we’re being honest and stripped away the thoughts surrounding our business models of adding value, making a contribution to the world, changing lives, and designing beautiful useful products that enhance the way our customers work and live, none of it is possible without money. 

There are big advantages to having a business that generates consistent revenue.

You can hire the best talent. Let’s be frank, you also sleep better.

You can take your ideas to market faster. You become less susceptible to making bad decisions.

You don’t chase shiny pennies or maybe you do because you have the capital to explore. And, most importantly, you can focus on areas of the business that matter the most to you.

RELATED: Want to Start A Small Business? 6 Women Tell Us Like It is.

3| A Recession Allows Us Perspective

If you’ve been on this journey with me long enough, you know I’m no Debbie Downer. In fact, I run my business with optimism as fuel. In a recession,  I counteract fear with action and I allow facts to reduce fear.

FACT: Also when you’ve been through a pandemic and you come out on the other side remotely ok, nothing seems insurmountable.

You can blame that on your newfound resilience. Also when you build your business model online you realize that the world is your market. When you grow your online audiences and build products that serve them, you can test marketability with organic content strategies and paid-for campaigns. You can scale what you’ve created.

What I am trying to say is that there is plenty of opportunity in a recession, but first, there is a need for a mindset change.

I want to gab on this some more.

You’ve also gotta shed years of programming that make you think you shouldn’t talk about how much you make and charge, your cost per good,  and revenue streams etc.

Those are all invisible scripts that keep your work insular and your worry isolated. In a recession, as small business owners, that is the last thing we need. In an interconnected Web 3 world, those invisible scripts become moot anyway.


4| Practical Advice About Money In A Recession

I like to think that managing fears about the recession is energy well spent.

The conversation about solutions takes up good energy, not a worried space. I think that even in a recession we should see money not as something we can’t make but as something we need to learn how to handle better so that it gives us stability in uncertain times.

We don’t need to think less or diminish our desire for meaning, fulfillment, and money even in a recession. We need to redefine things like how much we spend and on what, how we collaborate, how we define debt and use overdrafts etc.

You know the practical things that give us more control over how we spend.

The expert I turned to for this conversation is Maria Daniel, E&Y partner, small business advocate, and money expert. I actually did this interview with Maria about 4 years ago and it is still so good. ***Let’s dive in!***

woman talking about recession

practical advice on how to be positive and manage debt in a recession

5| How To Prepare For A Recession~ A Q&A with Maria Daniel

Good Or Bad Debt?

 Q. When it comes to debt in your business, how do you distinguish between good and bad debt?

A. A debt is good when things are going great in your business and it’s the worst thing you could have when it’s going bad. Your debt should really be what your operations could take. So for instance, if you have capital expenditure you should work out how much your cash flow pays and how much you really need in equity.


Q. The idea of having something now and paying for it later is incredibly attractive, isn’t it? But do small business owners really always understand the ramifications of taking on debt especially if they don’t know how to pay it off.

A. I have formulae that might be useful. Let’s say in a start-up phase a small business owner might be able to generate $300,000 dollars per year. That figure is the key because right there are some metrics that you can use of how much debt you should have, which should be $100,000 dollars. That is the maximum debt to have in this instance and it should be 3.5 times your free cash flow. The rest of it should be equity. Some businesses hardly have capital like professional services. If you don’t need equipment you don’t really need much equity.


Q. All this assumes you have cash flow? 

A. Well you have to have some cash flow when you are now starting up. You have to have some kind of equity where nobody is asking you back for the money.

Should You Still Launch Your Idea In A Recession?

Q. I was chatting with my friend who is in retail and she mentioned she dips quite frequently dips into her overdraft. Is there an alternative?

A. An Overdraft is not good debt, firstly it is expensive. You never pay back the principal so essentially you end up just paying back the bank and not really getting a return for your business. People run up their overdrafts. In some cases, if the overdraft is significant what might be better is a long-term loan. Overdrafts should only be for your ups and downs. You have to be careful with overdraft but unfortunately, a lot of entrepreneurs aren’t.


Q Is a bad economy the right time to launch a good idea?

A. I was at a Chamber lunch recently and one of the speakers said there’s opportunity in a crisis and it’s so true. People still have disposable income, but they are going to make more informed decisions about how they spend that disposable income. If you are starting out you might want to ask yourself will people buy my product or service in a recession? You have to understand where people want to get value for money.


Mindful about money in 2018

We asked Maria Daniel important questions about money.

How To Recession-Proof Your Business?

Q. Still it’s tough even if you’re not starting out even when you’ve gone through a test phase and know what you’ve created has a market? In such a case how does one go about recession-proofing their business?

A. The key is to be flexible. Look at fixed costs, try not to have too many of them. So where extra staff is needed, put people on contract. Inventory management is also very important. Let’s take a restaurant. The owner may put 50 menu items but customers are only demanding 10 percent of what’s on the menu.

So that restaurateur may want to think about what she is carrying in inventory that is not a good seller. So holding something for three months and never being able to sell it doesn’t make sense. Some important questions for this time include: Am I carrying more stock than I need to? Is 80% of my sales coming from 20% of my items? You really need to pay attention to the data.

How Should Small Business Owners Manage Fear When The Economy Dives

Q. Data counteracts fear, doesn’t it? People hear the word recession and they see what’s happening, the layoffs; they read the headlines about job cuts, and they become paralyzed which in turn hurts any economy. Is there such a thing as a recession of the mind?

 A. When people stop spending, then businesses start to do badly. When businesses start to do bad, they then lay off staff. When they lay off staff, banks don’t get mortgages. Banks then end up with bad debts. They then start to close down and it just ends up in a complete circle. It becomes a self-fulfilling prophecy. So you have to find a mechanism, and this is where governments I guess come into some extent of balancing expenditure. Not frightening people to the extent where everyone stops spending altogether. Because if you stop spending altogether, retail would die and if retail dies, distribution companies close down, manufacturing closes down, and banks go into trouble. So there is where that mind helps create the recession. 

Is There A Bright Side to A Recession?

Q.Are there practical things that an entrepreneur can do in a recession to lessen the panic?

A.You know there is nothing is wrong with dropping prices so you still feel that you will get part of the wallet rather than none of the wallet. I think people lose sight of a simple formula: Price x Volume = Revenue. So if you drop the price and you look at your volumes and you can get it up. You can make the same revenue.

Q. Is there a bright side to a recession?

A.It’s a mindset. I think as a people, we have so much potential. I Get out there and make it work. The good thing about the digital age is your market is not where you are located. The world is your market. There are many free websites, so many free things. Go out there. Teach yourself.



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Judette Coward

Judette Coward

xo xo xo Judette
Sharp Mind. Big Heart.
Heart-to-heart, I help female entrepreneurs like you create profitable content to grow your ideas, audience & small business, and feel free to have a life you love.

Free Coaching? I'd Love It.
Judette Coward

Judette Coward

xo xo xo Judette
Sharp Mind. Big Heart.
Heart-to-heart, I help female entrepreneurs like you create profitable content to grow your ideas, audience & small business, and feel free to have a life you love.

Free Coaching? I'd Love It.

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