4 Tips: How to Recession-Proof Your Business

Historically, the global economy has lent itself to spending and growth and economic downturns when spending freezes, and businesses and consumers everywhere suffer the consequences. According to the experts, the recession is around the corner, so what action plan should a business leader undergo in anticipation of a halt in business, whether Consumer-2-Business or Business-2-Business?

Understand that economic recessions are a natural part of the ebb and flow of our capitalistic economy. Some variables tend to presage economic downturns—such as rising inflation and an increasing unemployment rate—but these alone aren't enough to definitively conclude when the next crisis will strike. Accordingly, you need to keep your business prepared for anything.

How can business owners protect their businesses against an economic recession? Not every business is the same; for example, companies that serve consumer needs rather than wants will have an easier time surviving the next crisis. Consumers tend to cut back spending on luxury items and other non-essentials, putting businesses that produce and sell those goods in more serious jeopardy. Still, almost every business will feel the effects of an economic downturn in some way, and these are the strategies you can use to protect yourself:

1. Diversify

Diversification is a risk management strategy that can assist leaders during an economic downturn. Two fundamental forms of diversification are (a) diversification of your portfolio and (b) diversification of your client pool.   

• Diversify your business portfolio- Consider diversifying business and personal investment (business products and services).

• Diversify your client pool by seeking relationships with different companies (and target demographics). The more you hedge your bets here, the fewer chances you'll have to experience the worst parts of a recession or economic slowdown.

2. Have an emergency plan

One of the essential documents in every business leader's arsenal is an emergency plan. In business, an emergency could be:

• losing your top client,

• running low on cash,

• experiencing a significant decline in sales or

• being forced to close one of your physical locations.

Think things through, and prepare for the unexpected.

3. Understand the unique demands of your industry

Research your industry and competition. Your greatest assets are your chambers of commerce, mentors, and other leaders who are in similar industries.

4. Prepare for potential budget cuts

Know your business's financial health, devise a plan, and understand where you would make budget cuts in PS (personnel systems) and OTPS (other than personnel systems).

If you follow the above salient tips, you will likely have a much easier time navigating the next inevitable market crash. Remember, fluctuations are a natural part of our economy, and recessions are unavoidable. All you can do is prepare for them the best you can, understand where they come from, and remind yourself that downturns are only temporary.