Thriving in Tough Times: 4 Strategies to Recession-Proof Your Business

Thriving in Tough Times: 4 Strategies to Recession-Proof Your Business

If you have been keeping up with the news, it has been a bleak overview of an impending recession set to come to Australia. For businesses, this brings a bout of uncertainty and volatility that could threaten their daily operations. Economic recessions are inevitable in the business world, and they can be quite devastating for companies that aren’t prepared. However, as history has shown, recessions don’t last forever, and smart businesses can emerge stronger. 

In a 2010 Harvard Business Review article, authors Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen studied the strategies of 4,700 companies during three recessions (1980 to 1982, 1990 to 1991, and 2000 to 2002) and found that those that focused on a few key strategies outperformed their peers in the recovery phase. In this article, we’ll explore the key strategies used to come blazing out of a recession. 

The strategies outline how the companies allocate their resources for the following items:

  • Employee payroll or headcount
  • Gross margin or gross profit margin
  • Research and development expenses (R&D expenses)
  • Sales, general, and administrative expenditures (SG&A expenses)
  • Capital expenditures 
  • Fixed assets or property, plant, and equipment (PP&E)

4 main strategies utilised by companies during the recession period:

  • Prevention-focused companies: A prevention-focused company is one that focuses on risk management and avoiding negative outcomes to maintain the status quo. During a recession, they tend to focus on minimising risks and avoiding or cutting losses to stay afloat. This may involve cost-cutting measures such as reducing staff, freezing salaries, and delaying capital expenditures. While these measures are necessary, prevention-focused companies may miss out on growth opportunities due to their conservative approach in decision making as their main priority is to protect the existing assets and investments.


  • Promotion-focused companies: A promotion-focused company is the opposite of a prevention-focused company- their core mission is to gain an advantage in the market share and gaining a competitive advantage against their more established competitors. They are more innovative and agile, and are likely to pursue new opportunities in order to expand their operations and increase profits. They are more aggressive in their decisions as long as it pushes them further towards their goal of gaining a major market share.


  • Pragmatic companies: A pragmatic company is focused on practicality and efficiency- they ensure their work processes help push them to become more efficient and effective. With this focus in mind, they tend to optimise and maximise their returns on investments by increasing the efficiency and efficacy of their processes. Their decision making is pushed by their desire to improve their current processes and optimising their resources.


  • Progressive companies: A progressive company is more innovative, agile and future-oriented. They cut costs by increasing operational efficiency and place great investments back into other aspects in the business such as R&D, Marketing, Equipment etc to help explore other business opportunities. By deploying a mix of the 3 strategies- cutting costs, improving efficiency and maximising resources they are able to explore other business possibilities. They disrupt the status quo and push the traditional business models to create new markets and make their own opportunities for growth. 

So out of all the strategies- which one is the best one to deploy? 

Well, past research has found that businesses that are able to effectively reduce expenses and invest back into the business tend to emerge from the recession stronger than before. Especially businesses who used the progressive strategy tend to come out more victorious than that of their adversaries. Their combination of selective defence moves and comprehensive offensive moves holds great promise at ensuring they will thrive during and especially after the recession.

So what does that mean for your business?

To put it simply, a business that focuses on optimising and increasing their operational efficiency will survive and thrive. By focusing resources to optimise every process within the business they are able to operate at a lower cost without compromising on their quality of service or product. In turn, the lower operational efficiency costs helps rake in bigger profits when demand returns.

It is important to note that while the strategies enlisted provide a roadmap for businesses to follow during tough times, they are not a guarantee of success. What is most imperative is for a business to not wait until a downturn in the economy comes around before taking action- preparing early always helps to recession proof your business and help it thrive.

In summary, prepare, strategize, and take action. Remember, tough times may come, but with the right mindset and approach, tough businesses can and will survive.

Need help?

Not sure if your current accountant is a good long-term fit to prepare you to thrive in a recession? Contact us at Aero Accounting Group today for a free Business Introductory appointment where we get to know a little bit more about you and your business, to prime you for success. 

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