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Economic Downturns Don't Last Forever — Here Are 5 Ways to Maintain Resilience During a Recession Don't worry. There will always be a light at the end of the tunnel.

By Shawn Cole Edited by Micah Zimmerman

Opinions expressed by Entrepreneur contributors are their own.

There are a host of challenges you'll face as the founder of a startup. Finessing your products or services, identifying your target customer base and hiring your supporting staff are just a few examples. Some companies will need an influx of capital to support them as they navigate through their first initial months and years, so finding a credible funding source is critical.

One challenge that's particularly arduous for startups to deal with is a recession. The U.S. has flirted with the dreaded R-word for over a year, systematically raising interest rates to tamp down inflation and keep economic problems at bay.

While we may not yet be in a recession, that doesn't mean things won't change in the future. Aside from their many other responsibilities, startup founders are wise to stay abreast of economic changes to protect their fledgling organizations from future harm.

Here are a few tips to keep your business operations steady while navigating choppy waters.

1. Keep a close eye on your cash balance

Financial advisors often advise consumers to have at least six months of cash on hand to cover their expenses in case of a job loss or other catastrophe. The same advice applies to startups and other businesses. If revenue unexpectedly dries up, you should have enough cash to support continuing business operations for six months.

In a startup's early days, sales often fluctuate significantly. Your target customers become aware of your company's existence, and you'll see many clients eager to purchase your products or services. However, building sustainable revenue streams may take up to a year or two.

To protect yourself from the ups and downs of sales in the first years of your business, you'll want to sustain a healthy cash balance to support your organization. Maintain frugality and avoid spending your revenue on frivolous purchases that don't add value to your company.

Keeping up with your monthly financials is critical. If you don't have an accounting staff to manage your books, outsource the task to a qualified accountant. That way, you'll ensure you have an accurate set of books to base your financial analysis and forecasts on. You'll also need up-to-date financials to seek outside investment or debt financing.

Related: 4 Ways to Adopt and Maintain a Growth Mindset Even During a Recession

2. Don't let go of your team members

During times of economic volatility, the knee-jerk reaction of many founders is to cut down on their staff. After all, if they reduce their spending on employee wages, they'll have a stronger buffer against revenue volatility. However, laying off workers can be a major mistake — especially if your organization is in its early growth stages.

Company layoffs significantly reduce employee morale. Remaining workers who survive a round of layoffs wonder whether the company is on solid footing and whether they'll be next if the founder decides to cut staff again. They may begin discreetly looking for other job opportunities that pose less risk to them.

Remember that economic downturns don't last forever, and your startup will flourish if you keep the right mindset and remain steady rather than reacting impulsively to bad financial news.

You likely hired your team members because they believed in your organization like you do. When you surround yourself with people committed to your business, you'll reap the benefits — even if there are a few rocky months when things seem particularly problematic.

Related: 10 Ways Entrepreneurs Can Navigate a Down Economy

3. Find a supportive mentor

Being the top dog at a startup is exciting but can also be lonely. You'll want to be the face of calm and optimism to your employees. You probably don't want to share every hiccup you face as a business owner. Discussing your problems with family or friends can help, but they may not fully understand what you're going through, especially if they're not business owners.

Finding a mentor you can trust as you build your organization is helpful. Ideally, your mentor will have prior experience running a business and not compete with you. They can provide objective advice and guidance to help you make strategic business decisions.

If you have few connections to other business owners, consider joining a local club or group of founders or executives. As you get to know the members, you can form friendships with people you find inspiring.

If you have specific business concerns, like your company finances or operations, hiring a consultant with a solid reputation can help. They can provide qualified guidance on particular issues, like obtaining funding or managing vendor relationships.

Related: Looking for a Mentor? The 7 Best Places to Start.

4. Stay abreast of your customer's needs

Customer retention becomes even more critical during a recession — especially for startups. A dwindling client base can cause severe problems in the form of lower sales, which ripples down into the company's ability to meet its ongoing expenses. Many companies find it harder to attract new customers as businesses and consumers tighten their pocketbooks and emphasize saving.

Customer service becomes a priority to maintain and expand your client base during tough economic times. You want to ensure that your products and services address clients' needs and that they have a positive experience with your company.

Many companies implement surveys and similar techniques to keep a pulse on clients' experiences with the organization. When done right, a survey can expose any friction in the purchase process and problems with your offerings. You'll want to carefully address any major issues your customers note and keep a healthy relationship with your current and prior clients.

Customers with a good experience with your company will likely share it with their family, friends and others, which can help you build a solid reputation in your industry. Building a strong reputation to a startup has tremendous value and can help propel your organization forward despite economic headwinds.

5. Maintain an attitude of resilience — success will follow

While you can't change your macroeconomic environment, you can adapt. If you're the founder of a growing company or a startup, you'll want to keep a keen eye on your budget and maintain strong relationships with your employees and clients.

Remember that economic downturns don't last forever. There will be a light at the end of the tunnel. With the right strategies, you'll glide through the hardships and emerge even stronger than you were before.

Shawn Cole


Serial entrepreneur turned executive headhunter Shawn Cole is the President and Co-Founder of Cowen Partners, a global executive search firm. Shawn helps CEOs and Founders of start-ups to multi-billion dollar companies grow at scale, create value, and drive results with world-class talent.

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