I Asked ChatGPT How to Recession-Proof a Business. Here's What It Suggested (and What I Would Do Differently). Silicon Valley's leading artificial intelligence weighs in on how you can make your business more resilient to economic downswings.

Entrepreneurs everywhere always have to look out for the dreaded "r-word." They come around every so often and wreak havoc on businesses by reducing sales, dropping revenues and cutting employment. Of course, we're talking about recessions — a natural, but certainly painful, part of the economic cycle.

While there's no way to completely insulate a company from the effects of recessions, there are steps you can take to help mitigate them.

As a marketing and technology entrepreneur, I was curious to learn more about how to "recession-proof" my businesses. That's why I asked ChatGPT, the world's leading large language model (LLM) and the artificially intelligent darling of Silicon Valley.

Below, I'll share my conversation with ChatGPT about how entrepreneurs can protect their businesses from recessions and, ultimately, share my own thoughts on these ideas.

Related: 9 Smart Ways to Recession-Proof Your Business (Fast)

The prompt

I opened our conversation by asking the following question in the form of a written prompt:

How can I make my business recession-proof?

Then, ChatGPT responded with the following steps after providing a brief disclaimer that no business can completely protect itself from inflation.

ChatGPT's "recession-proof" entrepreneurship formula

Below are, verbatim, the seven recommendations offered by ChatGPT to help businesses weather the storm during recessions:

1. Build a strong cash reserve.

2. Diversify your offerings.

3. Focus on efficiency.

4. Maintain good customer relationships.

5. Keep an eye on your finances.

6. Prepare for the worst.

7. Stay flexible.

My thoughts on ChatGPT's formula

Personally, I think ChatGPT's advice is excellent, and I generally agree with each point. However, I have slight qualifications for some. Below, I'll share my thoughts on each:

1. Build a strong cash reserve:

To make it through down periods, you need to have cash saved for a rainy day. This is as true for businesses as it is for your personal finances. However, I'd go a step further and recommend holding non-cash savings as well to protect against inflationary effects. An asset such as gold and other precious metals, or even real estate, can serve as highly resilient stores of wealth during recessions — although they're far less liquid than cash on hand.

2. Diversify your offerings:

This is a big one. Ensure you don't count on a single product or service to carry your business. Diversify your revenue streams by offering several products or services so that if one gets hit badly by the recession, another can keep your business afloat.

For example, a car dealership could diversify its offerings by adding commercial vehicles and trucks to its preexisting lineup of passenger vehicles.

3. Focus on efficiency

This one deserves a caveat. Prepare for a lean, hyper-efficient operation if economic circumstances require it, but don't single-mindedly focus on efficiency by automating, downsizing and streamlining each and every task. Sometimes customer satisfaction and product refinement require a larger crew and more time dedicated to non-core functions, so allow space for that as well.

4. Maintain good customer relationships

This one is a given. Longstanding, loyal customers are far more likely to stick around during recessionary periods if you offer friendly, high-quality service. I suggest adding deal-sweeteners and discounts to repeat customers to keep them coming back.

5. Keep an eye on your finances

Create a budget, and stick to it. ChatGPT emphasizes the importance of monitoring your cash flow, and it's right. If cash inflows aren't leaving enough left over to cover all expenses while saving for a rainy day, you need to reevaluate your expenses and re-budget accordingly.

6. Prepare for the worst

Actively plan for an upcoming recession. In modern history, recessions have occurred every 3.25 years on average. Good entrepreneurs should use this as a baseline for when they should anticipate periodic business slowdowns, and contingency plans should account for these. This way, you can respond quickly if economic events lead to decreased sales.

7. Stay flexible

Always be willing to adapt. Market conditions can change suddenly, and savvy business owners need to be prepared for that by being flexible and able to pivot when necessary.

Related: 5 Ways to Protect Your Business From a Recession

Overall, ChatGPT presents a great set of principles to abide by if you want your business to be more resilient to recessions. But it's worth reiterating that no business strategy is "recession-proof" as deep, economy-wide events can and will have unmitigable effects on businesses of all kinds.

Yet, keeping a flexible and responsible approach to business management — as ChatGPT suggests above — would certainly make your company more likely to survive an economic downturn than one that doesn't.