A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Preparing Your Business for a Recession
A recession - a period of economic decline - puts pressure on businesses through falling demand, tighter credit, and rising costs. While no one can predict a recession's timing or severity, businesses that prepare are far more likely to weather it.
Our Manchester-based, ICAEW-licensed practitioners advise businesses on how to prepare for and navigate economic downturns.
Why Preparation Matters
Recessions catch unprepared businesses off guard. Those with strong cash reserves, lean cost bases, and diversified customer bases are far more resilient. Acting before a recession hits - rather than during it - gives you the most options.
Step 1: Strengthen Your Cash Position
- Build cash reserves - aim for several months of operating costs
- Improve credit control - chase invoices and tighten terms
- Negotiate payment terms with suppliers and customers
- Review financing - secure or refinance facilities before credit tightens
Step 2: Reduce Fixed Costs
- Review overheads and cut non-essential spending
- Renegotiate rent, rates, and leases where possible
- Audit supplier contracts for better terms
- Consider flexible staffing to match demand
Step 3: Diversify
- Reduce customer concentration - avoid over-reliance on one or two clients
- Diversify products or services to spread risk
- Explore new markets less exposed to the downturn
Step 4: Plan for Different Scenarios
- Forecast cash flow under optimistic, realistic, and pessimistic scenarios
- Identify early warning signs and the actions you'd take
- Know your options - restructuring, refinancing, CVA, administration, or closure
Step 5: Take Advice Early
If you see signs of difficulty, take professional advice immediately. Early advice can open rescue options that may not be available once a recession bites and creditors lose patience.
Speak to a Licensed IP
If you want to prepare your business for a recession, or are already feeling the effects, our Manchester-based practitioners will assess your position honestly and advise on the best route - free and confidential.