8 Ways to Recession-Proof Your Business

If the blaring headlines of tech company layoffs and investors tightening their purse strings have taught us anything in the past few months, it’s that an economic downturn, or recession, is upon us. In fact, our country has faced thirteen recessions since 1945 (that’s about once every six years, on average). Our economy is constantly evolving and advancing—and yet its fluctuation is ironically the most steady constant throughout the years. The key lesson to learn here is this: Recessions will always be a part of the business cycle. 

If this much is true, the best thing an entrepreneur can do for the long-term survival of his/her business is to spend time throughout the business cycle recession-proofing it. Those who take action now will be the business leaders best equipped for any economic circumstance. The most important aspect of recession-proofing a business is that it has to happen in the in-between moments. 


In other words, business owners should be strategically implementing practices to ensure their business is as recession-proof as possible—even while the economy is looking great—rather than scrambling to come up with a plan once a recession hits. Because at that point, it’s too late.

So how exactly can a business owner prepare for the unexpected? Like we said, a lot of it has to do with getting ahead of the game. As the old saying goes, if you fail to prepare, you’ll prepare to fail.

Here are a few ways you can arm and prep your business for a recession:

Learn from the pandemic.

Though the pandemic was not officially classified as a recession, there were many aspects of the economy that reflected that of one. Business slowed down, people were spending less money, and many companies were pinching pennies just to make it through the next month. Think about the things that worked, the things that flopped, and the role that creativity played in all of the chaos. 

The pandemic was also the cause of mass layoffs and inevitably, the Great Resignation, otherwise known as the mass exodus of employees who left their current jobs for other offers. Take a look back at how companies handled these layoffs, if they benefited from them, and how they maximized the productivity and ROI of their workforce.



Stay creative.

While this may seem cliche, it’s more crucial than you’d think. Many businesses serve a specific purpose or sell a certain product or service. And while there’s room for variability there, it’s part of the company’s core function and brand to represent one idea. However, in the midst of a recession, business leaders may be forced to pivot and rethink the way they position their business—in some cases, they may even need to think about how to repurpose a product or service that may not be as high in demand anymore. Creativity can help businesses stay afloat and increase profitability, even in the hardest of times.


Keep track of your cash flow.

Business leaders should always be monitoring and managing their cash flow well, but especially during a recession. Without a great amount of visibility and control, cash flow can make or break a business financially. Staying on top of cash flow ensures that nothing gets missed, payments are made on time, and there are incentives that can be offered to keep payments coming in in a timely manner. In addition, it may be strategic to create recurring cash flow forecasts for the next quarter to keep the management and executive teams on the same page and ahead of the curve.

Manage your debt and be smart about where you borrow.

If you have any debt, make sure you have a plan in place to be paying it down. The best position to be in during a recession is debt-free. However, that may not always be a possibility for business owners. To better manage debt, business owners should be looking for ways to cut back and reallocate finances towards paying down debt, and being smart about the money they do need to borrow.

The truth is, there are countless reasons why businesses would need to take out a loan or borrow money. 

While being in debt is never really a great thing, entrepreneurs have the opportunity to gear their loans toward growing their operations and streamlining their processes. That being said, small businesses do not have the same amount of leeway as large corporations do, and should always be cautious of the money they borrow.



Build up an emergency fund.

Many individuals are advised to keep a “rainy day” fund of up to 6 months worth of income in the event of a layoff or an unexpected cost. Businesses should do the same. Having an emergency fund can grant your business extra time when faced with uncertainty or an unexpected outcome—which can make all the difference. Additionally, a lofty emergency cash fund can help your business cover up to six months of essential costs including payroll, inventory, overhead and utilities.


Create a plan of action in advance, just in case.

The best time to plan for a downturn is way before it happens. Planning out well-thought out plans will benefit your business for practically any scenario that can come your way. Having plans in place can also reduce stress for business leaders in times of duress and help minimize the number of potential errors made.


Pursue strategic partnerships.

Partnerships are generally a great way to market to people who are typically outside of your target audience base. This is because partnerships can bring a unique service or product into the picture that wasn’t there before. When choosing potential partners, business leaders should band together with companies that will strengthen their value proposition and add to the company’s overall durability and quality.


Invest in your existing customers.

When the economy starts to slow down, it can be easy for business leaders to scramble to try and keep as many customers as they can. However, losing customers is a natural part of a recession. But fear not! It’s not all bad news.

While seeing a reduction in your customer base is never a good feeling, it means you can dedicate more of your effort and time investing in the customers who stay. Those who stay are likely most loyal to your business, and are worth investing in to keep. In fact, upselling and cross-selling your existing customers is more cost-effective and brings in better rewards than trying to recruit and sell to new customers. When your customers know how much you value them, they’ll stick around and continue using your services and buying your products.



Here’s the good news: 

Recessions will come and go, but they will likely keep happening in phases for a long time. The best thing businesses can do is be prepared. Recession-proofing your business may seem intimidating at first, but all it takes is planning and strategizing. This will likely require real-time analysis of financial data, accurate bookkeeping, regular check-ins with management and executive staff, and more. Ultimately, it can be easier than you think to make sure your business is equipped to handle any economic curves that come your way.


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