US tariffs and recession fears are in full swing, and a large part of that stems from the ongoing impact of US-China tariffs. These tariffs have started to squeeze global supply chains, driving up business costs and increasing economic uncertainty. 

For startups, especially early-stage entrepreneurs in Singapore, this could mean tighter cash flow, wary investors, and higher operational expenses. The question on many founders’ minds is simple: how can we weather what’s coming? The good news is that with thoughtful financial planning, startups can prepare for the economic storm and emerge stronger.

Why Recession Preparedness is Critical for Startups

Here are a few reasons why startups should prepare themselves for the looming economic recession:

1. Provides financial buffer for emergencies

Emergencies such as delayed payments from clients, increased supply chain costs, or a sudden drop in demand can quickly drain a startup’s resources. However, by having a safety net, businesses can continue operations without panic.

2. Attracts and retains investors

Next, being financially prepared helps attract and retain investors. When investors see that your startup has a clear financial strategy even in turbulent times, they’re more likely to back your venture. It shows foresight, discipline, and leadership, all of which are crucial during uncertain periods.

3. Maintain cash efficiency amidst rising costs

Robust financial planning helps you maintain cash efficiency, especially when costs rise due to inflation and tariffs. Whether it’s pricier imported materials or increased freight charges from the US and recession, startups that control spending can stretch every dollar further and avoid cash flow crunches.

How to Prepare for Uncertainty from US and Recession

The US and recession threats are concrete risks that can affect your business tomorrow. Here’s how to start preparing today:

1. Cut non-essential business costs

First, start with a clear-eyed review of your current expenses. Are you paying for software tools no one uses? Can you downsize your office or switch to hybrid work? Even minor adjustments, such as shifting to a lower-cost vendor, can significantly improve your cash flow. Focus only on what drives growth or enhances customer experience.

2. Reinforce strict budgeting

With economic recession on the horizon, now is the time to double down on budgeting. Every dollar spent should have a clear return. Track your expenses in detail and set monthly limits for each department. Use budgeting tools or spreadsheets to stay on top of this. Your budget should reflect what’s essential to keep the business going and growing.

3. Set aside a portion of your monthly revenue for cash reserves

Aim to allocate at least 10-20% of your monthly revenue to a cash reserve. For example, if your startup generates SGD 30,000 in monthly revenue, setting aside 15% means SGD 4,500 should go into savings. These reserves can be vital during slow months or unexpected disruptions. Make this a non-negotiable part of your monthly financial routine.

4. Run worst-case scenario revenue projections

Planning for the best is good, but preparing for the worst is smarter. Simulate scenarios where revenue drops by 30%, 50%, or even more. What does that mean for your payroll, marketing spend, or inventory levels? These projections help you build strategies to survive hard times and identify weak points early on.

5. Identify quick-adjust levers

Look for areas in your business you can quickly adjust in response to changing conditions. For example, highlight and promote high-demand products or services that customers continue to buy even during a downturn. You can also offer discounts for long-term contracts or upfront payments to secure cash. Diversifying revenue streams in the form of subscriptions, digital products, or packaged services is also a good way to add stability to your income.

6. Focus on customer retention

In a downturn, loyal customers can become your strongest asset and source of income. They’re also more open to upsells or premium offerings if they trust your brand. So, invest in customer service, personalise communication, and reward long-term loyalty. A solid customer base is a valuable shield against the unpredictable nature of the US and recession concerns. It’s cheaper to keep existing customers than to acquire new ones. 

7. Communicate well with investors

Transparency is key. Don’t wait for things to go wrong before updating your investors. Instead, keep them informed of both challenges and solutions. After all, investors understand that market conditions can change from time to time, especially during these turbulent times.

Share your financial runway, cost-cutting strategies, and how you’re preparing for the broader economic landscape. Investors appreciate founders who are proactive rather than reactive. Strong communication can even open the door to more support, financial or advisory, when it’s most needed.

8. Consider short-term financing solutions

If your cash flow is tight but you have a solid plan and steady revenue, short-term financing can help bridge the gap. In Singapore, one such option is the zero-interest Startup Financing programme from Funding Societies. 

It’s designed for early-stage businesses needing quick support without heavy costs. You can obtain a loan quantum of SGD 10,000 or SGD 15,000, repay it over 5 months, and no fees*. As long as repayments are made on time, there is zero interest. Furthermore, you only need to pay a fixed amount a month, making it simple to manage in your cash flow planning.

*one-time fee of $500 applies for Start-Up Financing loan quantum of SGD 15,000

Fintech startup funding Singapore

The US and recession situation isn’t just a headline, and the effects are far from over. While no one can predict the future with certainty, we can control how we prepare for it. For startups in Singapore, this is an opportunity to build discipline, strengthen operations, and emerge stronger than before.

Rather than getting caught off guard, take this time to assess your business’s financial health. Revisit your budgets, streamline costs, and double down on retaining customers. Equally important, stay flexible, stay lean, and keep your communication lines open with your team, customers, and stakeholders.

The keyword in today’s market is resilience, and it starts with being financially savvy. Should you find yourself needing an external source of additional funding, don’t be afraid to explore Funding Societies’ Startup Financing solution!

Dorcas Pang
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