10 Strategies To Protect Your Company During an Economic Downturn (or any time)

We’ve had a great business run over the past 10 years, for the most part. We’ve been lucky that the economy has been positive – we have not been through a serious economic downturn, and business has mostly been great. But can we expect this to last forever?

Of course not.

Business runs in cycles, and we may be due for at least a small downturn or market correction. For any business owner or CEO who has been in business for 10 years or less, you have never ever experienced a downturn in the economy. And unfortunately, this leaves most small businesses vulnerable, unless you take some action to protect yourself.

So how can you protect your company from a future economic downturn? Start now by putting the following 10 strategies in place.



I’ve broken down the 10 strategies to protect your company in an economic downturn into the following 3 simple categories for ease:

  • Financial Management Strategies
  • Client Management Strategies
  • Internal Management Strategies



1. Reduce Your Debt

Do all you can to ensure your debt is low enough that if you lose some clients, you can still survive.  Pay off all credit card debt if you have any. Keep it at zero. Pay the entire balance monthly, and pay down your line of credit as much as you can. This way, if the market falters, you are not at risk.

2. Build Your Cash Reserves

As they say, cash is king. It’s always good to have an emergency fund, but even more so when the economy takes a turn for the worst. Ensure your cash flow is in great shape so if, for some reason, you find yourself a little tight with cash, you have a buffer

3. Keep Your Credit (Both Personal and Business) in Good Shape

If you have great credit and find yourself in need of some extra credit (as a last resort) during an economic downturn, it will be easier to secure an extension on your line of credit. It will also be easy to get a short-term loan if your credit is in good shape. The last thing you want to have to do is use your credit card as a source of funds during an economic downturn.



4. Do Not Be Reliant on Just One Big Customer

This is the time to diversify, if you haven’t already. What if you lost your biggest and best client? Where would you be? Now is the time to ensure you have a great variety of clients and a decent number of clients, so if you lose 10 or 20% of them, you still have sales.

5. Make the Most of Your Current Customers

At the same time… make the most of your current customers and keep them extremely happy! If you do nothing else but go over and above for current customers to keep them coming back, they’ll remember to refer you business. This is the best kind of marketing – having your existing clients spread the good word about your amazing business.

So while it is important to diversify clients, it is equally important to keep your core customers very happy. Make sure you do not increase your number of clients to the point where you can no longer keep them all extremely happy. This way you’ll get on-going referrals that will not dry up as a result of a downturn in the economy.

6. Build Service Contracts with Future Work

Structure your service contracts in a way that ensures you have future work already built. A great strategy for a sustainable business is to get on-going work, rather than one-time work.  One-time work is great, but often is the first to drop off when your clients base is also suffering from a downturn in the economy.

If you secure contracts for on-going work, then you’ll have a buffer if one-off work dries up. And, as mentioned above, you will be much more likely to secure long-term work if your current customers are extremely happy.



7. Look After Your Team

If you look after your team, your team will look after you.  Right now, I have found that every company I work with is having a hard time finding skilled workers. So what happens in an economic downturn? Layoffs. Layoffs happen in order to cut costs. But then you lose the skilled workers you worked so hard to find.

So how can you work together with your team to cut costs? Perhaps everyone agrees to take Fridays off unpaid instead of one person getting laid off. Get creative. Ask them what they are willing to do.

If you are a great leader, they will often work with you in order to keep working for you.

Want to know more about being a great leader? Read What is Leadership? What Makes a Great Leader, and What Doesn’t.

8. Focus on Your Core Competencies

Go back to basics and focus on your core competencies in your business. It’s better to focus on one thing and do that one thing extremely well than to try to do many things mediocre. This is always true, but often in an economic downturn, we feel we should take ANY job just to have work.

So we promise more than we should, and then end up either getting a job that’s not as profitable because you are not yet efficient at it, or can’t complete it with the quality you wish you could.

Keep doing what you are great at, and you will get more jobs as a result.

9. Measure the Results of Your Marketing

Measure your marketing results now so you know what works, and then don’t cut back on marketing. If you have done a great job with your marketing, and have a sound marketing plan, this is not the time to cut it.

If you haven’t taken the time to measure the results of your market so you understand what marketing is working the best for you, now is the time to do this so you can keep counting on great marketing to get you business in a worse economy. Otherwise, an economic downturn seems like the perfect time to cut marketing costs – which could end up hurting your business further.

10. Inventory Control and Diversification

If you rely on supplies of any kind, now is the time (during good economic conditions) to ensure you have great control of your inventory and diversified suppliers.

First, ensure you have great inventory control and, if you need to, can cut it back slightly and still have everything you need for your clients. And it’s best to be able to order from multiple suppliers, not just one. When you rely on one supplier and they suddenly can’t supply you with goods you need in order for you to do business, this can choke your company.

Look for other sources and build a relationship with multiple suppliers so that if one stops shipping to you, you are not stuck.


Key Ideas

  • If you are a relatively new business (10 or less years old), you have not experienced an economic downturn, so you may be unprepared for one
  • An economic downturn will affect any and all businesses, but the impacts can be lessened if you take preemptive steps to cushion your business from economic effects
  • To survive through a market correction, improve your financial practices: eliminate debt, maintain an emergency cash reserve, and maintain good credit
  • Improve your client management: diversify your clients, keep your core clients happy, and create contracts for long-term work
  • Improve your internal practices: look after your team, focus on your core competencies, track your marketing results, and diversify your inventory and suppliers
  • Following the above strategies for smarter financial, client, and internal management will do wonders for your business, not only through market volatility, but during good economic times too!


None of us want to think about an economic downturn, or worse, losing clients.  But if you are risk adverse and proactive with how to protect your company at all times, not just during an economic downturn, your company will not only survive, but thrive!

Still feel unprepared for an economic down turn? Contact us to keep your business growing even when the economy isn’t.




Cindy Piva is Founder and President of Thrive Business Strategies.