How to prepare your business for an economic downturn

Executive overview

Every 10-year business cycle contains six good years, two great years, and two terrible years. Those terrible years can end a company — and they can't be predicted. The only defence is preparation before the crisis hits.

Four concrete steps can protect your business and position you to gain market share while competitors scramble.

Prepare for the worst and you'll be ready to take every opportunity the cycle offers.

Six months of cash reserves

• Hold six months of cash flow, personally and professionally.
• Cover all fixed expenses from reserves, not revenue.
• Always be ready to absorb a 30–50% revenue hit.

Revisiting your plan critically

• Slow down with your team and pressure-test the VTO (Vision Traction Organizer).
• Review 90-day Rocks, one-year plan, and three-year picture.
• Ask whether revenue and profit targets are still achievable.
• Confirm your marketing strategy and niche are still relevant.
• Identify the most profitable customers and shift focus there.

Reverse accountability chart

• Build an accountability chart assuming 30% revenue loss.
• Ask: who stays, who goes, what does the structure look like?
• Leaders almost always name three to five wrong-fit people immediately.
• If those people would be cut in a crisis, question why they're still here now.
• Always aim for right people in the right seats, regardless of where you are in the cycle.

Tightening the meeting pulse

• Meet weekly, quarterly, and annually with your leadership team at minimum.
• Weekly meetings: check numbers, priorities, people, customers, and open issues.
• In a crisis, increase frequency — some teams met twice daily during COVID-19.
• Quarterly and annual sessions: realign on vision, solve biggest issues, reprioritise.
• Missing meetings means missing both early warning signals and growth opportunities.

Bonus: keep your system simple

• Under pressure, you don't rise to the occasion — you sink to your lowest level of preparation.
• A complex operating system breaks down exactly when you need it most.
• Simple systems stick under pressure.