How To Stay Calm in a Recession and Lead With Confidence

This isn’t my first recession rodeo. In fact, I’ve weathered seven in my adult life. 

I graduated from high school during a period of hyperinflation. That year, I spent my Thanksgiving working a double at the Quick Stop my boyfriend managed.  

Despite the economic challenges at the time, I didn’t just survive — I learned to thrive.   

There’s a lot of anxious talk in our communities right now as we face rising inflation rates. But I’m not worried, partially because I’ve done this many times over, but also because I understand the cyclical nature of the economy and plan accordingly. 

Instead of panicking in times of economic instability, pause, take a breath, gain some perspective, and develop a plan.  

Uncertainty is often the root of fear, so let’s start with painting a clearer financial picture about our current economic circumstances.   

Now and Then: Gaining Economic Perspective  

Many people are comparing what we’re seeing today with the 70s, but that isn’t entirely accurate.   

To start, while inflation rates are comparable, unemployment rates are not.  

In 1974 the unemployment rate was 7.2%. Today it’s just 3.6%. 

And while the GDP back then is similar to our current GDP, we’ve just come off of ten years of phenomenal growth.  

These numbers alone tell us that making a direct comparison is a drastic oversimplification. So instead of comparing, let’s look more closely at our current environment.  

First, this shouldn’t come as a surprise. Congress just dumped a ton of money into the environment through PPP loans and individual stimulus checks. This was bound to happen.  

And while mortgage rates are rising, they’re still incredibly low.  

There’s an interesting psychological phenomenon that occurs with human beings and the economy: Many of us internalize the current reality and make it permanent in our minds. We think:  

Unemployment is low, so I can go get a different job anytime I want. Money’s cheap, so I can spend what I want. I’m always going to have a job. I can afford this house now, so I know I can afford it in the future.  

The problem with this human behavior is that despite our desire for a stable economy, it’s inherently unstable. So, when the economy inevitably changes, many of us panic. What we thought would never waver is suddenly in flux.  

But there’s a flipside to this. Challenging times are also temporary.  

When we recognize the flaws in our thinking and instead embrace the changing tides, we plan in a way that allows us to adapt. 

Like the Seasons, Our Economy Is Cyclical 

Economies are just like Mother Nature. We have expansion seasons (Summer) and contraction seasons (Winter). But Mother Nature doesn’t sound the alarm when winter approaches. Instead, she says, “Because it’s winter, I need to act like it’s winter.”  

A tree doesn’t put its leaves out in December because if it does, it won’t survive. For trees, winter is a time to conserve energy, prepare, and go within. Similarly, when a business faces winter, it’s not the time for growth and expansion. Instead, it’s the time to improve processes, enhance systems, and hone your skills. Winter is the time to shed the unproductive and invest in what you really need in place when spring arrives and it’s time to sprout.  

Preparing To Financially Hibernate Requires a Change in Mindset 

The first step to enduring a recession is to acknowledge the change in economic seasons and make appropriate choices for the new economic environment that we now face.   

Stay calm, don’t panic, gain perspective, and move forward with intention. Here are some things worth considering as we approach winter.  

1. Know Where You Are 

Now more than ever, businesses must have reliable, good data to support decision-making. It is vital for business owners and leaders to have a solid financial picture. Important areas to explore include: 

• Cash: Do you have enough money? What’s your cash cycle? How do you generate cash? Are you looking at your cash headroom on a regular basis (ideally weekly)?  

• Risk: What kind of risks are you most likely to face? How will you manage those risks? Do you have a supplier risk? A wage risk? A concentration of risk? What’s your gameplan when things go awry?   

• Personal Consumption: Is your personal consumption above what your company can afford to pay you? How can you adapt, personally, to ensure the health and longevity of your business? 

2. Identify and Prioritize the Right Strategies for Your Business 

Different businesses will require different approaches to endure a season of economic downturn. Consider the following areas and identify what adjustments make the most sense for your unique circumstances.  

• Cash Flow: Use credit cards to access 30 days' worth of free cash (just be sure you pay them off each cycle), sell old inventory, shore up collection policies, sell off outdated equipment, and find paths to collect on old AR.   

• Talent Management: Retain your best people. Hiring will continue to be a challenge for years to come. Build key relationships with schools and professional associations. Develop a marketing plan to attract people, not just to sell your product.  

• Supplier Disruptions: Most expect supplier disruptions to continue, so these need to be explored at length. Consider expanding beyond one supplier for your materials and also look at the geographical location of your suppliers.    

• Access to Capital: Always keep a line of credit open. Don’t wait until you need to get one (if you need it, you’re likely in a situation where no one will want to give you one). Negotiate a LOC now and have it on hand in case of emergency. It’s a cheap safety net.   

• Cost Management: Explore opportunities to trim the fat. Look for tech subscriptions that you no longer use and cut them. Outsource non-core processes. If you are flush with cash, use payment terms to negotiate better pricing. If you have balances on your credit cards, create a plan to pay them off — rates are rising!  

• Opportunities for Efficiency: Streamline, streamline, streamline. Lean into technology. If there are opportunities to use software and AI-advancements to replace people, let it.   

A note about credit cards: Having a credit card isn’t the problem. Not paying off your balance is the problem. Use credit to your advantage, not your detriment.  

Adaptability Is Essential  

It’s important to develop a game plan, but it’s even more crucial to understand that things won’t go to plan. Regardless, taking the time to run scenarios and map out your options, positions you to better make the tough calls in the moment.  

And when times feel especially stressful, pause and remember — spring will come (in due time).   

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