According to many economists, the UK is experiencing the beginnings of a deep recession, which could worsen in 2023. 

This won’t be welcome news for small business owners and sole traders, who may be wondering how to secure their finances successfully. In fact, there’s been a stark increase in demand for small business loans to protect cash flow. 

With the UK’s economic health set to worsen, now is the time to prepare your business if you haven’t already. From carefully examining your spending to investing in your sales, here’s everything you can do to manage your finances during a recession.  

1.Analyse your cash flow

During times of economic crisis, it’s even more important to have control over your cash flow. You should know every detail of your income and expenses to plan for any future emergencies.

A thorough evaluation of your cash flow will also reveal financial opportunities. In many cases, you’ll be able to see where you’re haemorrhaging money and what needs to change to become stronger.  

2.Build new revenue streams

As a new business, you’re probably focused on just one or two offerings, be they products or services. However, it’s worth considering your options for other revenue streams should the worst happen and your primary products lose traction. 

For example, you could look into PR opportunities or ways to build a monthly membership around your product or service. This will keep money coming into your business regardless of sales.

3. Finesse your sales strategy

With people less likely to be buying during a recession, it’s more important than ever that you have an effective sales strategy.

So ask yourself: how are you making sales for your business? Is it primarily through word of mouth or social media marketing? Is that working for you, or might you need to invest in another way of gathering leads and clients?

4.Get on top of invoices

If you’re a freelancer, you probably know the pain of late payments. However, during economic uncertainty, it will be beneficial if you can stamp these out.

Reach out to clients who frequently make late or irregular payments and ask them if they can introduce regular payments. The most important thing is securing your cash flow, so you may have to include late payment terms in your contracts if the problem persists. 

5.Identify your strengths

The small businesses that survive are those that know their strengths. So, evaluate what your business is doing well.

Is one product performing better than others? Do you see high-value sales in one area of your business? Refocus your attention on the most profitable areas and capitalise on this good performance. 

Our Advice

Being a small business owner right now is tough – but there are ways to secure your finances through a difficult economic period. Preparing now will help you better weather the storm and ensure future financial success.

If you are having trouble managing your finances as a solo business owner, it might be time to consider hiring an accountant.