Recession Proofing Your Business

It's critical for business owners and managers to prepare their organizations to survive, and possibly even thrive, through a recession. What steps can be taken to prepare a business to maintain operational integrity during a recession?

In a recent chat for USA Manufacturing Hour on Twitter, host Pavel Stepanov from VirtuDesk led a discussion about this very timely topic.


What is a Recession?


The chat began with participants sharing their thoughts on what a Recession is.


Nathan Dube from Industrial Packaging in Massachusetts said, “A time where economic growth and business slows down alongside manufacturing and distribution.”

Kati McDermith from Manufacturing News in Illinois said, “A negative or downturn in economics.”

overhead-people-meeting-recession-planningPaulie Rose from RCF Technologies in Missouri said, “A recession is a general decline in economic activity and a contraction of economic growth?”

Julia Gardner from Hourly – Insurance & Payroll in California said, “It's when the economy goes AHHHHHH OH NO!”

Kelley Plats from North American Coating Laboratories (NACL) in Ohio said, “Period of economic decline that typically involves trade and other industries. I believe GDP decrease is involved as well.”

Dave Meyer from BizzyWeb in Minnesota said, “A downturn in the production of the economy. Fun fact: the media has predicted 20 of the past 2 recessions :-)”

Jasmine Labelle from velavu in Canada said, “When the economy starts to fall apart!”

Nigel Packer from Pelatis Online in Wales, UK said, “Officially it has always been recognised as two quarters of negative GDP. I understand that the US Gov have recently changed that definition. The original definition still stands in Europe.”

Matt Long from Aviate Creative in New Jersey said, “A general decline in economic activity.”

Brett from FreightPOP in California said, “A recession is a decline in economic activity! GDP goes down (even negative), unemployment goes up, and many businesses see a decline in sales.”

Emily Kite from Obsidian Manufacturing Industries, Inc. in Illinois said, “Period of time when the economy decreases.”

Missy Moorefield from Southern Fasteners & Supply, Inc in North Carolina said, “To put it one way - when the economy has an ouchie.”

Adam Baker from Schooley Mitchell in Pennsylvania said, “Two successive quarters of GDP decline...or at least the was the definition in 2021.”

Michelle Riccetto from Brash Inc in Canada said, “Something we don’t want that’s for sure!”

Ingor van Rooi, a Networking Ninja from Canada said, “A recession is a decline in economic activity.”

Rebecca Prox, a Marketing Pro in Wisconsin said, “From what I understand it's two quarters of negative GDP. I've read that it's not really a recession unless GDP dips 20% or more for that long.”

Host Stepanov said, “This is a period where there is a significant decline in economic activity that usually lasts for months or years. Declaring one depends on key economic health factors.”


Recession Problems for Businesses

The discussion continued with participants sharing what problems arise when a recession hits a business.

Dube said, “A decrease in production and fewer companies spending on new projects or elements for their business.”

Packer said, “Many businesses start to cut back and "save money" First to get hit is the marketing budget. This is the last thing that should be done. Not everyone will suffer. many still need to buy product so keep investing in your marketing and sales.”

Meyer said, “A sure way to start a death-spiral. The analogy I tell my clients is: if you need to run a marathon, the one way to be sure you don't finish is to stop eating before the run. Marketing is food for business

Plats said, “This right here! Marketing is the first thing that is "expendable".

Labelle said, “Businesses of any size are likely to reassess their operations and spending during a recession.”

Meyer said, “There's a bunch, but the obvious ones are 1) financing gets more spendy (higher interest rates) & 2) as consumer confidence falls purchases from customers start to slow down. This round is super weird though: it feels more like a covid hangover than an implosion.”

Chase Bodor from Plastics Plus Technology, Inc in California said, “Yeah the covid hangover is real. We haven't seen purchases slow down extremely except for the highs from covid coming back to nominal-ish. But as consumers are more conscious of how they're spending it is bound to slow down.”

Phil Samuels from Intuilize in Texas said, “It has traditionally been a time for businesses to reassess there operations and make the necessary belt-tightening moves, while still being smart about having momentum when the economy recovers.”

McDermith said, “One of many things I see is far too many mass layoffs!”

Ruby Rusine from Social Success Marketing in California said, “I'll go with Kati on this one.”

Moorefield said, “Like Kati said - layoffs. And with that, companies tighten their belts. Pushing off upgrades that need to happen.”

Gardner said, “It’s gotta affect profits, hiring, everything.”

Long said, “Loss of clients, loss of profits, loss of staff. Basically, a lot of loss.”

Riccetto said, “Layoffs, cuts in spending, overall decline in sales and profits (for most). The list goes on and on…”

Kite said, “Lack of sales and income coming in which can lead to layoffs.”

Bodor said, “It exaggerates problems we're already seeing in the supply chain and labor.

He continued, “I read a fascinating article showing how qualified workers (who are applying) will actually opt out of the hiring process due to uncertain economic conditions. That is scary.”

Host Stepanov said, “I saw this one as well. And it's crazy.”

Bodor said, “It's one thing to have competition for work. It's another to have qualified candidates just sit out of the workforce altogether. I'm sure that has implications for how much money flows through the economy in general.”

Rusine said, “Typically companies tighten their belts - and that means businesses could lose clients. Then, I can only imagine the domino effect of that.”

Baker said, “Short term thinking creeps in - the focus is on today and poor long-term decisions get made.”

Prox said, “So many! Recessions stop people from spending.”

Plats said, “Decrease incoming projects/revenue, potential redundancies, hiring/salary freezes...overall just not a good time.”

van Rooi said, “Declines in sales and profits...ultimately less money.”

Host Stepanov said, “Businesses make fewer sales and profits so they cut capital spending by laying off people, decreasing production, and finding cheaper materials which affect the quality of their products. The worst is, leading some businesses to bankruptcies.”


Preparing for Economic Downturns


The discussion continued with participants sharing their thoughts on what steps need to be taken to prepare a business for economic downturns.

Rusine said, “Any business should always plan BEFORE a downturn or an economic set back. Then, this is when that plan is executed...and there are many steps.”

She continued, “..and I don’t want to dwell on it because it’s not a fun thing to dwell on. It’s a reality that business owners like me are facing right now.”

Labelle said, “Try to find bottlenecks in your operations - where are you wasting time and money?”

Prox said, “The best thing is, we can usually see it coming. Pare down to the essentials, live within your means, follow companies that have done this well in the past.”

Moorefield said, “I feel like I should have better ideas on this, but the only thing popping in my head is - see what corners can be cut without hurting quality.”

Sri Mahabir from Next Level Consulting in Texas said, “How can you pivot during this time? What are parts of your business that are doing well? Where do you see opportunity where you could make an impact.”

Moorefield said, “Oooo, nice!”

McDermith said, “I feel like when we are ahead we need to set ourselves up for success for the times when we struggle. Not just economically...”

Baker said, “I really feel like this is a softball - make sure your expenses are as low as they can be without negatively impacting operations and also have a plan in place of what levers you would pull in what order to handle the impact of the recession.”

Meyer said, “You need to be flexible and able to pivot. This is super tricky for many manufacturers when sometimes a sale can take months or years. There are a lot of great people in this community that can help with supply chain, new marketing ideas (ahem), and sales pivots.”

Host Stepanov said, “What do manufacturers do to be flexible at these crucial times?”


Meyer said, “New markets or applications for your product, changes to production/supply chain (local vs. international with covid delays/etc.), finding new ways to reach potential audiences and customers and much more. One of my favorite things is brainstorming ideas with clients.”


Dube said, “Create content educating prospects and customers about opportunities where spending during a recession will pay of great dividends for their business and get them ahead of their competitors.”

Brett said, “Start with actually having a plan! Businesses should always be prepared for emergencies. Find out areas you can cut costs in order to keep as many employees on board as possible and make sure to communicate with your clients so no one is left in the dark.”

Baker said, “This is terrific. Some companies start with labor cuts and all that does is create mistrust amongst employees. If employees know you've done everything you can before you get to them, while they might not like it, at least the ones left will still trust you.”

Riccetto said, “Invest in technology, focus on decision making and most importantly make sure to maintain, nurture and improve your current business relationships.”

Samuels said, “1) Recognize it 2) Don’t overreact 3) Remember to have a war chest before it happens 4) Don’t forget recessions end. Be prepared to take advantage of competitors mistakes. 5) Plan for growth.”

Bodor said, “I think having that "war chest" is important. I think hedging your potential losses is good and protecting yourself as well as your customers is crucial.”

Host Stepanov said, “I like these steps, Phil.”

Felix P. Nater from Nater Associates in North Carolina said, “Keep extra cash under the mattress.”

He continued, “I will say that during the banking crisis, my American Express Card was a noteworthy financial back up.”

Kite said, “Making sure you aren't spending unnecessary money that won't directly benefit the company.”

van Rooi said, “Retain current and pursue new customers; keep up with trends and remain current in your field.”

Plats said, “Don't panic and don't make rash decisions. Stick to a plan and be smart! Cut where you need to, but not in areas that are imperative to your brand and strategic objectives.”

Nater said, “I found creative marketing solutions. I accepted an Honorarium speaking arrangement in exchange for travel and longer lodging stays and access to the organization's members.”

Packer said, “Read the business press to watch out for the indications of downturn or upturn. FMEA the scenario to prepare a plan B. This should be an ongoing exercise at any state of the economy.”

Host Stepanov said, “Planning ahead of time is crucial if you want to keep your business performing and staying afloat amidst economic downturns.”


He continued, “If you don’t have a contingency plan for your business, you can do the following steps in anticipation of a recession:

  • Do a cash flow forecast and restrategize
  • Focus on operational efficiency
  • Switch to digital work
  • Outsource
  • Keep on Marketing
  • Nurture Relationships”

Prox said, “Thank you for saying "Keep on Marketing." So many companies take money OUT of the budget for marketing when there's an economic downturn, but marketing is an essential bone in the skeleton of a company.”


Recession Resistance


The discussion turned to the factors you should consider to make your business resistant to the effects of recession.

Prox said, “1. Protect cash flow 2. Review your inventory, make adjustments 3. Don't cut back on marketing! 4. Win more customers from the competition.”

Samuels said, “Are there cuts that SHOULD be made? Products, processes and employees that you were reluctant to address in good times—now the recession is a reason to not reward things that don’t work. How do I position the business to have momentum out of the recovery.”

Amy.M.Anderson said, “This is an important part of the planning for dealing with an economic blip... "How do I position the business to have momentum out of the recovery."

Meyer said, “Phil (& your RT) nailed it pretty well. If you can pivot a bit, survive and perhaps lean on your reserves a bit, and pay attention/be ready to invest when things come back, you can thrive out of a recession. But you need to be proactive above all.”

He continued, “Tighten your belt and make safe bets. Panic & inaction kills more businesses than competition in a recession. Don't bury your head in the sand.”

Plats said, “Have a handle on your cash flows! Stay connected with your teams! Don't be afraid to spend the marketing dollars! When in doubt, refer to your strategic plan.”

Mahabir said, “1.Think twice about big expenditures 2. Look at you can do resource allocation and cross-train the team in certain areas.”

Moorefield said, “Going along with others - have a plan. Always be mindful of spending and, if spending is cut, make sure it's in appropriate areas.”

Riccetto said, “Don’t panic! There’s nothing you can do to stop an economic downturn. Get creative, listen to your employees and clients, try to stay lean and organized with your operations.”

Brett said, “Don't make any drastic decisions and have open communications with everyone involved in your business (employees, clients, suppliers, etc.). Keep the cash flow tight and leave no stone unturned when it comes to finding areas to save money!”

Labelle said, “Invest - in - technology. Return on investment will be massive.”

Packer said, “Make sure you have good relationships with your suppliers, customers and staff. Be honest with them if there is an issue and deal with any issue quickly, when it arises.”

Nater said, “Factors I considered were intentional. I needed to stand-out from the competition to keep the appeal and attract to new business by differentiating my work. I took risk by blending my work with whom I am. Became more resilient in how I packaged my services.”


Host Stepanov said, “Factors you have to consider: 

  • Keeping your cash flow
  • Maintaining employees
  • Identifying money leaks
  • Contingency planning”


Investing During A Recession

Participants next shared their thoughts on if you should still invest during a recession. If yes, what assets do well during a recession?

Prox said, “I would think that investing would be a good idea during a recession. Stocks are usually down (and cheap). Look for stable balance sheets and steady business. When in doubt, ride it out.”

Baker said, “Yes, definitely invest during a recession....but I'm taking notes on where to put the money....”

Meyer said, “Yes! A careful business can find cheaper materials (sometimes - again w/ covid & supply chain this is really weird right now), can make gains by investing in proactive marketing, and you can find acquisition opportunities if you're in a spot to grow.”

He added, “Investing in automation is a great bet as well.”

recession-proof-tag-brownRiccetto said, “Well said!”

Samuels said, “In the people you want to retain, invest in technology to reduce workload and/or multiply their productivity and determine what investments will help marketing keep your name up front!”

Labelle said, “Productivity is so important. Time wasted = money lost. Technology, like our flexible.”

Host Stepanov said, “Operational efficiency is so important if you want your business to thrive even during a recession!”

Packer said, “I have seen a recession every decade of my life. Just because some have hard times there are still markets out there to buy your products and services. In hard times, it is harder to find your customers but they are there. When the recession is over grow quickly.”

Brett said, “You absolutely can, and many do with great success! It's all a matter of timing. Keep a close eye on your money and where exactly it is going, and have realistic, achievable, trackable goals.”

Plats said, “I would say yes, however what I would invest in are your people. Ensure that your people have the training and support they need. People make the difference!


Hoat Stepanov said, “Yes, you can. Consider investing in the following assets:

  • High-yield dividend stocks
  • Government bonds
  • Real Estate
  • Precious Metals
  • Yourself! (Learn new skills, develop your career, etc,)”


Cash is King


The chat concluded with a last discussion topic about what "cash is king" means and why it is important during a recession.

Moorefield said, “He (or she) who has the cash is king (or queen).”

Rusine said, “I couldn't agree more?”

Samuels said, “Cash is king because it can help you endure recessions if you build it during growth periods. The more I have, the more strategically I can approach a issue!”

Prox said, “Cash is the best option because it doesn't default.”

Host Stepanov said, “Cash is king implies how precious cash is during a recession. Thus, having liquid funds (emergency funds) available can provide flexibility in these crucial times.”



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