Recession Proofing for Uncertainty: A Guide for Business Owners

With Halloween approaching, it’s only appropriate that the economy is feeling a little scary right now.

Combine the geopolitical climate, inflation (along with activity designed to combat it), and plenty of insecurity about the future, and it's bound to make any smart business owner a little nervous. Fortunately, most of us know by now that the only certainty in business is uncertainty. That’s why making a few strategic moves to “recession proof” your company has never been more critical.

During challenging macro-economic times, it can feel as though your hands are tied and your organization just needs to hang on and weather the storm (or not). At SAGIN, our goal is not just to survive in the face of uncertainty, but to thrive into the future–no matter what it may hold. We work with clients who have similar goals and often ask about the proven ways to prepare for potential downturns. Here is our best advice on proactive steps you can take now.

5 Moves for Recession-Proofing Your Organization

Keep Labor Flexible

In times of economic uncertainty, flexibility is your best friend. Instead of locking yourself into long-term contracts with employees, consider outsourcing functions that aren’t your core competencies. After all, this is the time to strengthen your business by focusing on what sets you apart from competitors. That means spending time on strategy and execution–not getting bogged down in endless day-to-day tasks.

This is the perfect time to outsource wisely. Think IT, HR, Legal, and Training & Development. All of these areas are ideal for third-party services, allowing you to scale operations up or down based on business needs. Technology is one area where founders tend to struggle, and many of our clients rely on our managed services solutions to understand the latest tools and best practices so that they don’t have to. Another benefit of outsourcing is that you won’t have to worry about layoffs should a real downturn occur, which can offer significant peace of mind.

Evaluate Your Supply Chains

If you thought supply chains were just for logistics pros, think again. A robust evaluation of your supply chains can save you from being haunted by shortages or inflated prices when the economy takes a dive. 

As part of this process, make sure to identify alternative suppliers for your core products and raw materials. This not only mitigates risks but also makes you less dependent on any single source. Being less dependent means you have more power in pricing negotiations. Having backup plans (and a backup for your backup) provides additional options–and greater options provide confidence for whatever comes. Another part of your supply chain evaluation should include considering different unexpected circumstances and how your company will handle them. Make sure any internal stakeholders are on the same page about what forward motion will look like across scenarios.

Lower Inventories

Picture this: you’re staring at a warehouse filled with items gathering dust. When the economy hits a downturn, excess inventory can become obsolete, leading to significant losses during liquidation.

During these uncertain times, we suggest keeping your inventory lean and mean. Maintain higher cash and working capital balances to ensure you can ride out a difficult period. After all, cash is king. You can always scale back up when cashflow feels more certain.

Review Your Physical Locations

The office market in the United States has reached a record vacancy rate. That’s partially due to savvy business owners who understand that holding onto entire unused office buildings is a poor use of resources. Now is the perfect time to assess ROI on any physical locations you have.

Are there opportunities to improve efficiency? Evaluate your offices, warehouses, and service centers to see if consolidation makes sense. Don’t be afraid to talk to building owners about creative ways of making the most of spaces you lease (or getting a break on current rent).  If you can save money on leases without sacrificing service quality, you’ll be a less stressed business owner.

Embrace Automation and AI

Let’s face it: technology isn’t going anywhere. No matter your thoughts on AI in general, it's time to get smarter on it (or outsource to people who are already pros). The fact is, new tools are here to help you cut costs and improve service levels. Implementing automation and AI can lead to significant process optimizations.

Review your systems and processes to identify areas ripe for automation. Whether it’s customer service chatbots or AI-driven analytics, integrating technology into your operations can help you deliver better results at a lower cost. Plus, it frees up your time for more important things that can help your organization innovate and grow. This list has lots of great AI tools that are ideal for founders and small businesses to take advantage of.

At the end of the day, recession-proofing your business means being able to look back on this time as one of growth instead of panic. With the right strategies in place to evaluable your supply chain and keep labor and inventory flexible, you’ll be well-positioned to navigate whatever this economy throws our way.