Two Ways to Recession Proof your Business

Business owners don’t need the Federal Reserve to know when cash is tight and sales are slow.  When the economy takes a hit, it's time to focus on what you can control to strengthen your company and recession-proof your business: Control cash flow and strengthen decisions.

The economic jury is still out on whether the economy is or will be in a recession, but business owners don’t need the Federal Reserve to know when cash is tight and sales are slow. 

As a CFO, advisor, coach, and mentor to over 100 business owners, I know that when inflation hits, sales decline, and hiring is tough, it's time to focus on what you CAN control.

Keeping your eyes on what’s right in front of you is the absolute best way to recession-proof your small business!

Recession-Proof your Business Tip #1: Control CASH Flow

One lesson I’ve learned repeatedly as a CFO: cash management is the #1 skill that can make or break a business. Controlling your cash flow is extra important as you try to recession-proof your business.

Thankfully, I’ve got you covered with three steps for keeping your cash in check! ✅

Step 1: STOP the Cash Bleed 🩸 

The first thing you need to do when getting a handle on your cash is to cut, slash, or delay expenses.

Start by reviewing everything you’ve spent money on in your business during the last 90 days. Then...

  • Cancel all subscriptions you are not currently using

  • Delay projects that aren't directly tied to new sales

  • Look for other expenses you could eliminate or scale back (including your team and consultants, sadly).

Step 2: Monitor Cash 👀

Once you’ve stopped the bleeding and prevented any unnecessary cash from leaving your business, keep a close eye on the money in and out. Also, be sure to look ahead to find the shortfalls in where your money is going.

Create a week-by-week cash management spreadsheet tracking the following:

  • Your Opening Balance

  • Cash In (sales, loans)

  • Cash Out (payroll, expenses, loan payments, credit card payments)

  • Your Closing Balance (Opening Balance + Cash In - Cash Out = Closing Balance)

CFO Pro Tip: The closing balance of this week is next week's opening balance.

Repeat for the next 6 to 12 weeks so you can see when cash is tight and adjust. Check out this detailed explanation of how to build your cash flow.

Step 3: Build a Cash Reserve 💰

Once you’ve gotten a handle on your cash flow and know what’s coming in and out regularly, you’re ready to build up a reserve of cash. And my personal recommendation for doing that is harnessing the tools and system inside Profit First by Mike Michalowicz.

Why am I so in love with Profit First? First, because it works!! And because it’s so easy to understand! The system in this book applies human behavior principles to managing cash to help thousands of owners run profitable businesses.

Using Profit First, set a clear cash profit target or percentage of your cash revenue that you want to save. Then, follow these steps:

  • Open a new bank account called Profit Reserve

  • Every Friday, add up all the deposits made into your bank account over the past 7 days

  • Multiply that number by your profit percentage

  • Move the calculated cash profit to your Profit Reserve account

  • Move the remaining funds to your operating account to spend as needed.

  • Leave the profit reserve to accumulate for a full quarter — DO NOT use these funds on operations. 

CFO Tip: To ensure long-term success, begin building your cash reserve only after you have a few weeks of stable cash flow and have paid off any high-interest/short-term debts.

For more on what Profit First is (and what it is NOT), check out this blog on 3 Profit First Myths You Can Forget.

Recession-Proof your Business Tip #2: Upgrade Decision Making

You’re monitoring your cash and building a reserve. Woohoo! 🎉🎉

The next step to recession-proof your small business is to make sure your decisions are informed and aligned with what you want for your business now AND post-recession.

Making crisp and clear decisions is one of the top characteristics of successful business leaders. Still, many people go through life and business without ever learning what goes into a "good" decision-making process. If this is you, you’re in the perfect place to start!

7-Step Decision-Making Process

While the exact process will (and should) vary from one business to another, the key steps in any decision-making system must include these 7 steps: 

  1. Define the problem or obstacle you need to resolve — establish the focus for the decision process.

  2. Clearly state the outcome you want — be specific.

  3. Identify possible solutions — be creative!

  4. Gather data about each option — be rigorous.

  5. Understand the risks of each one — look into the future, and ask “what could go wrong?”

  6. Choose and commit — document the decision and your reasons for choosing that path.

  7. Evaluate both the business decision process and the results of the decision. Do NOT skip this step! 

Your decision making process will continue to evolve and become even stronger when you take time to reflect on the quality of how you made each decision. Remember that a good outcome does not mean that a good decision process was used.

Being deliberate and focused on using clear decision processes during a recession will help you avoid being triggered by fear, regret, or other emotions that cloud our decisions. This can only make you stronger and better positioned to grow and achieve your goals when the economy improves again. (Because, yes, it will eventually!)

In the meantime, if you’re ready for more support and money talk that actually means something...

Subscribe to our newsletter: Speed Notes.

Twice each month, you’ll receive a newsletter with solid tips and tools for growth-oriented business owners who use numbers and values to drive decisions. 

You’ll be the first to get in on new resources like:

  • 10 tips you need to improve cyber-security for your business

  • How to choose the right bank, investor, or partner for your business — without sacrificing your social impact/social justice priorities 

  • How and why to produce a Social Impact report along with your financials


“If you care about both profit and social impact, this is the newsletter you need.”