Recession-proofing your business: stash cash and prepare for a long downturn

Executive overview

In a downturn, revenue impacts lag — by the time you feel pain, it may be too late to cut costs. The instinct to keep spending as normal is dangerous. Cut aggressively now, hold cash for at least 20 months, and position for the recovery.

Businesses that survive a recession do so by outlasting it, not outspending it.

The domino effect

• Closures and spending pullbacks cascade through the economy in waves.
• The hit to your business may come months after the initial shock.
• Don't wait for impact to feel real before acting — it's likely already in motion.

The rubber band effect

• Governments inject stimulus aggressively, stretching the rubber band.
• Consumer and business fear keeps spending suppressed despite that stimulus.
• Advertising spend, purchases, and investment all contract in tandem.
• The snap-back (recovery) will come, but the timing is unknown.

Cash survival planning

• Sumo Group cut Facebook and Google ad spend by 30% immediately.
• Plan for revenue to drop at least 40%; stress-test for 70–90% drops.
• Target maintaining a 5–15% profit margin even under severe revenue loss.
• Andrew Chen (a16z) — typically a growth hawk — advised planning for 20 months of cash runway.
• Ask: can your business survive 20 months at current cash reserves?

One-company mindset

• Every person in the business should be asking two questions: how do I grow revenue, how do I cut cost?
• People are still spending — the question is whether they're spending with you.
• Adapt your offering to where spending is actually going (home tools, online work, cost-cutting software).

If and when — two words to frame your decisions

• If — prepare contingency responses now for scenarios that haven't hit yet.
• When — the economy will recover; decide now where you want to be positioned when it does.
• Act during the downturn so you're ready to move fast when the rubber band snaps back.