Worried About a Recession? 3 Steps to Take as a Small Business Owner

All of these might ease your concerns.

Will a recession hit in 2023, or will the U.S. economy be spared? That's a question on a lot of people's minds these days, and it's hard to arrive at the right answer.

For months on end, economists have been warning of a downturn as the Federal Reserve moves forward with aggressive interest rate hikes that have the potential to grind consumer spending to a halt. But that's not guaranteed to happen.

In fact, the U.S. economy is in decent shape right now, and the labor market happens to be quite strong. So there is a chance we'll be spared a recession in the near term.

Still, it's a good idea to hope for the best but prepare for the worst. This holds true whether you're a regular consumer or a small business owner. But if you're in the latter category, here are a few essential steps to take in the coming months if you're concerned about a recession striking in 2023.

1. Shore up your savings

Individuals are currently being urged to boost their emergency funds in case a recession hits. It pays to do the same as a small business owner. Not only should you aim to pad your own savings, but you may want to try to boost your small business cash reserves as well in case things slow down in the coming year and your revenue takes a hit.

2. Reconsider your spending

Everyday consumers are being told that now's a good time to assess their spending habits and find ways to cut back. Well, the same holds true for small businesses. Take a look at all of the money you're spending in the course of keeping your business open, from your payroll to your overhead to your supplies. From there, see if it's possible to cut back in any way.

Now to be clear, this isn't to say that you should start slashing employee wages because you're concerned about an economic downturn. That's not really fair to them, and also, that's a good way to lose the staff members you rely on. Rather, make sure you're not paying for labor you're not using. If you have 14 people on staff working 40 hours a week but don't need everyone putting in that much time, try limiting some employees to 30 or 32 hours a week.

Is that the same as cutting their pay? Not exactly. Today's gig economy is still strong, so if you keep your employees' hourly wage in place but offer fewer hours, they'll at least have the option to go pick up a side hustle and make up that income elsewhere.

3. Get out of debt

You may have incurred some debts in the course of starting your business or keeping it running. Now may be a good time to look at whittling that debt down if possible. That way, if your revenue shrinks next year, you'll have fewer ongoing payments to contend with.

The idea of a recession can be scary, whether you own a business or are simply worried about your own personal finances. But if you're a small business owner, it's crucial that you take these steps to gear up for a period of economic decline given the warnings at hand.