Top 9 Tips to Recession-Proof Your Small Business

If you’ve tuned into the news recently, the words "recession" and “tariffs” are enough to send chills down the spines of small business owners around the country. With recent tariffs shaking up supply chains and adding new costs and the stock market tanking, preparing your business for economic uncertainty has never been more important. For small businesses operating on thin margins, this added pressure makes financial preparation crucial.

9 Steps to Recession-Proof Your Small Business

1. Get a clear handle on how your business is doing

Before you can make any significant financial preparations, it’s vital that you have a clear picture of how your business is doing. This should include:

• How much money is coming in

• Whether that amount will continue to come in

• How much money is going out

• Opportunities for growth

Spreadsheets are great for some things, but keeping tabs on the financial health of your business is not one of them. Many business owners track everything manually, only to discover they're actually losing money on what they thought were profitable accounts. You need to know what's coming in (and will it continue), what's going out (and where can you cut), and where growth opportunities exist.

Use dedicated small business accounting software that gives you real-time insights into your cash flow, profit margins, and tax obligations. Break down expenses by category and track revenue by client to identify your strongest and weakest income sources. These details about your business can inform recession planning, so clarity and accuracy are key.

2. Automate your tax savings

Recession or not (and whether you like it or not), tax time is coming. This has much bigger implications for self-employed people than for most.

When W-2 employees get a paycheck, their employer usually deducts taxes and pays them to the IRS on the employee’s behalf. However, freelancers and independent contractors typically need to pay their income taxes manually. 

The most effective way to do this is to set aside money every time you receive a paycheck. It’s all too easy to forget or to spend the money on something more urgent during a crunch. However, this will leave you in a bind come tax season. 

A good rule of thumb for 1099 contractors and small business owners is to save 25-30% of your income for taxes. Remember that the actual percentage you'll need to save will vary depending on your income level, deductions, and other factors. For every income or deposit you receive, move 25-30% to a separate account earmarked for tax payments, so it’s ready to go when tax payments are due.

When you use Found, you can set up a Tax pocket specifically for quarterly tax payments. Your deposits go to your Primary pocket, and if you choose, a portion of your earnings can be automatically set aside in your Taxes pocket to help you save for tax time.

3. Focus on marketing that actually works

When money gets tight, your marketing budget is often first on the chopping block. Instead of cutting everything, be strategic about where you invest. While it may be tempting to try to maximize your reach by spreading your marketing efforts across every channel you can think of, focus on the ones that are the most effective. 

Here's how to identify and optimize your most effective marketing channels:

• Audit your current marketing performance: The key here is to look at actual conversion rates, not just impressions or clicks. Then calculate your cost-per-acquisition for each channel, and identify which platforms bring your highest-value customers

• Cut the bottom performers: Stop investing your money and time in the low-performing channels and turn your attention to the high performers. Keep a pulse on if it’s working. 

• Optimize what's working: Analyze your best-performing content types and replicate them. Test price points, offers, and messaging with your  audience within those channels, too. 

Track results meticulously: Examining these numbers isn’t just a one-time thing. A variety of factors might affect your marketing channels, so be sure to revisit them regularly.

4. Reassess your (business and personal) budget

When money gets tight, one of the best things you can do is reevaluate your spending. For a small business, that means looking for ways to cut back. You started this process when you narrowed down your marketing strategy—now it’s time to do it with the rest of your business expenses.

Start with software subscriptions. Are you paying for premium features you rarely use? Consider switching to free alternatives for project management, moving to an online business bank account with no maintenance fees, or negotiating with vendors for better terms.

This budget advice also applies to your personal life. If you get your personal finances in order, you may be better able to weather a slump in business performance. This is especially true for freelancers or solopreneurs, where your personal and business finances may be more closely intertwined.

Cutting $200 in monthly expenses equals $2,400 saved per year–money that can serve as a crucial buffer during tough times. Consider moving that money to an emergency fund in case you need it.

5. Build a solid emergency fund 

With economic uncertainty on the horizon, having cash reserves isn't just good advice—it's a business essential. The recent tariffs have shown how quickly external factors can impact your bottom line, making financial buffers more important than ever.

Many small business owners mistakenly believe they only need personal emergency funds. The reality is your business needs its own safety net. Start by calculating your essential monthly expenses and aim to save 3-6 months of these core operating costs. Make sure these funds aren’t in your business operating account. This separation is crucial for mental accounting and helps prevent you from dipping into these reserves for non-emergencies.

Create an emergency fund using our step-by-step guide. Learn more →

6. Add more revenue streams

Diversifying your revenue streams can help build extra income and add a buffer by ensuring that if you lose one stream, you still have money coming in.

For freelancers and service-based business owners, this could take the form of products that you sell alongside your services. For example, a freelance designer might sell some icons or design template packs that customers can use on their websites. This helps generate passive income and funnel potential clients toward your hands-on design services. 

Affiliate marketing is another common strategy for adding passive income. A massive number of companies have affiliate programs these days. These programs provide everything you need to market the company’s products and get paid. Simply look at the services you use every day and reach out to see if they offer an affiliate program.

7. Invest in relationships with current clients

In a recession, finding new clients can be difficult. Ideally, you want to enter the recession with a strong existing customer base. To get there, strengthen your relationships with current customers and clients. 

The best way to solidify your client base is to consistently deliver outstanding work for them. Instead of just delivering what's expected, go deeper. Schedule regular check-ins (not just when you want more work). Send thoughtful notes or small gifts on client anniversaries. Create a referral program that rewards loyalty.

Of course, the specifics depend on the nature of the client and the type of work you do. However, the principles are universal. When it comes to building lasting client relationships, it’s truly the little things that count. These small, personal gestures are so rare in today’s world—when they do happen, people remember.

8. Explore strategic partnerships

In uncertain economic times, strategic partnerships can provide stability, expand your reach, and create opportunities that wouldn't be possible alone. While competitors struggle individually, businesses that form smart alliances often thrive.

Consider partnerships that complement your core offerings without creating direct competition. Look for partners with similar values but different strengths. The ideal partnership fills gaps in your business while you fill gaps in theirs, creating mutual benefit that builds resilience against market fluctuations.

Strategic partnerships aren't just about survival—they position you for faster recovery and growth when economic conditions improve. They allow you to appear larger than you are, compete with bigger players, and create unique value propositions that set you apart in the marketplace.

9. Secure financing before you need it

If a recession hits, credit becomes harder to get precisely when you need it most. If you think you may want or need financing in the future and a recession is looming, try to secure it now, rather than waiting. Loans, credit cards, lines of credit, and even personal investments tend to be harder to get during tough financial times.

The strongest position is having financing available but not needing to use it.

Don’t face economic uncertainty alone

The threat of recession and rising tariffs keeps many small business owners awake at night. But with the right preparation, you can not only survive but potentially emerge stronger than less-prepared competitors.

Found’s all-in-one business banking solution helps you automate tax savings, gain clear visibility into your finances, and identify cost-cutting opportunities without sacrificing growth. Our specialized accounting tools give you the financial clarity and control you need to navigate economic uncertainty.

Get started with Found for free—no hidden fees or maintenance fees.* Take the first step toward recession-proofing your business today—your future self will thank you.

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