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Every large change in the business environment brings opportunity. Even a recession, which lowers sales for most companies, offers opportunities for a small number of companies to expand. Business planning for a recession (which I am predicting to start in late 2023 or early 2024) should include not only surviving but also thriving in the aftermath of the downturn.

Company leaders should sketch out their opportunities for growth at the beginning of their recession planning process. Then as they work through likely cuts to expenses, they can keep in mind the upside potential they want to grasp in the final stages of the recession.

Growing market share is an achievable goal in a recession. An Arizona distributor of fasteners—nuts, bolts, nails, etc.—grew market share by stocking greater inventory than his rivals. Cutting inventory is a usual strategy for coping with a recession, but this company had entered the downturn with decent cash. Their customers were in very cyclical sectors of the economy: construction and manufacturing. The company knew its sales would decline in a downturn, but it also knew its merchandise would not go out of style. So they maintained adequate inventory. Buyers called other companies and learned that the specific products and sizes they needed were out of stock. So they tried this company, which had the goods. The next time the buyers were ready to order, they called this company first. This distributor had a larger group of loyal customers at the end of the recession than at the beginning.

The same approach could work through better customer service and sales efforts. One magazine cut back on its advertising sales staff so deeply that the remaining representatives were simply order-takers. No outbound sales calls were made. When the recession ended, the company was at a disadvantage because past clients had shifted advertising to the companies that asked for the sale.

Acquiring better equipment during the recession can propel a company forward in the recovery. The early low-cost airline AirTran (now part of Southwest Airlines) took advantage of the 2001 recession and the air travel shutdown following the 9/11 attacks. They purchased modern aircraft that were more fuel efficient than their old fleet and which also cost less to maintain. Some of the planes were late-model used, while others were brand new whose buyers had backed out of the purchase. When air traffic rebounded, AirTran had a cost advantage over most of its competitors.

In addition to buying equipment, companies may use the recession to improve their locations. A Dublin hairdresser had three mid-tier shops before the 2008 recession. She wanted to upgrade her locations, but the best sites were pricey. So she built up her cash and waited. In the downturn, which hit Ireland severely, she saw top locations go vacant. After a respectful time passed, she approached the landlords—and bargained hard for low rents. She also bought an inventory of wigs and hair extensions cheaply from bankrupt shops. She told me that the recession was the best thing that ever happened to her business.

The hairdresser’s approach had been validated years earlier by a McKinsey study of multinational corporations. The companies with the best long-run track records used the good years to pay down debt and build up cash. They were not caught up in the euphoria and optimism of the boom. When recessions hit, the best-performing companies bought competitors and market-adjacent businesses that expanded their range of products. They were willing to borrow to buy cheap, and their banks were happy to lend to a prudent company with a strong balance sheet. As the hairdresser proved, this strategy can work for small businesses as well as large corporations.

The year before the recession—which is probably right now—is a good time to identify talented people to hire. In the tight labor market, many companies are hesitant to offer sky-high salaries. Part of the problem is the actual cost of the new employees, but the bigger issue is paying for existing employees when they learn what the new hires are earning. So a great talent acquisition strategy is to use the pre-recession period to identify talent. Managers should get to know good prospects. Lots of coffee dates help. Instead of offering a premium wage during the boom, wait to offer a moderate wage when the talent’s current employer runs into trouble, cutting bonuses and laying off some good people.

What other strategies can help a company exit the recession stronger than it went in? Bring the management team together to brainstorm this challenge.

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