Most financial experts say a recession is coming, but a new poll found SMBs aren't ready.
- 80% of business owners polled feared a potential recession, yet 44% said they haven't done anything to prepare.
- 21% said they had already begun scaling back large investments, and another 21% said they planned to do so in the next 12 to 24 months.
- Hiring has already slowed down at 16% of respondent businesses, while 15% expected to see a reduction in hiring in the next two years.
Economists don't have a particularly bright view of the economy's near future. Fears of a looming recession have been bubbling to the surface for some time, and experts are already expecting certain swaths of the population to be hit particularly hard this time around. Since SMBs are not immune to the effects of a large-scale economic downturn, a new study by BlueVine sought to learn how they're preparing – and found that many aren't preparing at all.
Conducted in partnership with market research firm Researchscape, BlueVine's survey polled more than 1,000 U.S. small business owners about their thoughts on an impending recession, as well as what measures they were taking to weather its potential effects. Researchers found that while 80% said they were worried about a recession, 44% hadn't done anything to prepare. Furthermore, 36% said they hadn't intended on making any preparations in the next two years.
Considering the fact that approximately 1.8 million SMBs went out of business between December 2008 and December 2018 as a result of the last recession, BlueVine CEO Eyal Lifshitz said these findings should be particularly worrisome to American entrepreneurs and small business owners.
"Small businesses should be taking time now to prepare their business while the economy is still strong, particularly when it comes to getting the right financing to withstand any economic condition," he said.
While researchers found that some small businesses aren't preparing, they also sought to understand how others were gearing up for the next downturn.
How SMBs are getting ready for the next recession
It's hard to prepare for a recession. Without the ability to understand how bad things will get as a result of market fluctuations, it's not easy for businesses to determine how much they need to save and what actions they need to curtail for a brighter economic future.
Researchers found that business owners who were planning to take measures to recession-proof their livelihoods made certain actions a top priority. According to the survey, 21% of respondents had already begun adding products and services to diversify what their SMBs offered, while another 28% said they planned to do so in the next 12 to 24 months. Additionally, 17% said they'd already begun to seek out more affordable suppliers and partners going forward, and 22% said they planned to do so soon.
Unfortunately, some things about running a small business need to be scaled back or stopped altogether in the wake of a coming recession. Researchers found that 21% of respondents had already begun reducing the number of large investments they’d considered taking on and 21% planned to begin curtailing any projects in the next 12 to 24 months. Roughly 16% of business owners polled said they'd also begun dialing back on hiring or had already stopped hiring new employees, with 15% saying they were planning to do so in the next two years.
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Getting finances in order
One of the biggest issues that cropped up during the 2008 recession was that bank loans came to a screeching halt as the economy shrunk, leaving businesses in the lurch.
That's why, when it came to battening down the hatches for rough financial weather, researchers said they were surprised to learn that businesses weren't particularly concerned about obtaining financing.
Of the small business owners polled, 19% said they were worried that they wouldn't be able to get approval for financing, while 10% said they'd already applied for additional financing and 15% said they planned to do so in the next two years. [Looking for business loans? Check out our best picks and reviews.]
"The golden rule of financing is the best time to seek financing is when you don't need it," researchers wrote. "As a possible recession looms, it is critical that more small business owners begin investigating working capital now while the economy is strong, business needs are minimal, and the business is in solid financial standing to be approved by a lender."