12 steps your business can take to get recession ready

When economic activity is declining and recession rears its ugly head, what can you do to help recession-proof your business? In this article we set out 12 steps that will prepare your company for a recession. They can help you batten down the hatches during times of slower economic growth while also laying solid foundations for better times ahead.

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Published: 14 Nov 2022 Updated: 14 Nov 2022

In the current climate of high inflation, rising energy costs and supply chain issues, company directors must understand their business, its cost base and the potential impact of different scenarios on overall performance. These 12 steps can help you make sure your business is recession ready.

1. Understand the outlook for your business

High inflation and rising interest rates make it critical to understand your business value levers, cost base and cost drivers. What is the best way to do this? By preparing a comprehensive business plan and integrated forecast model.

Need help? Our experienced team can support you in reviewing, optimising or preparing an integrated financial forecasting model and show you the impact of key drivers on your performance.  

2. Identify cost reduction opportunities

Reducing costs without affecting business performance is the key here. In this high inflationary environment, have you considered your cost base and where you can make cuts?

How do we tackle this for our clients? We combine benchmarking with bottom-up overhead cost reviews before proposing areas for improvement and reduced spend. These could include insurance, professional services and finance cost savings. We also optimise procurement processes, focusing on pricing, economies of scale and payment terms.

3. Manage your cashflow effectively

Do you have the cash you need? With so much focus on profitability, businesses often don’t pay enough attention to liquidity. But if you’ve got significant debt – and with restrictive covenants – this can quickly cause big problems. In times of recession, managing cashflow is key.  

What’s our approach? We seek out and resolve those cash drains and spot opportunities for improvements. Using data analytics tools, we identify and return value from locked up cash and put in place optimised working capital processes.

4. Improve employee retention

Providing your employees with a competitive and tax-efficient benefits package can help retain and attract the best staff. This is vital against a backdrop of labour shortages and cost-of-living rises.

How can we help? Our team can support you in optimising your benefits package and offer a free employee benefits health check to benchmark your package.

5. Align the interest of employees with your company

How engaged are your employees? And are their interests aligned with those of your business? Offering key employees a stake in your business via share options or incentive plans can make all the difference.

We can help you achieve this while also supporting your employees with financial wellbeing seminars and tailored advice. 

6. Maximise cashback from investment in innovation

The UK Government incentivises innovation, providing generous tax breaks to businesses investing in research & development. This includes cashback for SMEs. But many companies aren’t claiming what they could. Are you one of them?  

How do we support businesses like yours? By identifying eligible expenditure and maximising claims. We can work on a contingent fee basis so you only pay for our services if there is a claim to be made.

7. Simplify complicated group structures

Are you one of the many businesses with a complicated, difficult-to-manage group structure? It’s a common occurrence and a big cause of increasing headcounts, risks and costs.

What can we do? Our team is here to help you streamline your structure to reduce this administrative burden, eliminate unnecessary costs, improve operational efficiencies, release trapped value and minimise tax risks.

8. Proactively manage your business rates liability

Business rates are frequently one of the largest overheads for businesses operating in the UK. But with careful planning and expert advice it’s often possible to reduce your business rates liability. 

How do we help clients? We liaise with the Valuation Office Agency (VOA) to ensure a fair business-rates assessment and make sure your business is claiming all appropriate reliefs.

9. Access real time, easy to digest business information

Are you plagued by business information that is out of date, has an inaccessible format and is so difficult to use that it is not effective?

Our team can produce live, drillable dashboards. These combine internal and external information to help you identify trends and track KPIs specific to your business and sector.

10. Capitalise on capital expenditure

Capital allowances offer tax relief on qualifying capital expenditure. But the rules are complex so businesses often understate their capital allowance claims. To get your business recession-ready, make sure you haven’t left any valuable tax or cash savings on the table.

Our capital allowance experts can work with you to identify all qualifying spend and make sure you’re claiming your full entitlement.

11. Make sure you’re achieving expected synergies from acquisitions

Integration is the last step in an M&A process. It requires time, effort and co-ordination and if executed poorly, is a significant risk.

What can we do to help? We have experience in planning ahead as well as troubleshooting so our team can help you achieve the value behind your deal rationale and make sure your integration is properly embedded.

12. Maximise the tax efficiency of your business

The tax-efficiency of your business can make all the difference when heading into a recession. By reviewing current tax and indirect tax arrangements, it’s possible to achieve significant cashflow and profitability improvements. Do you know how tax-efficient your business is?

What can we do to improve business tax-efficiency? We can help you review your entire tax environment including VAT recovery, interest deductibility, transfer pricing, R&D reliefs, tax payments and any time-to-pay arrangements with HMRC. 

Evelyn Partners is here to help your business through tough times and beyond

Our experienced team knows how to prepare for a recession and what it takes for businesses to survive a recession and go on to thrive. We’re here to help so please do get in touch.

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