A recession is a difficult time for any business, so knowing How your business deals with a recession is a vital part of your toolkit,

It may be that your customers may have less money to spend, you may have to let staff go, and your bottom line may be shrinking.  But all is not lost, there are things you can do to help your business weather the storm.

In this week's I Hate Numbers podcast I'll look at some ways to deal with a recession and keep your business afloat. Furthermore, your business can even prosper, listen to find out more.

A recession can be a difficult time for businesses of all sizes. Knowing how to deal with a recession and keep your business afloat is essential for any entrepreneur or small business owner. In this blog post, we'll discuss some tips for weathering a recession and keeping your business moving forward. Thanks for reading!

Conclusion

So hopefully these tips will show you How your business deals with a recession. If you have any questions, or want more information on how to apply these tips specifically to your business, please don’t hesitate to reach out. I love talking shop, so feel free to subscribe to my Hate Numbers podcast where every week we discuss ways small businesses can survive and thrive, regardless of the economy. And until next time, keep calm and carry on!

And if you’re still feeling lost or don’t know where to start, our team at Numbers Know offers comprehensive financial planning services that will help get your business through these trying times and into a bright future ahead.

So, what are you waiting for?  Check out our website now and see how we can help get your business back on track!

Are you ready to have an easier and more rewarding relationship with your numbers?  My book, I Hate Numbers helps you get there.

This book will show you how to have a rewarding, productive relationship with numbers and your business.  Furthermore, my book will help with that battle between the ears, that all business owners experience.  Learn more and buy my book today!

Get in touch with us to help make your life easier and stress-free. Contact us if you need help figuring out and sorting your numbers, creating your future financial story plans, your tax, payroll and other accounting and business matters

How do you feel when you hear about a recession looming? Do you get panicky? Do you get nervous? Do your bottom cheeks clench? Or are you reasonably sanguine? Relax and think. No, I've got this.

You're listening to the I Hate Numbers podcast with Mahmood Reza. The I Hate Numbers Podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi, folks. Welcome to another weekly episode of I Hate Numbers. This is the podcast that's there to help you improve your money mindset, increase your financial awareness, help you win more battles than you lose for what goes on between your ears. More importantly, helps you and your business make more money and have the business that you aspire to. My name is Mahmood. I'm an accountant and educator and proud author, I should say, of the book I Hate Numbers. Now, over the last 27 plus years, I've helped thousands of businesses in various sizes, shapes and forms not only survive and prosper, but actually get the business they so desire.

Let's crack on with this podcast. Now, my aim in this podcast on I Hate Numbers is to give you seven tips on how to cope, more specifically, how you and your business should cope with a recession. Let's start off with what a recession actually is. Now, the official definition of a recession is where we experience two consecutive quarters of negative economic growth. Now, that's the official definition. Nothing has been officially published in terms of we are in that position. But let's not kid ourselves. We are in a recession. It may not be called as one, but it's happening. Belts are being tightened, inflation is creeping up, cost pressures are there, supply chains are getting more challenged in terms of the cost of those raw materials,

energy costs are going up, there's volatility in the exchange rates... So we are in the beginning of the eyes of a storm of recession. However, it's really important in terms of tip number one that we have the right mindset. We're made of the right stuff. Now, being in business is never easy. We can certainly not change what goes on around us in the world, but we can certainly change our attitude to how we deal with that. And the key things we need to have in our attitude mindbox is resilience, a positive, not a naive outlook on life, but something that's positive. We need to feel confident that we can take our business while we wish it to. We need to have that element of resilience and we mustn't be like that proverbial rabbit stuck in the headlights.

It's absolutely critical as business owners that we have the right approach, not only for ourselves and our mental wellbeing, but also for our team and the people we interact with. Having talked in terms of having the right stuff, the right attitude and it's not easy by these stretch but we do need to have that, then we need to focus on the next tip, the next challenge. Critically, we have to remember that recession does not affect all businesses equally.

Some businesses will actually prosper in recessionary times. Some businesses will fill those challenges and those chilly wins very much more dramatically. Your business will not be affected in the same way as another business. If you're operating B to C for example, there may be an impact on your customers who will be buying from you. They may be more cautious, they may be more careful with what they're spending but there is money out there to be spent. If you've got customers overseas then obviously the cost of exporting and importing will be different challenges to you compared to a domestic based business.

So it's important to remember to understand and evaluate your current situation. Analysis without paralysis is really vital. How are your supply chains going to be affected? Is your staffing challenges going to be dealt with? What about your customers? How they feeling? How will they be affected by those recessionary winds? Understand what your costs are and you need to carefully evaluate and understand before you can make any meaningful decisions. Tip number three. In any climate that we have, cash is one of the most important commodities we can have and cash is the thing that will get you through any storm.

Cash management, it's a kind factor now and tight cash management, cash control will be really, really important. What that means is it's important that you develop and you have to hand a flexible, coherent business route map which ends up as a cash flow plan. If you don't plan for the future, look ahead for at least a twelve month period, then you will find it very difficult to juggle your way and get your way through this path.

Businesses can and do survive without making profits. But a lack of cash, lack of access to cash means you won't pass go. Your cash flow statement, check out the show notes for some links, will be the thing that guides you and it's a reflection of your business ambition and your business journey. Tip number four. Understand your cost basis. Now, organisations have a variety of costs and typically they will break down into ones that are fixed. So irrespective of the activity of your business, those costs remain constant and committed, certainly in the short term.

So business that operates as a venue, as a shop, as a manufacturing base will have fixed commitments like rents, salaries. Now irrespective of the production levels, irrespective of how many customers come through the door, irrespective of the miles that we travel in our transport fleet, those costs like salaries, rent, insurance and tax will remain the same. The key thing we need to understand is, is that activity i.e.how many items we sell to our customers, how many miles we drive in our car. All those influence the cost. If they're unaffected, they are fixed. What's the level? The other type of cost that we've got to consider is what our variable fluctuating costs are.

So if you happen to be a retailer selling product the cost of buying in your stock and your inventory will be your variable costs. If you use freelancers, subcontractors they will be considered as variable costs. They will be influenced and affected by how much business you're undertaking. And the key thing is variable costs are in theory and in practice avoidable. Management decisions can decide to remove yourself from having that cost. So those are the variables. Typically if you've got a transportation fleet, the fuel that goes into your vehicle is variable, is influenced by the number of miles and journeys that you undertake. Now, once you understand what those two costs are, the blend of them gives you the total cost.

And bear in mind when the winds are chilly, when demand goes down, fixed costs will be unaffected in the short term. So you can be carrying quite a high burden of those fixed costs and it may be time to reevaluate and think if you want to move to a different type of cost structure. However, folks, bear in mind that if your business is stable, if not improving, then fixed costs will increase your profitability. But understand what your cost base is nevertheless. Our next tip - look at the current level of debt that you have now and the level of debt that you might be taking on in the future.

Debt is a fixed commitment. The bankers, the lenders or finance will expect you to service that debt to pay it back to them in terms of interest and repayment irrespective of how much business you're doing. So if your business is likely to experience a bit of a shock, a bit of a downturn, that debt still has to be serviced. So look at the level of debt you're carrying. It's likely in inflationary times interest rates will go up and the cost of carrying that debt could be quite expensive. So if you have the cash reserves see earlier comments about your cash flow plan, then you could pay down some of the capital and therefore the risk of things going wrong will be reduced accordingly.

However, think about it carefully. Paying off debt if it's using cash that can be used elsewhere may not be the right thing to do. So make sure you speak to advisers, make sure you have a cash flow plan and make those decisions once you've formulated what the cash flow future looks like. So we've talked about debt, we've talked about cash flow plans, we've talked about resilience, we've talked about understanding the cost composition in your business. What else can we talk about? Well, what we also need to do is about evaluating the costs that we currently have.

Now, some people look at money that's being spent as costs, as a negative thing. Some of those costs are supporting and helping you run your business, make it more efficient, become more productive, and they will represent investments that you make for the future. Some companies have a kneejerk reaction, a slash and burn. And the things that potentially will go first is in the event of what's considered a very choppy, turbulent time, and I'm not dismissing that, is to cut marketing, cut professional advice, cut investment in assets. That may not be the most productive thing to do for the future. Businesses that maintain a level of marketing spend that's essential, that's core, that's there, that don't stop investing, are a much stronger position to take advantage when the economy turns the other way.

So by all means, examine what your non-value added costs are, things that don't add anything. Evaluate your bank statements, what you're spending money on and those amounts that you're spending, do they add value? Do they support your business? Are they necessary not just for the next few weeks, but long term? If no and it has no impact in your business, then consider, remove them out of the cycle. Now, what else have we considered? Well, we've looked at a few already. Let's go for a last couple of tips.

The next thing we should certainly be thinking in terms of is productivity and efficiency. Again, a kneejerk reaction could be to divest yourself with staff to cut staff back. My view would be that staff are likely to be retained more positively because we make an investment. More people are working from home. What you've got to do is to think before you get rid of staff, before you will the acts. Are there other productivity measures that you can make? Are there other areas that you could invest in? Cut non-value added activities out of before you think about reducing the headcount. Reducing the headcount could put more pressure on your existing team and yourself just to make sure you get through the next two or three weeks. There are always options, but make sure you take those decisions very carefully before you decide to chop and get rid of staff.

Last thing to consider is the investment in digital technology. Now, good technology on a bad system is always a bad move. But it may be you've decided to defer investing in digital assets, in systems, in software. You may decide to pause on that digitization of your accounting system. Your introduction to the cloud may be coming much later, but it may make sense to bring that investment forward to actually save you time, give you better quality information to help you be more productive in your business. So folks, let's have a quick recap of what we've covered.

Resilience, mindset is key. Having a map, having a roadmap expressed in financial terms of your business future, reflecting your business journey that you're intending to carry out is important. The important is critical. Understanding your cost base, the combination of your fixed and variable costs, these are all important. Understanding your debt structure, where those pressure points are, is another tip to throw into the mix. Understanding where you can make cost savings. Removing those non-value added items is important to add in as well. Look to where you can invest in digital assets that will aid and improve your business.

And all these together should give you a real positive approach to dealing with recession. And you can come out the other side being stronger, being more positive. So folks, I hope you found this useful. I would certainly recommend check out the show notes for some links to some resources. I'm providing a free cash flow guide to help you and check out the numbers know how platform. Obviously as far as the podcast is concerned, if you found it of value, I'd love it if you could share some comments, some feedback. And until next week folks, relax, be sanguine.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.