Adversity is inevitable and every business owner needs to prepare for a downturn.  But no matter how long or how much you plan, and no matter how many hours you prepare, there'll always be something or some things that catch you completely off guard. Things that you would not guess in a million years could happen, but they do.

This is why we need to look at things in the worst case.  For example, when I was in the business of buying and selling residential real estate, I once bought a cluster of 20 residential condos. When projecting the P&L for rental income, it is considered ultra-conservative to provide a 20% provision.  That is 20% of the revenue as a reserve for vacancy, because vacancy is inevitable, especially when you're talking about 20 units. There's always  times when you're looking for tenants. When my partner and I bought the condos, they were a hundred percent occupied with tenants. So the 20% provision for vacancy was very conservative. After applying the 20% provision, along with all of the other operating expenses and reserves for repairs and maintenance, and the project was making money, as it turned out, our vacancy rate was 50%. 50%! Never in a million years would us or anyone put a 50% reserve for vacancy when projecting these costs. But it happens.

I believe that you need to have a business and cashflow forecast so you can prepare what-if scenarios on a downturn. Now these what if scenarios can be 10, 20, 30% off so that you can see what your P&L and business looks like. But it could also be 10, 20, 30% up too, and see what it looks like then as well in good times, and this is, this is so important in good times, get to know your customer better and test marketing strategies so that when something unexpected happens and you have to advertise aggressively, you know what to do. 

While adversity is never fun, it is a lot less painful when you are prepared.