Over the past few months, most business owners, and individuals alike, have heard mutterings about a potential recession.
Although we in no way can predict what’s coming, at Competitive Edge Insurance, we thought it’d be helpful to provide business owners with the top three tips they can take to recession-proof their businesses.
Let’s dive in; first, with an overview of what’s going on.
What Is Going On?
While we are not yet technically in a recession, many Americans might already be feeling the heat with decades-high inflation, record gas prices, and hefty grocery bills.
Bloomberg Economics says there’s close to a 75% probability there will be a recession by the start of 2024.
But how did this happen? And what is a recession?
What Is a Recession?
A recession, as defined by the National Bureau of Economic Research (NBER), is a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
There are many contributing factors that have led the U.S. economy to tip its way toward a recession—inflation, supply chain issues, a nationwide labor shortage, the list goes on.
Moreover, The Washington Post notes that the Federal Reserve’s efforts to temper demand and tame prices have also been a contributing factor.
Oracle writes that “since 1950, recessions have lasted between two and 18 months.” This period can be “stressful for business owners, since they don’t know how long it will last. A business can freefall without an end in sight — if it isn’t ready.”
So let us help you prepare.
How Can You Recession-Proof Your Business?
There are many things you can do to recession-proof your business. For example, business owners can create a business emergency fund, assess their risk tolerance, reduce overhead, and more.
Minimize Workers’ Compensation Claims
One thing you don’t want in the midst of, or prior to a recession, is workers’ compensation claims being filed against your business. Why? It’s expensive.
Employers face both direct and indirect costs when a workers’ comp claim is filed.
Most obviously, when an employee is out on workers’ compensation, a business owner essentially “loses” their work. You then have to pay for another employee to pick up the slack (overtime in some cases), which can be costly.
Additionally, workers’ compensation claims can:
- Increase your insurance premiums
- Damage your public reputation, and
- In some cases, a business can be penalized up to $136,532 per person by the Occupational Safety and Health Administration (OSHA) for repeated or willful violations
(Yikes, that’s a lot of money!)
This considered, it’s crucial (especially during this time of teetering toward a recession) to do everything you can to make your workplace safe, and therefore, reduce workers’ compensation claims.
Interested in learning how workers’ compensation plays out for remote workers? Read our article “What Does Workers’ Comp Look Like for Remote Employees?”
Create Trust and Safety Among Employees
Significant layoffs can already be observed across the nation. This considered, a recession can be an especially scary time for your employees.
During this time, as a business owner, it’s especially important to create trust and safety among your employees. Consider doing the following to build employee retention:
- Keeping an open, honest line of communication
- Listening to your employees
- Utilizing employee engagement data
- Offering consistent and effective feedback
- Recognizing a job well done
- Not letting team building fall to the wayside
- Encouraging health and wellness and work-life balance
Invest in Insurance
The last thing you want during a recession is to get hit without the proper insurance. Typically, business profit is already top-of-mind during a recession.
If a cyber attack occurs, you receive high levels of workers’ comp claims, or an injury takes place on your commercial property, you want to be sure that you have the right insurance in place to keep your business financially protected.
Without proper insurance, a business owner may have to pay out-of-pocket for costly damages and legal claims against their company.
Interested in learning more about how to keep your business safe? Read on to find out what types of insurance your business needs during a recession.