Resilience in Action: How Small Businesses Can Prepare Themselves for an Uncertain Future

In the world of business, the future is always uncertain. It is true that the longer a small company sticks around, the better it gets at understanding market fluctuations. Even still, when you’re out on your own without the comfort of traditional employment, you always have to worry about what will happen to your business, your income, your employees.

There are constant external factors that can change the way you work: recessions, competition, and tariffs. When the unexpected happens, it can be very alarming for entrepreneurs. In this article, we take a look at how small business owners can prepare themselves for an uncertain future. 

Work on Cash Flow Management

The first and most important step any business should take in insulating itself from uncertainty is a cash flow management protocol. Really, this is a feature that should be baked right into the DNA of any company, especially for MBA graduates. The reality, though, is that most startups are held together by duct tape.

In the first few months or even years of owning a business, you’re really flying by the seat of your pants. If you’re fortunate and things go well, money begins to come in. You start seeing proof that your idea, even if not explosive, is at least feasible. Then you start worrying about systems, financial awareness, and so on.

One of your biggest considerations at this point needs to be figuring out how to manage money. Ideally, you’re going to have at least three months’ worth of expenses in your business banking account. That number will change based on your overhead and the specifics of your business. If you’re responsible for a lease, auto payments, or something similar, you want to make sure all of that is covered — maybe even for longer than three months.

On the other hand, if you’re running this business from your garage and your expenses are limited to a few software subscriptions and maybe the cost of replacing your computer, you can be a little faster and looser with your cash-on-hand framework.

Regardless, you need to be able to stay open even if you have an extended rocky period. Ideally, you’ll also have reserves set aside so that you can continue with your growth strategy. That will include money for at least entry-level marketing and promotions. This isn’t something you want to be figuring out when the going gets tough. Emergency reserves should be around at all times — ideally never needed, but always accessible.

Tailor Your Messaging to the Moment

Today’s tariffs are an excellent example of an external element adding uncertainty to small businesses. For some companies, costs are going up, margins are thinning out, and it’s becoming impossible to deliver the same level of service as before — or at least not feasible at the usual price.

There are a few ways to handle this situation. First, you can decrease your margins and work on maximizing volume. You understand that you won’t make lots of money off each sale or service, but you also know that effectively shuttering your business until tariffs end is not a move you want to add to your playbook.

In this case, you might pare down your margins as thinly as possible and focus on cross-sells or up-sells to capture a little extra revenue.

Your business may not provide the same gains you’re used to, but it can maintain momentum. That way, when the tariffs are over, you’ll be able to resume your typical growth patterns and probably have a leg up on other companies that took a few steps back.

You can also be upfront with customers about whatever you’re struggling with. Their understanding will only go so far, but it can help take the bite out of price increases. People know about tariffs and supply chain issues.

Put it out there: this is what’s happening, this is what we’re doing about it, and this is how it impacts you. People will be more understanding. The key is to have a disaster-readiness plan in place before you’re feeling the pressure of a crisis. It should be like any other system within your business — a pre-programmed response that you can reach for when the situation calls for it. 

Price to Match Demand

The extent to which this recommendation is possible will depend on your business. For example, a coffee shop making 10% margins on its products can’t really move prices too much one way or the other. But let’s say you’re a service company in the HVAC business that’s booked three weeks out. Under these circumstances, you can afford to be more aggressive in your pricing strategy.

If someone calls looking for an appointment and you know you can’t get to them for two and a half weeks anyway, you can comfortably give them a higher-than-typical quote. Why? For one thing, you don’t have much to lose because you’re already busy.

For another, you might be surprised by what percentage of people actually say yes.
It’s in this stage, when businesses are starting to get busy, that they’re able to play with pricing strategy and start experiencing faster growth and greater profitability.

On the other hand, if you hit a slower period, you want to move prices downward. This helps you get jobs on the schedule, fill yourself back up, and work your way back toward profit. The key is to make sure you’re pricing consistently to meet demand, even if that consistency corresponds with whatever situation you’re in.

In other words, you should have a clear pricing model for when you’re busy and a separate but equally precise one for when you’re trying to pick up demand. This approach can help with large-scale business challenges like recessions or tariffs, and it can also help you successfully navigate seasonality.

Accept a Degree of Uncertainty

If you’ve done everything we’ve discussed — if you have a proven product or service, cash in the bank, and systems designed to eliminate as much uncertainty as possible — the only step remaining is to get used to a little bit of discomfort. If you wanted a guaranteed paycheck, you should have gotten a 9-to-5.

Business ownership comes with a lot of benefits, but at the end of the day, there’s a price you pay. Generally, it can be described as comfort and certainty. There are things you can do to insulate yourself from risk. Getting a degree in business, for example, can add valuable skills to your resume and equip you with tools to improve your business model exponentially.

At the end of the day, though, your biggest job as a business owner is just to stick around. The bad times will end eventually. If you’re prepared adequately, you’ll be able to capitalize on the new money coming in

This article has been published in accordance with Socialnomics‘ disclosure policy.