It’s the topic on everyone’s minds: A recession is looming on the horizon. 

The U.S. Bureau of Economic Analysis recently reported a drop of 0.9% in GDP (gross domestic product) from April through June. This fall marks back-to-back quarters when the GDP has dropped, which normally constitutes a recession. The Fed isn’t ready to call it just yet, citing a strong job market and continuing consumer demand for goods and services as reasons we haven’t hit a recession.

But the probability of a global recession happening in the next 12 to 18 months has been steadily climbing. In a recent report from Bloomberg, economists put our chances of a recession happening at 38% (up from 0% several months ago); economists at Citigroup estimate a 50% probability.

What’s to blame? You can take your pick — inflation, rising interest rates, the war in Ukraine. All of these factors are building on top of each other, sending our economy into a downward spiral.

For businesses who’ve been around the block a few times, this potential recession will seem like a bad flashback. For newer SMBs, the idea of a recession can be anxiety-inducing. Especially when our most recent extended recession lasted 18 months.

But we do have some time — time to prepare and protect ourselves from everything a recession will throw at us. So, we’ve compiled three tips that you can apply to your business and help fortify you for the coming economic downturn.

Figure out your cash flow plan

Let’s say you run a real estate business. Do you know exactly how much you’re bringing in from each client? What about your expenses — how much are you spending per month on your customer relationship management (CRM) software? Your employee insurance? Your “For Sale” signs? Do you know how much cash is flowing in and out of your business?

According to a study by U.S. Bank, 82% of businesses fail because of cash flow mismanagement. And cash flow will be especially hard to track during a recession, so it’s important to control it now.

Get the numbers from your revenue streams and use them to create a profit plan for the future. Your profit plan should include tier levels that indicate when you might need to pivot your business plan. These pivots could include:

• Reducing cost by focusing only on your most popular products and services.
• Cutting unnecessary expenses (subscriptions, business travel, etc.) and downgrading to lower-cost software.
• Lowering your headcount.

It’s better to plan for all scenarios now rather than be surprised later — especially if your business exists in an industry that’s vulnerable during a recession.

Invest in your partner and customer relationships

The statement “we’re all in this together” has never felt more appropriate. The recession is going to hit us on a global scale, and every business is going to feel its effects. So, now’s the time to have conversations with your partners and suppliers about how you can best support each other.

Let’s say you run a tour guide business. Try creating partnerships with your local artisan shops and foodservice places. You bring them prospective clientele, and in exchange, they advertise your services to any tourists who walk through their doors.

Some other options include establishing long-term contracts with your suppliers to help you reduce costs or negotiating for discounts in the event of pitfalls or roadblocks.

Now’s also the time to really double down on your relationships with your customers. A recession could come as early as next year, so you want to ensure that you are so essential to your customers, they can’t afford to get rid of your goods or services.

Meaning, you need to show your customers that the value of your business is worth the price they can pay, even during a recession. If you’re a service-based business, you can start offering freemium packages to new customers. You can also offer discounts to your most loyal client base.

Secure capital now

Like we said, the recession is on everyone’s minds — including lenders. They’re already thinking about how they’re going to navigate the economy moving forward, which means tightening their standards for who they lend money to. Plus, financing like SBA-backed loans and bank loans can take a while to secure.

Having capital before you need it will save you panic and desperation later, so secure financing now. Like, right now — gather your tax documentation, get your credit affairs in order, and look into any loans, grants, or crowdfunding that can help you stay afloat.

And if you haven’t already, apply for a business credit card. They’ll help you establish business credit, and if you end up carrying a balance on your card, you’ll be able to keep it off your personal credit score.

We can safely say that the recession is going to be rough. For all of us. But for our businesses to make it through the recession as unscathed as possible, we have to plan ahead and start preparing now. Having a game plan in place will help you feel more confident and secure about your business’ future — no matter what it holds.