263 | Preparing Your Product Business for a Recession with Katie Hunt
As if business owners hadn’t had enough of pivoting over the last two and a half years through the pandemic, now we are in the midst of a recession. Small businesses everywhere are worried about how to not only prepare, but also thrive during this time. As someone who has personally worked through three recessions now, I'm sharing my thoughts about what you can do to keep your business moving forward!
Today’s episode is brought to you by LABS, our 12-month group coaching program that was built for product based business owners who want to streamline their systems and streamline their revenue. If you’re ready to join this program, make sure you’re on the waitlist for when we open enrollment!
Today’s episode was inspired by Proof to Product LABS member, Lorina, who asked, “What do you think is the best way for businesses to prepare for a recession? How can we combat things now before they get bad? And what are some good marketing and key takeaways that we should be working towards to help sales stay steady?”
Working Through Recessions
In case you missed it, in Q2 of 2022, the United States entered a recession. This can be a scary time for everyone, but especially business owners. To give you a little background, this is officially my third recession as a working person.
In 2000, I was working at a tech PR firm where I was let go in the fifth round of layoffs during that recession. Prior to my layoff, I was having a tough time as a young professional, watching my friends be let go and picking up the additional work that came from them being let go. As more layoffs happened, I felt uncomfortable and out of control.
That lack of control as an employee is something you get to control when you’re a business owner. We get to make strategic choices based on what's best for us, the business, our customers, and all of our partners in business.
In 2008, I had just launched my stationary brand, signed a contract for my first wholesale trade show in New York, and worked full-time in a day-job. Was it naive to be taking risks of investing in the trade show? Absolutely, but I had the security of my day job and the fire of a young entrepreneur.
In this third recession that I’ll be living through, I am full-time in my business. As I look back on these two recessions and at the two and a half years that we've just experienced through the pandemic, I see some common trends that I think we'll see continue in the future.
Fear from Economic Downturns Cause People to Panic
Unfortunately when major events happen that create risk in business, fear sets in and causes people to panic. As we saw in the pandemic, business owners tend to do one of three things:
Make rash decisions (cutting employees and expenses).
Make no decisions.
Began to innovate (these are the businesses that thrived).
Economic downturns present an opportunity for businesses to become stronger. Specifically, during the pandemic, we saw that when times were tough, new opportunities emerged. Whether it was through discovering new ways of doing business, identifying new products to sell, finding different ways to reach out to our customers, and nurturing relationships.
How to Navigate a Recession
Recessions and economic downturns are scary to go through, particularly for the first time as an entrepreneur. I'm confident, given my previous experience, that you will get through it. Here are a few strategies and tactics to help you navigate a recession.
Acknowledge things are changing and that you may need to change your goals.
First and foremost, while we may want to hold onto our long term vision and mission for the company, our short term expectations will likely need to change. We have to accept that we don't know how things are going to go, so we'll need to respond to what's happening around us in real time. This means adjusting plans, expectations, financial goals, and anticipated outcomes.
Take Your Business Temperature
The next thing you need to do is take a look at your revenue and income, then figure out what your break even point is. How much of a buffer do you have with your profit margins to keep the business moving even if you have a dip in revenue? How much of a cash cushion do you have in the business if you need to pull from your savings?
If you're a LABS member, we have a training on this inside the program specifically for you to watch!
Look at Your Expenses
While you’re taking your business temperature, take a look at your expenses and see where you can cut costs, conservatively. This isn’t to say that you should make major cuts in your business, but where can you trim expenses? It could be in switching suppliers to get better pricing on some of your raw materials or removing tech subscriptions that you don’t use. Take a look at your inventory, team’s hours and efficiency, how can you improve those things? You could even look at investing in tools or supplies to help you streamline your efficiency. Ultimately, the goal of this review is to save you money in the long run!
Assess Your Product Mix
Another tactic to consider is assessing your product mix and discontinuing any low performing products or items that have low profit margins. Once you've identified those SKUs, sell through the inventory so that you free up space on your shelves. This will give you a cash influx in the business and you’ll have a stronger collection of products that you market & sell.
Continue Innovating and Bringing New Products to Market
Lastly, it’s important to continue to innovate and bring new products to market. This doesn’t mean spending more time sourcing, but rather, look at what is working in your own sales data. What sales products have great profit margins, great manufacturing partners, and perform well? Begin creating more of that product to add to your collection. During a recession, it’s important to be smart about how you’re allocating your resources, including your time, your money, and your energy.
Do Not Isolate
A recession is not the time to isolate. This is a time when it is crucial to connect with other people that you trust, who understand your industry, and can offer you a wider perspective of how your business is performing during a recession. You could hire a coach, join a community, or building a peer group.
Don’t Pull Back on Marketing
In regards to marketing, a recession is not the time to pull back on it. Visibility is so important, especially with your existing customer base—show your appreciation by loving on your existing customers to keep them happy. Here are a few ways you can do this:
Pull your customer data and find out who your top performing customers are.
Keep doing your monthly emails, send out handwritten notes, engage and connect on social media, and choose marketing tactics that work best for you and feel easy.
As we head into this recession, I hope these tips help you prepare your product business to thrive. If you’re looking to join a community to help you through this recession, make sure you’re on our waitlist for Proof to Product LABS!
Today’s episode is brought to you by LABS, our 12-month group coaching program that was built for product based business owners who want to streamline their systems and streamline their revenue. If you’re ready to join this program, make sure you’re on the waitlist for when we open enrollment!
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Connect with Katie Hunt
Katie Hunt is a business strategist, podcaster, mentor and mama to four. She helps product based businesses build profitable, sustainable companies through her conferences, courses and coaching programs.
Website: prooftoproduct.com | Instagram: @prooftoproduct
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