New figures show that the UK economy is heading towards a slowdown. If that’s the case, what should you do to prepare your business for a downturn?
And just as importantly, how will it affect your business goals?
No matter what the reasons are for a reduction in economic activity, the businesses that prepare can weather the storm. Many businesses in operation today survived the 2008 recession and the Covid pandemic. But many didn’t.
The first thing is not to panic. Prepare! If you look ahead and have a plan, then you will be able to adapt more quickly. And this will help the chances of your company’s survival. Bury your head in the sand, and the tide could overwhelm you.
What causes a downturn?
There are many reasons why the economy slows. Just like in business, there are peaks and troughs. Sometimes, your business is booming and months or years later you could see a slowdown.
These reductions in economic activity can be the result of many reasons. Some could be down to the domestic market and others due to international events. These can include:
- Consumer spending reductions
- Financial crises
- High interest rates
- Natural disasters
- Geopolitical conflicts
There are many other reasons. The recession of 2008 was caused by the collapse of the US housing market. ‘The Great Recession’, as it became known, started in America but quickly created a major downturn across the world.
The current slowdown in the UK is blamed on a variety of factors. These include worldwide tariffs being imposed by America. Closer to home, increasing costs of doing business (such as employer’s NI and minimum wage rises) are making it more difficult for businesses to operate.
New data from professional services company EY say the second quarter of 2025 has seen more companies sounding the alarm about the business landscape. It says that 59 profit warnings have been issued by listed firms. That’s a 20% increase on the previous quarter.
How to prepare your business for a downturn
Anxiety from larger companies can create issues for businesses of all sizes. But being prepared can mean your business rides the waves of reduced activity.
Before we look at four ways you can prepare your business for a downturn, don’t forget your goals. Whether that was to work four days a week or to create a legacy, don’t lose sight of your goals. You can still achieve them in a downturn. Just like your business, it’s all down to planning. If you are prepared and plan you will proceed! We are always happy to speak to business owners about how well prepared your business is. Early intervention can ensure your goals stay on track regardless of the wider economy. So, how do you prepare your business for a downturn?
Focus on your cash flow
Your cash flow can be affected by your customers’ economic situation. But taking action during the early stages of a downturn can give you the time to make effective decisions.
For example, start building sufficient cash reserves before a reduction in activity leads to a recession. No one is saying a recession is inevitable. But staying a step ahead means you effectively have extra time while some competitors end up struggling to catch up.
Should cash flows into your business reduce, you will need to ensure your expenses reduce. You might want to cut spending or delay buying items that are not essential. But don’t forget that downturns can mean some items are sold at a discount. If you have focused on your cash flow, you may have the funds to take advantage of the downturn.
Cutting costs ahead of a reduction in economic activity can mean your business becomes leaner for the future. And that can mean you reach the other side with a stronger business. You may even reach your goals more quickly.
Make sure your billing and invoicing is up to date. You don’t have to be aggressive to ensure your outstanding bills are paid. Good business relationships are priceless.
Focus on your customers
And that leads us to our second point. Keep a focus on your good customers now. Without them, you have no business. Boosting your relationship means that if they need to cutback, you’re less liked to be affected than a competitor.
If you have planned ahead with cash flows and built up reserves, you could help a customer should they hit difficulties. Extending their credit terms might be a possibility. Or, you could offer a discount for paying within a reduced timeframe. If you are flexible, they will appreciate it. And when they come out of their difficulties, they will remember you.
Planning ahead means you can be prepared to make such offers. Failing to plan means you risk sounding desperate, which damages your reputation.
Focus on your operations
We’ve already mentioned that reducing costs can help in a downturn. But streamlining your operations can help you focus on the work and orders that bring in more revenue. Consider a cost-benefit analysis. A good accountant, like Concept Accountancy, can help with that. Looking at the figures now means you can trim your budget to be leaner. And that, in turn, leads to a business that’s ready to operate in difficult times.
Knowing which clients and customers pay on time, for example, allows you to focus on them. That means you won’t be working for someone who might not pay you during the downturn.
Make wise investments
Spending money when there is trouble on the horizon may seem like madness. But the truth is that making wise investments now can pay dividends during a downturn.
For example, investing in marketing activities now means more people are aware of your business. Henry Ford famously said if he was down to his last dollar he’d spend it on marketing! That makes a lot of sense. The more people who know about you, the bigger the chance of gaining customers.
If a well-run, larger business is widening its net for suppliers during a downturn, you’ve more chance of winning work.
Getting out and networking with other businesses now can give you time to build good relationships for the future. If someone trusts you now, they’ll trust you when times get tough.
Investing in wooing customers today by inviting them to events means you’re building resilience into your sales pipeline. A wise penny spent now can mean you have plenty of them coming in during a downturn.
What should I do next?
If you’re thinking about planning for a potential downturn, then we can help. Concept Accountancy knows how to interpret your figures so your business is ready and resilient during a downturn. Contact our team today for a chat and we can help your business prepare for a downturn.
