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10 Smart Ways To Prep Your Startup For The Recession

Key Takeaways:

  1. In 2023, the U.S. economy is at risk of a recession due to Covid and international conflict.
  2. 7 Figures Funding shares ten smart ways for startup founders to prepare their businesses in an economic downturn.
  3. These strategies include diversifying funding sources, re-evaluating cash flow and expenditures, building financial cushions, cutting unnecessary expenses, and investing in partnerships.
  4. Additionally, raising funds from investors or government initiatives and strengthening relationships with employees are essential steps startups should take during a recession.
  5. Finally, focusing on customer experience can help ensure customers’ return even when financially challenging.

During the past couple of years, our world has seen drastic changes due to Covid and the international conflict between Russia and Ukraine. This turmoil has disrupted trade supply, resulting in a massive hit on the U.S. economy. With inflation on the rise, it’s no surprise that recession is on everyone’s mind (66%, as per surveys).

Are you worried about how the recession might impact your startup? 7 Figures Funding shares ten smart and strategic ways to prepare your business for an economic downturn. These tips will give you a fighting chance to weather the storm and come out even stronger on the other side, from diversifying your revenue streams and startup funds to cutting costs.

10 Smart Ways for Sailing Through the Recession

1. Diversify your Startup Funding Sources

Money is a significant concern for any business, especially in a recession, as all business operations require funding to operate smoothly. Startup founders must take proactive steps to ensure that there are no sudden shocks when it comes to financial stability.

One of the best ways to do this is to diversify your startup funding sources so you can access capital from multiple channels. It could include venture capitalists, angel investors, crowdfunding platforms, government grants, and more.

2. Re-evaluate Your Cash Flow and Expenditures

Keeping track of your cash flows and expenditures is essential to ensure that you are spending only what you are taking in. During a recession, it is even more vital to closely monitor your finances as there could be a dip in sales due to the economic climate.

Evaluate every expense to check for areas you can cut back or reduce without compromising quality. It’s best to utilize smart money management solutions from trusted financial vendors.

3. Build a Strong Financial Cushion

During a recession, having a financial cushion might make all the difference in weathering the storm. Startup founders should build an emergency startup fund to help cover unforeseen costs during hard times. Consider creating a budget that you can use to set aside money for unexpected expenses so that it doesn’t go into your operating fund.

4. Re-strategize Your Growth

Growing a business is hard, but growing it in a recessive environment is even more challenging. Startup founders should re-strategize their growth plan and focus on becoming more cost-efficient by cutting costs in areas that don’t directly contribute to revenue. Startup founders can also consider investing in customer experience or product expansion instead of speculative hires.

5. Cut Unnecessary Expenses

When it comes to a recession, every penny counts. Startup founders should be vigilant in reducing their expenses and focus on what’s necessary for the business to survive. It will help keep cash flow levels high, which is essential during a recession. Startup founders can also look into renegotiating contracts with suppliers, vendors, or partners to save money. Besides that, focus on investing startup funds into activities that will help the business grow.


6. Invest in Partnerships

Partnerships and collaborations allow startups to benefit from each other’s resources, expertise, and networks. Startup founders can use partnerships to leverage their relationships with new customers or distributors. It will create more visibility for the startup and result in increased revenue.

7. Raise Additional Funding

When times are tough, angel investors and venture capitalists will be more likely to invest in startups demonstrating financial resilience. Startup founders should consider raising additional startup funding during a recession as it puts them in a better position to weather the storm.

8. Be Aware of Government Initiatives

During times of economic crisis, governments often provide incentives to help businesses get back on their feet. Startup founders should keep an eye out for government initiatives and subsidies that can benefit them and use the funds to consolidate their finances and increase efficiency.

9. Strengthen Relationship With the Best Employees

Startup founders should start by prioritizing their best employees. It can be done by offering them attractive salary packages, incentives, and other benefits that will make them stay with the company through thick and thin. Keeping a great team intact is critical for startups to survive a recession. Besides that, communication is vital to motivating employees to improve productivity.

10. Focus on Customer Experience

Recessions impact everyone, especially customers. They are the lifeblood of a startup. Startup founders need to take extra measures to provide a better customer experience and make sure they come back again and again. It can be done by providing excellent customer service, offering discounts, or creating loyalty programs that customers can benefit from during tough times.

Related: Establishing A Business In 2023: How To Engage Investors?


There are many ways for founders to prepare their startups for a recession. From making sure there is enough money in reserves to cutting back on expenses or focusing on customer experience, these strategies can help protect the business against financial hardship. Startup founders should take their time and create a plan that works best for them and their company during this difficult time. It’s best to rely on money management solutions to help businesses grow.

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