3 Strategies to Prepare for a Recession

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When the economy is booming, it’s easy for businesses to grow and expand. But what happens when that growth suddenly stops? If you’re not prepared for a recession, your business might not survive. A recession happens when there’s a general slowdown in business activity. It often leads to falling prices, high unemployment, and reduced wages as a result of businesses cutting costs to remain profitable. Recession can be extremely challenging for businesses that don’t have enough cash reserves to last them through these hard times. Even if you feel like you’ll never see another recession again in your lifetime, it is always helpful to have a backup plan. These are some of the best recession-proofing strategies that will help your business thrive no matter what the economy throws at you.

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Maintain a cash cushion

The best way to prepare for a future recession is to build a cash cushion. This is an amount of money that allows you to sustain your business during times of low cash flow or a recession. The best way to calculate this is by taking your current operating costs and multiplying that by two. You can also think about how long you would be able to last if you suddenly lost 50% of your revenue. Building up a cash reserve can be challenging for growing businesses, but it’s a critical part of your business’s survival strategy. If your cash flow is positive, it will be much easier to keep your business afloat during a recession. Cash reserves can be used in a number of ways. You can use it to fund new projects, cover payroll costs when your cash flow is low, and to buy inventory when prices are low. Having a strong cash flow can help you save your business when times get tough, and keep you from making rash decisions that could damage your business in the long term.

Lay off employees carefully

Layoffs are always a scary but necessary part of running a business. If you’re growing and have more work than your employees can handle, sometimes it makes sense to lay off a few employees so that you can keep the rest. If you put people on a “buddy-system” and give them work that is manageable, you may be able to avoid layoffs for a while. This is much easier when you have a positive cash flow and healthy reserves. If you’re forced to lay off employees during a recession, it’s important to do so carefully. Make sure that you give employees plenty of notice, and try to find them work at other companies if you can. If you lay off employees without a clear severance plan, it can make it more difficult to hire again in the future. A sudden change like a layoff can also make it harder for your remaining employees to get their work done. If you have to layoff employees and a cash flow is low, try to avoid letting them go all at once.

Diversify your services

Your business is likely to experience peaks and valleys as you grow. Sometimes, you have more work than you can handle and other times you don’t have enough. One way to smooth out this change is to diversify your services. If you focus on a single service, you may find that you’re in a valley when that industry is in a peak. It can be hard to find customers when everyone seems to have more work than they can handle. Having a backup plan can help you weather these storms and avoid laying off employees or taking on work that isn’t the right fit for your business. Although you need to make sure that your new services are closely related to your core services, you don’t want your other services to be too closely related. Trying to do everything for a single industry can make your business reliant on that industry and make it harder to find new clients when you’re in a valley.


A recession can be a challenging time for businesses, but they’re also an opportunity to hone your strategies and make your company stronger than ever before. There are many ways to prepare for a recession, but the most important thing is to start planning for the unexpected now. When the next recession hits, you’ll be ready. It’s important to remember that recessions are not constant and you may not experience one in your lifetime. But it’s always best to be prepared for every situation. Having a strong cash flow, diversifying your services, and maintaining a cash cushion will make your business stronger and more resilient.


Hanna Eirian

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