Want your business to thrive during tough economic times? The best way to do this is to recession proof your business beforehand.
Recessions are unpredictable. We don’t know when they will arrive. We don’t know what industries will be hit. We don’t know how long they will last. Most of the time they catch us off guard, wondering what happened.
Because of this unpredictability, your business needs to be ready at any time.
The following tips I have gathered over 19 years of running my own business. So, let’s dive in and cover how to recession proof your business.

How to Recession Proof Your Business
Business Finances
We will get the boring stuff out of the way! When boom times are around it is easy for a business to get away with some sloppy financial management. (They shouldn’t but they do!)
Yet, when the economy changes, and business is not as easy to win. Those financial leaks will make it harder to stay in business. How you are able to maneuver in a recession is all dependent on your money.
So, what should you be paying attention to? The following three are the most critical to your business success.
Emergency Funds
Your business should have some extra cash to deal with emergencies. Especially in a recession. Being able to still make payroll, order supplies or go for that next big opportunity will be easier with an emergency fund.
You never know when your competitor might be up for sale, because they did not prepare for a recession. If you prefer you can call it an opportunity fund!
Cash Flow
The time to get a better understanding of your financial flow is before it becomes a crisis. Running out of cash is one of the biggest problems for a business. You may be showing a profit and have great sales, but if you don’t have cash in the bank it does not matter.
Debt
Can you manage the payments if sales go down by 5%? Do you have covenants that might kick in because of a downturn? Understanding this will help you manage that cash flow better. The last thing you need in a recession is the bank calling for more money.
Business Owners Finances
The ability for your business to survive also depends on your own personal finances. If you are living "paycheck to paycheck" or still putting money in the business it will be harder for your business to survive a recession.
With that in mind there are three things you can do for your personal finances that will help.
Emergency Funds
Yes, emergency funds again! They really are the lifeline to your business and personal life staying afloat. Make sure that you have adequate cash to keep you going for at least six months. This is higher than the recommend three to six months, but your circumstances are different. You need more wiggle room.
Income Diversification
Just as your business needs to be diversified your finances should be also. This one is harder to achieve, but if you focus on it overtime it will improve.
Examples include: partner's income, dividend investing, ownership in other business and rental income (unless of course your business is real estate!).
I myself have created a dividend portfolio outside of my business for extra cushion. It has take some time, but every year with reinvesting dividends it keeps getting bigger.
While working on this, ensure your emergency fund is able to cover the gap if your revenues decline.
Overhead Expenses
Take the time to review your fixed expenses. These are the bills you have to pay every month no matter what. While it can be easy to cut back on dinners out and vacations, you have to make your housing and car payments.
The lower your fixed overhead costs are the easier it is for you to trim back and survive a recession.
Balanced Marketing
Besides for having marketing that works, you want to ensure that it is diversified. The combination of these two will help you adjust quickly during tough economic times.
Below are some areas to review to ensure your marketing is balanced.

ROI (return on investment)
It is important to know exactly how much your marketing efforts are paying off. You want each marketing tool to be profitable. Plus you want it to have some wiggle room in-case the cost of the marketing tool goes up. Or you have to lower your prices.
Clients
You want as many different clients as you can handle. If your business is reliant on just one or two for most of your income and one of the goes out of business. You are in trouble.
Expanded Offerings for Products and Services
If you only offer one product or service, it is time to explore other options.
Here are ways to expand:
- Other ways to deliver your service. Can you turn it into a product?
- Are there complimentary products that you can add?
- Can your product or service be broken down into smaller pieces? If you offer a 6 month coaching package is there anyway you can do it in 3 months?
Try and imagine what your customers would want during a recession. Do they want a cheaper service? Do they want more help? Understanding what your customers will face during a recession will help you create new offerings.
Multiple Sources of Clients
Remember Myspace? What if you were getting all your business from there and never adapted as they began their decline? You would be out of business.
If your business now is all from one source, it is time to expand your options. Try and make it something that is completely different. If you are getting all your business from Facebook don’t go to Instagram as your second option. Instead add something like: SEO, live events or association sponsorships.
I see this becoming a bigger problem with the creation of more independent contractors. If you only deliver goods for Amazon, or drive for Uber or shop for Instacart. And things slow down, you are less able to maneuver your business to other places.
How to handle? Work for multiple of them. Or pay attention to the business owner finances earlier in the article.
Business Operations Management
Does your business operate efficiently? Or are you always scrambling to fix something that was missed?
When times are good, it is easy to forget to make your business as well run as possible. It might give you a few headaches, but nothing major.
The problem is, once the next recession shows up those holes in your process will cost you time and money. Both of which will be in short supply.

Operational issues can show up in every area of your business. In order to find where your problems are, start tracking where you have daily problems. Eventually you will see a pattern of what areas may need fixed.
For example, let's say that the problem that keeps showing up is customer no shows. You know then, you need to reevaluate your on-boarding and scheduling process. Where is it getting mixed up? Is it not enough reminders? Poor payment terms? Once you figure out the problem, you can fix it!
Business Strategy for Recession
Having a strategic plan for your business will help you stay on course, no matter what is going on.
When you have a strategic plan, you understand exactly what your weaknesses and strengths are. This helps you quickly adapt when tough economic times to appear.
The strategic plan will also help you make sure that you don't get off track. It is too easy when you are searching for revenue to add products, services and clients that don't fit your business. This is a great way to eliminate any competitive advantage you have in the market place.
Things to Keep in Mind When Preparing Your Business for a Recession
One final thing to cover. Recessions are unpredictable. Not only do we not know exactly when they will occur, we also don’t know:
- How long they will be.
- What will trigger them.
- Which industries will be affected the most.
- How bad it will be.
Because of these unknowns, nothing is guaranteed. You can do everything perfectly. But if it hits your industry and goes on for a long time and is a serve recession – you may still not make it.
As you are working on your business, don’t let anyone tell you anything is guaranteed. That is an impossible promise for people to make.
Do the best you can with what you have. If at the end of the day you can say you did all you could – that is a win.