November 1, 2022

Making the Most of Your Budget in a Recession

A recession is looming—98% of CEOs have said it’s all but inevitable. What is your business doing to ensure its survival?

A recession is like a plague for SMBs. Due to a contracting economy, a certain percentage of companies operating now will fail. There’s no way to fight the numbers. Many businesses that fall victim to a recession don’t fail because of the quality of their products or services. They fail because they don’t prepare. As of 2019, 44% of SMBs were completely unprepared for a recession. If this recession is anything like the last, millions will go out of business.

How can you prepare your budget to survive a recession? Every recession is unique, so there’s no surefire way to allocate funds. But in today’s unique economic climate, there are some novel ways to cut costs before a recession is fully underway to keep your business solvent.

Let’s look at a few budget-saving moves that some companies are already taking.

First Step: Perform a Spending Audit

Making hasty decisions increases your likelihood of making poor ones. So, no matter what inspiring ideas you read in this article and others, your decisions must be grounded in the reality of your current budget.

How familiar are you with your current expenses? Most SMB managers think they know how their money is spent—but it’s easy to lose track of where every cent is going. For example, you may be paying for a SaaS subscription that you’ve long grown out of.

Doing an audit will often reveal some pain-free cuts to the budget. It will also give you a better idea of which processes/departments are less prone to frugality as well as those that already make the most of their budget.

Reevaluate 3 Top Expenses: Labor, Location, and Inventory

If you can trim fat from the biggest expenses for SMBs, you’ll have a major advantage during a recession.


Cutting jobs is never fun. But there’s no hiding the fact that labor accounts for around 70% of total business costs. Larger businesses often cut jobs before a recession in anticipation of reduced demand. Small businesses tend to get hit hardest during a recession, making layoffs an even more important consideration. You may be able to cut a customer service rep or part-time employees to pad your accounts for tough days ahead.


Real estate costs are among the biggest for SMBs. But in the coming recession, companies may have an easy way to reduce them. Having some employees go fully remote may enable you to cut rental costs. Most of your staff is probably used to working from home in some capacity, which means they’ll be able to easily transition to a home office setup. Not only that, but productivity actually increases when employees work from home—another budgetary boon.

Local management might put up a fight—this is because they fear for their own jobs. If you no longer need multiple managers to manage staff online, you may find yourself with even more opportunities to trim the fat.


Supply chains function differently when the economy is sunny than they do during a recession. In times of plenty, you need a well-stocked and fluid supply chain to move goods quickly to consumers. During a recession, demand slows down, and inventory stagnates, leaving you bleeding cash.

Before that happens, you can adjust your production, shipping, and warehousing agreements to more realistically reflect a recession market. Don’t be afraid to alter current contracts. Your logistics partners are anticipating a recession too, and they may be happy to provide deals in return for your continued patronage.

Invest in Automation

Sometimes you have to spend money to save money. If you’ve been putting off exploring automating some of your services, now is the time to do it. From email marketing to customer service, you can save a lot of man-hours and potentially cut labor costs with automation.

While other companies are cutting hours and reducing their offerings, automation may enable you to offer the same level of service at lower costs. One example is using chatbots for customer assistance during non-peak hours.

Automating requires some trial and error and possibly some training, so it’s best to start exploring automation before a recession hits (like, right now). Larger companies are scrambling to automate many of their processes, so don’t wait and hope you can weather the storm before doing so yourself.

Tread with Caution around Communications

Marketing is one area where most experts don’t recommend making significant cuts. Cuts to marketing affect brand recognition and reduce sales, leaving a business worse off during and after a recession. However, this doesn’t mean that your marketing department should pretend as if nothing has changed.

Marketers should attempt to streamline operations and reallocate costs in order to mitigate any future budgetary hardship during a recession. The hard part is doing this without affecting reach.

Some options include shifting more communications online to counter reduced spending on TV/print ads. Content creation can also be streamlined by partnering with less costly influencers or limiting production costs of in-house content. For example, brands can produce high-quality social media posts with stock footage, royalty-free music, and free sound effects. This can save thousands on production.

Is Your Business Prepared for a Recession?

We may not be in a recession yet, but if your business isn’t ready for one now, you’re getting dangerously close to being too late. Large businesses have been preparing for a recession for months or years. And they are doing so with the aim of eliminating small competitors.

The most important step you can take to protect your business during a recession is to act now. Don’t wait until you have more information on how the recession will take form. By then, you’ll already be bleeding cash.

Begin an audit of your spending as soon as possible and do research on how your industry was affected during the last recession. Make cuts that anticipate decline—not ones that hope for growth. We’ll say again small businesses get hit hardest when the economy contracts. Make budgetary moves that anticipate temporary decline, and you’ll survive to grow again.

About the author 

Kyrie Mattos

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