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Recession Planning

by | Apr 18, 2025 | Uncategorized

Nobody wants to talk about recessions until we’re in one. And by then, it’s too late to plan. So let’s talk about it now.

I’ve been doing this long enough to see a few downturns, and the businesses that survived them all had a few things in common. They weren’t bigger, smarter, or luckier. They were prepared.

Here’s what recession planning actually means:

  1. Know your numbers cold.
    • What’s your breakeven point?
    • What’s your minimum monthly revenue to cover fixed costs?
    • How long can you operate if revenue drops 30%? 50%? Zero?
    • If you can’t answer these, you can’t plan.
  2. Build a cash reserve.
    • The old rule of thumb was three months of operating expenses. After 2020, I tell clients six months if you can manage it.
    • Keep it separate from your operating account. Out of sight, out of mind.
  3. Review your fixed costs.
    • What can become variable?
    • Can any subscriptions be paused or downgraded?
    • Is anything on autopay that you forgot you’re paying for? (You’d be surprised.)
  4. Diversify your revenue.
    • If one client accounts for more than 25% of your revenue, you have a concentration problem.
    • If one product or service line is carrying the business, you have the same problem.
  5. Strengthen your client relationships now.
    • In a downturn, clients cut vendors they don’t love. Make sure you’re one they’d fight to keep.
  6. Line up credit before you need it.
    • Banks will give you a line of credit when you don’t need the money. They won’t when you do. The Small Business Administration has programs worth knowing about (SBA 7(a) loans).

Here’s where AI automation matters for recession planning: real-time cash flow forecasting that used to require a dedicated analyst is now something I can set up in an afternoon. Tools that model scenarios (what if revenue drops 20%?) and flag early warning signs are accessible to businesses of every size.

The worst time to start thinking about a recession is during one. The best time was yesterday. The second best time is today. I’m not trying to scare you. I’m trying to save you. Plan now so that when things get tight, you’re the business that’s still standing.