Building a Resilient Business: How to Adapt

The past five years have tested small businesses again and again. A pandemic shut down the economy, a tight labor market drove up wages, and inflation pushed prices more than 25% higher than they were in early 2019.

Despite it all, small businesses have shown remarkable resilience. Many adapted. Some thrived. Small businesses are still starting at rates we haven’t seen in years. The number of new business applications (a key predictor of actual business starts) was 37% higher in December 2024 than in December 2019.

But while resilience is common among small businesses, that doesn’t make uncertainty any easier to manage. Stable economic conditions help business owners plan: to place inventory orders months in advance, to hire with confidence, and to set realistic growth targets. Certainty builds momentum. Uncertainty requires recalibration.

Now, new tariff policies threaten new uncertainties. New and young businesses may be trying to figure out how to navigate uncertainty for the first time, while existing businesses may be exploring ways to adapt their business to handle uncertainties.

That’s why it’s essential to build a business that is flexible: one that can adapt to price shocks, supply chain disruptions, and shifts in customer behavior. This isn’t just about getting through the next few months. It’s about making sure your business can survive and grow no matter what comes next.

Understand your business plan

Every small business is built to solve a customer problem, and that core mission doesn’t change in times of uncertainty. What might change is how you respond to the economy. Understanding your market, and how you expect to earn profits, will help you build a resilient business for when the environment becomes abnormal.

A good business plan outlines how your business runs in normal times. That means it defines your market, revenue streams, expenses, and growth strategy. A resilient plan also includes how your business will respond when things change. This is sometimes called scenario planning or “what-if” analysis. During these exercises you strategically think through different scenarios: how your business would respond if costs spike, sales dip, or customer needs change.

Consider your revenue

If you have multiple revenue streams, your scenario planning should consider how each stream could be affected by higher costs. 

For example, a caterer serving both corporate events and weddings might expect companies to cut back faster than couples—but both could shrink their budgets. Planning ahead helps you gauge how much of a slowdown you can absorb—and where new opportunities might exist.

If your business imports from a country that already has a high tariff in effect, then understanding your revenue streams and market means thinking beyond your current customer base. One strategic option to consider with your finance and legal advisors is selling in international markets, especially in countries where import taxes are lower. Selling in these markets, even temporarily, can keep you in business and maintain your revenue stream while you assess the U.S. market. 

You should also look for ways to diversify your revenue stream. This might mean introducing new products, or highlighting offerings that are assembled domestically or in countries less affected by tariffs. If you’re unsure where to start, look at what customers ask for most often and explore if there’s a product or service variation that could meet that need.

Plan for changes in expenses

Businesses that are currently exposed to high costs due to tariffs should also take an immediate look at their expenses. Your business plan helps here too. Start by reviewing where you expected to spend money over the next couple of months, and look for flexibility. Pausing planned spending that isn’t necessary or shifting to a lower-cost vendor can help you preserve cash to cover additional tariff expenses that you did not plan for.

If you’re not currently exposed to high-cost tariffs, plan for a scenario in which you might be. Are there costs you can identify now that can help you create a buffer for future shocks? Are there domestic suppliers you can switch to? You may be using suppliers that made sense when you started—but they might no longer be the best fit for where your business is going. You should consider if there are domestic suppliers who can meet your needs, or if your vendors offer goods provided from parts of the world that are less affected by tariff policies.

Whether you’re currently exposed to tariffs or you might be in the future, you may have to change your prices. How would your customers respond if prices rise? What price changes are possible, and which ones risk undermining trust? Thinking this through now helps you act more confidently if costs increase, and is crucial to any business plan. It will also help you maintain trust with your customers by remaining transparent about pricing changes.

Business plans help keep you grounded

A business plan is important to make sure that you know where your business is going, but it’s also critical to help you track your performance if the economy gets shaky. Creating—or updating—your business plan can help you keep your footing when reports of consumer and business sentiment start going negative. This means you can compare your business’s performance against your expectations, rather than being distracted by outside factors.

Already facing high tariffs? Revisiting your business plan can bring clarity when shifting conditions cause uncertainty. Clarity around your direction and objectives helps you focus on the choices that keep you nimble: expanding to international markets, finding ways to diversify your revenue stream, identifying vendors that can substitute newly high-cost materials, and communicating price changes with your customers.

If you’ve never written a business plan, now is a great time to start. Check out Gusto’s resource on making a business plan, and be sure that you’re ready to manage uncertainty. 

Managing your cash: know if you can cover unexpected expenses

Small businesses run on tight margins, and even tighter cash reserves. Research shows that the typical small business has enough cash to cover expenses for about 15 days if revenue stops altogether. That leaves little room for surprise—but the last five years have been full of them: a global pandemic, high labor costs, and high inflation. And now, small businesses are facing or preparing for new tariffs.

Taking steps to mitigate larger expenses now through increased access to cash—whether through savings or financing—can help you weather the initial shock of price increases.

Building cash reserves is the first step toward financial resiliency. Much like a personal “rainy day fund,” cash reserves help ensure that a business can withstand unexpected expenses. By expanding your cash reserves as much as you can, even if it’s slow and gradual, your business can better absorb the initial shock of price changes.

So, how do you start? 

First, understand your cash flow. If you work with an accountant, they likely already have a great view of your business’s cash flows. Reach out to them to get a clear view of how your business uses cash. If you don’t work with an accountant, check out Gusto’s explainer on how to understand and track your current cash flows. There are actionable tips there about how to organize and analyze your revenues and expenses.

Next, forecast your cash flows. Scenario planning isn’t just for your business model, it’s also for your cash. Your forecast can help you understand what your cash will look like if expenses rise or if you have to raise prices you charge your own customers. It can also help you estimate how price changes may change customer demand. 

Forecasting may seem intimidating, because you have to make guesses about a world that is increasingly uncertain, but we’re here to help. Check out this training on how to forecast your cash flows, complete with a template for getting your own forecasting started and video walkthroughs to help you get started.

Secure funding if you don’t have access to cash now

Of course, building savings is easier said than done and if you’re already facing high tariffs you may not have the time to build your cash reserves. Many small businesses need to borrow. Credit can help you bridge the gap between high expenses and incoming revenue. In fact, many small businesses use credit to cover operating or payroll expenses, and loan products are designed to cover these circumstances. Nearly 60% of new businesses used financing to cover expenses last year, meaning that many lenders understand the realities of business ownership and can help you manage the space between expenses and revenues.

Financing can come from many different sources, including grants and loans. Your first step may be to look for a private loan. If you go through that route, consider your business credit and how you might be able to build it. However, not every business will qualify for private credit. If you find difficulty getting private funding, many lenders offer loans that are backed by the U.S. government. These are called SBA loans, and for-profit small businesses may be eligible. This alleviates some of the risk for private lenders, while ensuring that small businesses are able to access support.

One thing to consider when seeking out credit financing is that many creditors may require collateral that they will be entitled to take if you’re unable to pay off the loan. In some instances, this may be assets owned by the business like business real estate. However, they may also be personal assets like your home. Be sure to talk with your financial advisor or accountant to make sure that a loan is the best option for your circumstance.

Not sure where to start when looking for financing? Gusto has compiled a list of state-specific resources for finding grants and loans that you may qualify for in your state.

Managing risk means making sure you have cash, or access to it, when you need it. Strengthening your cash position won’t prevent prices from going up, but it can help you weather the storm and make thoughtful decisions, instead of rushed ones.

Consider your expenses, but don’t limit growth

Even if you understand your cash flows, and build cash reserves or secure funding, your operating expenses may still be too high for your business’s long-term financial success. You may need to cut costs, but how you do it matters. That means looking carefully at your expenses, understanding what’s essential, and avoiding short-term fixes that create long-term problems.

For example, across-the-board staff cuts may quickly reduce costs, but they also risk eliminating critical roles. Employees are still with your business for a reason. Removing them will cause your business to lose institutional knowledge about how and why your business operates the way that it does. This knowledge will be critical after the economic condition stabilizes and you’re ready to start growing.

Instead, think strategically. Are you paying for space you no longer use? You might lease or sublease it to another business. Can you renegotiate contracts with suppliers, especially if they offer more flexible terms? Asking your suppliers about these opportunities may provide ways to control your expenses.

Your business plan and cash flow analysis can guide you. These tools help you distinguish between expenses that create customer value and those that don’t. They also help you prioritize: where to cut, where to hold steady, and where continued investment might pay off.

Cutting expenses is never easy. But by approaching it strategically, you can reduce costs while keeping your business positioned for growth.

Economic uncertainty isn’t new, but the past five years have made it feel relentless. Resilient businesses aren’t the ones that guess right about what’s coming next—they’re the ones that plan well enough to adjust when it does.

Resiliency doesn’t require a complete overhaul. It means writing or revisiting a business plan. It means knowing where your cash is coming from and where it’s going. It means cutting costs with intention–not panic. And it means asking questions like: What if prices go up? What if sales slow down? What if the way I’ve always done things no longer makes sense?

The answers don’t need to be perfect. They just need to help you navigate uncertainty with a clear head and a steady hand on your business.