Entrepreneurship has been a life-changing path to financial freedom for many, but there are no guarantees in this world.

Starting and running a business is difficult even in the best of times. You have to provide a product or service that people want at a price they think is reasonable, handle all of the administrative tasks, market your offering, and maintain client relationships. Moreover, you have to do it all better than your competitors.

This is a tall order in a strong economy, but when conditions change for the worse, it becomes exponentially more difficult.

And that’s exactly what entrepreneurs are facing today. While inflation has fallen from recent highs, it’s still higher than pre-pandemic levels, and more Americans are relying on credit to maintain their standard of living than ever. At the same time, unemployment continues to climb, with even more layoffs looming on the horizon.

This uncertainty is something that entrepreneurs need to be prepared for so they can adapt in a way that allows them to hopefully not only survive, but thrive through the coming economic storm.

Business Will Become Even More Cutthroat

Being an entrepreneur is a lot like a contact sport. You’re going to face battles, experience losses, and take your share of beatings throughout your journey. That’s because it’s a competition, and everyone is constantly fighting to climb further up the food chain.

But as the economy weakens, that competition intensifies because there’s less revenue to go around, so whether you serve individuals or business clients, they will all hold onto their money more tightly than usual in an effort to keep their own budgets under control.

This means you need to be prepared to adapt rapidly if you expect to survive. You need to bring more value while marketing more aggressively, and your message must be clearer than ever. You need to act as if you’re in a war and your survival depends on winning.

David Bell, CEO of the national workplace drug testing company, USA Mobile Drug Testing, recounts a time when his business suffered a massive decline in revenue caused by a coordinated attack by a group of competitors during a previous recession. They tried to organize a frivolous lawsuit and then used that to defame the company online, quickly filling the first several pages of the search results with negative claims. This yanked the rug out from under the rapidly growing company, both by making it nearly impossible to sell new franchises and by making it difficult to acquire new clients. Anytime someone searched the company name online, they were met with pages of results that made it look terrible.

This once dominant brand was brought to its knees overnight, so Bell had to act quickly and decisively to ensure its survival.

“It was a tough time — we went from several million in annual revenue to about $300,000 shortly after the attacks started. The attacks were completely false and it wasn’t fair, but at the end of the day, that didn’t matter. This was a battle I was forced to face, so I had to get creative,” Bell explained.

He launched a PR campaign to both push down the defamatory claims and to highlight the truth about the company.

“We started getting my name in the media everywhere we could. I shared my knowledge and insight in industry publications, as well as local and national news outlets. I got more active on social media. I even began getting involved in key industry organizations. All of this built a powerful and irrefutable impression of me and my company,” he said.

The lawsuit was eventually dismissed, and most of these dishonest competitors ended up going out of business, while Bell continued to rise. His company went on to land significant contracts with major sports organizations, Fortune 500 clients, and even the U.S. government, and he was appointed to a board position at the most prominent trade organization in his industry. As a result of his efforts, he became recognized as a principled leader in the drug testing industry.

“If I had just tried to operate as if nothing had changed, this dishonest attack would have destroyed my company. I have zero doubt on that. I had to treat this like an all out war — because it was,” he explained.

When faced with the prospect of going out of business, competitors may become willing to do things you wouldn’t normally expect, often engaging in immoral and even illegal behavior to prevent it. Bell says entrepreneurs need to be prepared for this, and more importantly, they need to be prepared to address it quickly and aggressively.

“You can’t be passive,” he explains. “You have to meet it head on with overwhelming force before it has a chance to gain momentum.”

Managing Your Finances Is More Important Than Ever

Warren Buffett famously said, “Only when the tide goes out do you discover who’s been swimming naked.” This means that when the economy is firing on all cylinders, most people seem to be doing pretty well, but when it starts to decline, reality starts to set in.

When times are good, expenses tend to go up because there’s plenty of revenue to offset them. Budgets get sloppy and wasteful, and often, we end up spending a lot of money we don’t need to spend, especially when it comes to software and subscriptions. But when the economy starts to decline, those expenses start to become a problem.

Many financial experts commented on this phenomenon during the 2020 pandemic when revenue dropped off a cliff for businesses across most industries. Entrepreneurs were forced to take a closer look at how they were spending their revenue, and many were horrified to find out just how many unused subscriptions they were paying for every month.

Noted financial expert, Dr. David Phelps, says most entrepreneurs have no idea what’s actually going on in their finances, and warns this is a recipe for disaster.

“Your budget is like the heart of your business, so it’s critical to know how it’s performing. This is always important, even in the best of times, but when the economy slows down, like it’s been doing over the last few years, it becomes absolutely critical. As revenue tightens and credit becomes more difficult to get, entrepreneurs have a smaller margin for error,” he explains.

Some companies are already taking this lesson to heart. For example, Drivo, a New York-based car rental service offering everything from compact economy cars to luxury sedans and cargo vans for commercial use, has adapted by diversifying its fleet to meet multiple market segments. By serving budget-conscious travelers, business-class clients, and even commercial cargo transport needs, it reduces its reliance on any single revenue stream and increases resilience against sudden market shifts.

Phelps says, “The first priority is to evaluate which parts of our budget are critical to the day to day operations of your business. These are the most important expenses that your business absolutely can’t run without. Next, you need to sort everything else by priority and cut non-essential expenses to leave plenty of margin at the end of each month. The idea is to build in some padding so that you can better weather the financial ups and downs.”

He emphasizes that it’s not just about cutting costs, though, because that can only take you so far. It’s also about becoming more efficient and creating new sources of revenue.

“The reality is there’s only so much you can cut, so it’s also critical to leverage software and processes to maximize efficiency as well. Learn how to do more with less, and once you’ve done that, you need to find new ways to generate additional revenue. More effective and larger-scale marketing is part of the equation, but it’s also important to create entirely new revenue streams. This might include new products or services, like memberships, coaching, or even software,” he explained. Some entrepreneurs are also exploring blockchain-based models to diversify revenue or enhance transparency in transactions, though adoption remains limited and case-dependent.

A solid financial plan is always essential to a strong business, and it becomes even more important as the economy softens. While the business environment will become more challenging during these times, those who get it right will be more likely to experience life-changing opportunities, as historically happens during recessions.

Experienced Mentors Are Critical to Survival

As the old saying goes, “No man is an island,” and that’s true in business as well as in life.

A solid support system of experienced mentors is critical as an entrepreneur, for a variety of reasons. One is that this is a tough environment that most people simply don’t understand. Sure, you can talk to your friends or your spouse about the challenges you face, but unless they are entrepreneurs too, they’ll never really understand, so any support or advice they give you will be limited. But a mentor who has already been through what you’re facing absolutely understands and can provide actionable advice based on their own experience.

The more important reason, however, is that an experienced mentor can help you avoid costly mistakes in the first place.

Veteran real estate investor, Tatiana Zagorovski, shared a story about a time when she learned this lesson the hard way early in her own career.

“I thought I had found a great business partner when I met a woman in a real estate investors mentorship group with a pretty high price tag to enter. I trusted her simply because she was a member of this group, a pastor in a church, and had a very smooth talk — presenting herself as an experienced investor who’d done multiple JVs. So I assumed she was trustworthy. I quickly learned that wasn’t the case. The first red flag? She didn’t provide contacts of any previous JV partners and spoke badly about all of them — without ever naming names,” she said.

The two entered into an agreement where Zagorovski would fund the investment opportunities, and her partner would do the renovations, with the goal of splitting the profit when the properties were sold. But along the way, things didn’t add up, and her partner began suggesting changes to the exit strategy and pushing me to use a mortgage broker and title company she preferred.

“Since it was an out-of-state deal for me, I was inexperienced and fully trusted my JV partner. I just thought this was a normal part of the process,” Zagorovski recounts.

It wasn’t until she met her current mentor, Damon Remy, who looked at the situation and bluntly told her, “You’re getting scammed.”

“While I lost over six figures in this investment, ultimately, I believe it made me a better investor because while costly, this experience taught me to trust my gut and always fully vet everyone I get involved with. It also taught me the importance of finding an experienced and trustworthy mentor,” Zagorovski explained. “If I hadn’t met Damon, who showed me exactly how I was being scammed, this would have dragged on longer and cost me even more money.”

Zagorovski says what she learned from Remy enabled her to get back on track, completing several successful projects and recouping her losses.

“Once I had a real mentor, I learned what to look out for, but I also learned how to be a better investor in general, which has helped my trajectory significantly. If I had just tried to keep plugging along on my own, I would have inevitably made more mistakes and wouldn’t have achieved the success I have today anywhere near as quickly. Having an experienced mentor is an absolute game changer,” she says.

While there is no silver bullet, a mentor can help you avoid costly mistakes and stack up wins more quickly, and that can mean the difference between success and failure in the hyper competitive business that environment a weak economy creates.