A recession happens roughly every six years. There have been 11 recessions in the US since 1948. They span out differently, from as short as two months, which happened in 2020, to as long as 18 months during the Great Recession in 2008. 

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Recessions are an inevitable, natural part of an economic cycle. Businesses will go through this painful and alarming period. It may result in decreased income, decreased wholesale and retail sales, decreased industrial output, and higher unemployment.

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What’s important to note is that recessions are temporary. There are means to creating a business that is recession-resistant and continues to generate revenue through changing economic conditions such as a recession.

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Make Your Business Recession-Proof

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1. Conduct a business health check

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Just like your car, which goes through a mechanic’s assessment and maintenance, your business should also undergo regular checkups to foresee any potential problems. Reviewing your operations and financial health should be scheduled every quarter.

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2. Plan for changes ahead of time and forecast different scenarios

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To avoid going out of business, it is essential for businesses to develop a plan for any future changes, such as those brought on by a recession. Manage business changes efficiently and productively to help your company push through any economic condition.

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3. Keep an open mind for your business

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When owners establish their businesses, they have a specific vision and mission in mind. But throughout the months and years, the market and economy will always change. Being flexible and able to adapt to change should be practiced to keep the business intact and relevant.

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4. Determine your risk tolerance.

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Running a business involves a lot of risks that need to be considered normal occurrences. A business should know both its risk appetite and the level of risk it can tolerate. Risk appetite means knowing the amount and type of risk the business can take. Risk tolerance is how much loss or deviation the organization can be comfortable with based on its objectives and risk appetite.

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Taking the risk appetite and tolerance into the context of road speed limits, the risk appetite would be 0 to 70 mph, the risk tolerance would be 70-80mph, and the unacceptable risk would be anything above 80 mph.

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5. Maintain good cash flow 

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A positive and consistent cash flow is possible when you’re able to maintain good financial health for your business. Managing your bills, payroll cycle, supplier payments, reviewing credit policies, and utilizing other tools like a business credit card are worth looking into regularly to help your business become recession-proof.

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6. Secure a business emergency fund 

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Cash reserves for natural calamities like typhoons, earthquakes, fires, and floods are of great help for businesses that experience such unexpected events. Business owners may not be able to control the occurrence of a recession, but having an emergency fund will help a business continue to thrive in an evolving economy.

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7. Reduce expenses whenever possible

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Review your costs in different aspects of your business. Take a look at your supply expenses, optimize any production costs, review your insurance policy rates, and maximize remote settings, and online marketing strategies. You can also consider the option of hiring a cost-reduction expert so you can prepare your business before a recession takes place.

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8. Manage debts 

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Managing business debt is time-sensitive especially when you’re dealing with one that you’re not too comfortable with. What do the interest rates look like? Do you think you need to negotiate the rates and terms? Are you able to turn things around by creating more revenue sources? Is debt consolidation beneficial for your business? Look into these aspects to see if this financial debt is still beneficial or if it’s becoming more of a burden.

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9. Diversify your market 

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Growing your business through diversification has its own rewards and risks. Diversification itself has many types, but if done right, it can help your business ride out a recession. If you’re offering something related to your current products or services, tapping a market wouldn’t be as complicated as if you were to incorporate a completely different business offering.

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10. Maximize marketing strategies

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Recession can certainly bring a lot of doubts and worries for both consumers and business owners. Businesses shouldn’t hesitate to level up their strategies and action plans. Yes, consumer spending might go down, but you shouldn’t be quick to assume that your market won’t be interested anymore because of a recession.

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11. Inventory management

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For businesses in the retail trade, having good inventory management is essential to the life of the business. This lets business owners have real-time knowledge about their raw materials, product demands, and pricing.

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12. Manage growth activities

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Go back to your company’s objectives and review which growth activities should be given priority. Check when it is optimal to start hiring again and review your budgets. Always continue to adapt to your customers' needs and take care of your current customer base.   

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13. Consider adopting technology

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If you haven’t yet, seek partners that will help you automate certain aspects of your operations. The easiest fix is to apply it to payment systems and billing.  

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14. Team dynamics

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Taking care of your team, whether they are full-time employees, part-timers, or freelancers, should be a constant activity. If your people share the same vision for the business, they will certainly help your business weather any economic changes such as recessions. 

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Build a company culture that is positive and promotes a healthy working environment for everyone.

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15. Build strong customer relationships and ensure customer service is dependable

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It’s true that taking care of existing customers is a must. It will cost a business more to acquire a new set of customers than to keep the current ones and encourage them to continue purchasing.

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16. Quality over quantity

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Never sacrifice quality over productivity. Even if your business had to downsize, ensure that your remaining staff is able to ensure quality work instead of simply rushing to meet production goals.

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Thriving Through an Evolving Economy

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Recession can recur at a certain point in your business but remember that it is temporary. Businesses that are able to prepare and power through over their competitors can secure their position during major economic events.

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