Small businesses around the U.S. are preparing for an economic downturn, with confidence in the economy sliding and concerns rising, according to Bank of America.

The latest of the bank’s semiannual study – the Spring 2019 Bank of America Business Advantage Small Business Owner Report – found that 69% of survey respondents have “taken steps to protect [their] business” in the case of an economic downturn.

Businesses are recognizing the need to prepare for the unexpected even as the current record-breaking U.S. economic expansion appears to be chugging along nicely, with major stock indices hitting new highs and consumer sentiment still upbeat. However, signs of growing longer-term risks in U.S. and global economies also exist, including lower industrial production and weakening trade activity. Concerns cited by the report include healthcare costs, the political environment, trade tariffs and credit availability.

The general consensus, nonetheless, seems to be that things are OK for now. There hasn’t yet been a clear catalyst that would trigger a broad recession. In any case each business certainly will experience the impact of the economy and financial markets differently. It would be prudent, in our view, for business owners to ensure that their company is prepared as much as practically possible today for whatever economic scenario may unfold in the near or medium term.

Here are some questions that we think business owners should be asking themselves and of their operations:

Do I understand my customers?

  • A business must know and understand the customer base it sets out to serve. It is important to give thought to how the customers are doing currently and how they may be affected by a downturn in the economy in the future. Anticipating their pain points and catering to specific needs – and reminding them of the competitive advantages of your business – could help keep existing customers and strengthen those relationships.

How can I better position the business’ financials for the recession?

  • Study your numbers. Sales, costs, profit margins, inventory, etc. Analyzing these figures can help you identify any trends and find areas in which you could make adjustments to lower expenses or free up cash. For instance, you might see there is some discretionary spending that you could do without for a while, or perhaps there’s more cash tied up in inventory than is necessary. Perhaps you could find ways to speed up cash inflows and slow down outflows. These practices can help create an alternative business plan for more difficult times.

How well capitalized is my business?

  • Revisit your business plan and financial models. Consider how a potential economic downturn might affect availability of funding and any planned business initiatives. Assess your sources of capital and work to manage them to set your business up for an appropriate level of funding, whether it be equity or debt, or a mix of both.

How will I market differently or adjust pricing in a down market?

  • A recession will cause customers to spend differently, so we reiterate that anticipating their needs will be important. It may serve your business well to consider marketing or pricing your products or services differently, and creatively. Note that slashing prices and counting on those cuts to drive business are probably not a sustainable practice. Position your business accordingly not only in terms of attractive prices but in terms of value offered to the customers. Highlight the value of the products or services your business provides, and look for ways to stand out among the competition. If possible, perhaps this is the time to be launching new initiatives and taking market share.

How can our team increase productivity?

  • Your business no doubt has talented individuals making operations possible in the first place. Consider various scenarios of what you might need to do in terms of the workforce in weaker financial situations. Conduct a stress test to see whether, or at what point, cost-cutting measures might become necessary. Meanwhile, think also about boosting productivity within the organization today. It may help to be transparent with your employees, providing overviews of the company’s health on a regular basis, for instance. In doing so you’d be helping keep everyone on the same page, and if red flags start to appear, having included your employees in this problem-solving process would likely help motivate them to work toward a solution.

Economies don’t just move in one direction. There are cycles, and cycles are a normal part of any economy or market. To be sure, there is reason today to be optimistic and not lose focus on investing and growing the business. But we believe it is necessary at the same time to be taking steps to prepare for a potential turn in the economy as caution today would help protect and facilitate business in the future during more challenging times.