Transcript for Growing Your Business During A Recession

Well hello there! Catherine Langman here with you on the Productpreneur Success Podcast! Welcome to the show if you’re a new listener, and welcome back if you’re a long-time listener!

Today on the show we’re going to talk a bit about what’s happening right now in terms of the economic climate we are now operating in and living in. 

It’s no secret for any of us I dont’ think, that we’re experiencing some difficult economic times right now. 

Inflation in Australia is seeing prices of staples like groceries and petrol much higher than they were a year ago. 

Why have prices gone up so much? 

It’s a combination of things like supply chains being constricted – with long lockdowns happening in major manufacturing countries like China delaying deliveries of goods, with freight out of those countries so restricted with too much demand and not enough space, with the cost and availability of of fuel so expensive and so scarce thanks to the Russian war in Ukraine, and no doubt there are many other factors contributing as well. 

Bottom line is, we don’t have enough goods to fulfil the demand for them, which drives up prices. Plus, prices have gone up on many things we do produce here, such as food, because of the cost of fuel and the lack of delivery drives to get it to us. 

The RBA has just recently increased interest rates in an attempt to try and reign in inflation.  

And with all of this happening, and with all of your business and personal costs increasing, I know there is a lot of fear around how the heck you’ll get through. Many of you are fearful of how you’ll manage to survive in business in this sort of climate.

Let me tell you a bit about what happened when I started my first business, Cushie Tushies in late 2007, right before the last recession caused by the Global Financial Crisis…

My desire to start a business was because I had 2 babies, one year apart, and my boss at the time in the ad agency I worked at, basically told me my job was full time or nothing. And full time hours in Sydney is not 9-5, it’s more like a minimum 8-6pm, which is just impossible when you have two babies. So I really wanted to create my own business because I desperately wanted something more flexible as well as more meaningful than working in a big advertising agency!.

In starting my own business, not only was I losing my secure income, but I was also investing my savings to help realise my dream.

And then the GFC happened, and the economy tanked….

Scary? Absolutely! But I was also very determined, so I found a way to take action even whilst I was afraid. 

I suppose it was somewhat lucky that the product we created was a reusable nappy, which provided significant financial savings for parents compared to disposable nappies, so that was a really big selling point at that point in time when families were needing to tighten their budgets due to the GFC.

But funding the business was difficult. Banks stopped lending for quite a while, so I only had two options open to me: invest my savings, and use a credit card. Which is what I did. 

And then, because I had to bootstrap my business myself with a very lean budget to grow, I just had to get scrappy. I used all the marketing know-how I’d learned throughout my career in my corporate advertising career to forge a way ahead and grow at a time that many businesses were going backwards.

The moral of this story is that a recession can actually be a great time to start or grow your own business!

Did you know…

The following businesses were started during the last recession – you might recognise some of them:

  • Uber
  • AirBnB
  • Slack
  • Pinterest
  • WhatsApp
  • Square

Some of the most iconic companies of the next decade will undoubtedly come out of tough economic times we’re experiencing now. 

But experience tells me, all of you – all of us – will have one of 3 reactions to this situation:

  1. You can be a passenger – passively going along with whatever comes your way
  2. You can be a victim of your circumstances, or
  3. You can be the driver and make change happen for yourself.

You might be tempted to think there isn’t much you CAN do to changed your circumstances in the conditions we’re in right now. But even though there are many things you can’t control – the price of groceries or fuel for instance – there are many things you do have control over. Starting with how you choose to respond to this situation. 

So I wanted to create an episode for you to give you some ideas about how you can survive and hopefully thrive even as the economy may struggle in the coming months.

But before we dive further into this episode, I’d like to ask you a quick favour: if you love this episode, would you share it with one or two of your business besties? Especially if you know they’re looking to generate more traffic and sales on their eCommerce website this year. It’s super easy to share – just click on the icon next to the podcast on whichever platform you listen to it, copy the share link and then send it in a message to your friends.

OK, let’s dive into the episode and talk about some strategies and ideas to manage your business through tougher economic times, whether it’s a full recession or just a downturn. 

So here goes…

Let’s go over 8 Tips To Growing Your Store In A Recession (When You Want To Thrive, Not Just Survive…)

1. Protect Your Cash Flow – but don’t become Smaug

Cash flow is the lifeblood of your business; to keep your small business healthy, cash needs to continue flowing through. Now no matter how tough times get, having cash flow out of your business will never be a problem.

As long as your business exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing in. Recession-proof your business by implementing strategies to keep the cash flow moving – and I’ll talk more about how to generate those sales as consistently as possible a bit later.

One important task to work on is a cashflow forecast so that you can anticipate when you’ll have bills coming in or expenses due, and what your expected sales revenue will be. 

And then, when you do bring in some cash, don’t spend it all at once. Try to slowly build up a bit of a buffer in your bank account. 

I’m a big fan of keeping a separate bank account to set aside money for tax and to save for big inventory purchases. I actually like to have a couple of separate bank accounts to put money aside, so one for paying for inventory, another for putting aside money for tax and BAS’s. I’m about to set up an account to put profits aside on a regular basis as well, following the Profit First philosophy. 

But, one thing you want to be mindful of when it comes to cash management in your business is – you need to remember that cash has less spending power when inflation is high. 

The knee-jerk reaction for many right now is to hoard cash and stick it in a savings account, but in fact the spending power of that will be a lot less than it will be if you find ways of investing it, such as in your business.

That doesn’t mean you throw cash at anything – that would be ridiculous – but you do want to invest in growth-generating and money-making strategies. Whether that’s investing in inventory or investing in marketing that you can clearly track is resulting in revenue.

  1. Optimise, Optimise, Optimise!

This is something that a lot of businesses just don’t do enough. When things are going great guns – like in late 2020 when eCommerce went completely nuts thanks to Covid lock-downs forcing consumers to shop online. When it’s an easy cash-grab situation like that, you can pretty much put up any marketing and it’ll convert. 

But most of the time, it’s not like that. You put together a marketing campaign and send it live, but you’re creating the content around what you think will resonate with your audience based on past experience &/or gut instinct. 

Don’t just leave it there. Go back and review your results on a regular basis. Literally look at every step of the marketing funnel – from click through rates to add to cart to purchase to ROI. Look at which creative variants or copy variants are getting the best result. Test things like adding bundles to your website, or changing out the hero image or test different incentives. 

There are literally thousands of things you can test and then optimise based on the results you see. 

Bottom line – don’t finish a marketing project and then tick it off your list never to look at it again, or make the mistake of doing something and then assuming it didn’t work because you didn’t suddenly make a lot of money. Follow the data and let it lead you to improved results.

  1. Review Your Stock Control Practices

See what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many of particular items? Can an item be sourced somewhere else at a better price? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs?

Just because you’ve always ordered something from a particular supplier or done things in a particular way doesn’t mean you have to keep doing them that way – especially when those other ways may save you money.

The other way to look at your inventory, is to figure out what your top sellers are and try to get more in of those items. It’s super important to focus on doing more of what’s working well at times like this!

4. Focus On What You Do Well

I have seen many articles on diversification as a strategy for small business success, and it can be really tempting during a downturn to branch out and try to reach a different market or try launch new and different products. 

But too often small business owners confuse the concept of “diversification” with “different”, and unfortunately if you go too hard down the track of trying to sell to new and different markets, you can end up losing your core audience along the way.

Just adding other products or services to your offerings is not diversification. Unless you know for sure that the new thing is going to be a hot seller, don’t do it now. Chances are, it’ll damage your core business by taking your time and money away from what you do best and/or damaging your brand and reputation.

Drop the extras and focus on what you do best that is most profitable to recession-proof your business.

This means, doubling down on selling your main products and categories to your main audience. 

Perhaps tweak your messaging so it’s more relevant to your customers current lives, or pull together promotions themed around topics relevant to your customers.

5. Develop and Implement Strategies to Win the Competition’s Customers

If your small business is going to prosper in tough times, you need to continue to expand your customer base – and that means drawing in customers from the competition.

How can you do this? By offering something more or something different than the competition does. Research your competition and see what you can offer to entice their customers into becoming your customers.

Providing better customer service can be one of the easiest ways to outdistance the competition. This was something that worked really well for me in my first business. 

In that business, we sold a product that was sometimes a bit tricky to use, or certainly trickier than the disposable alternatives. So we really knuckled down on our customer service and made it REALLY easy for customers to get help. 

What happened was, we started getting customers from other brands contacting us to troubleshoot their problems because they’d heard we could fix everything! And by being helpful and approachable, we ended up winning those customers over to us.

6. Sell More To Your Current Customers 

Hopefully we’ve all heard the saying that it’s easier to sell to your existing customers than to win new ones. And those repeat sales are not just easier to win, they’re also more profitable than a first sale because they don’t incur the costs of finding a new customer, such as paying for advertising.

And that’s something you really need to take advantage of during a downturn. 

Even if you do need to use tactics like incentives, coupons, free shipping or bundle offers, it’s worth keeping those existing customers buying from you rather than giving them the chance to feel like they can get a better deal elsewhere…

When it does come to trying to win those repeat sales from your existing customers, it’s worth remembering that there are a few different distinct types of buyer within your audience:

  1. The ‘I want what’s new’ buyer – this is your spontaneous buyer who will generally snap up whatever latest products you get in, just because they always want to have the latest and stay in front of trends.
  2. The ‘big spender’ is your efficient shopper. I confess I’m one of these. I don’t actually shop very often, but when I do I basically buy everything I need for several months. So I’m the sort of buyer who is influenced by volume incentives or bundles, or even free shipping thresholds.
  3. The ‘discount’ shopper is the one we all know about, and we will always have a portion of these in our database. It’s definitely OK to share discounts and incentives sometimes, just don’t stick to discounts as your only marketing offer because then 100% of your database will be taken up by discount shoppers.

    And if you haven’t already – you might want to listen to my recent podcast episode all about discounts and incentives. Just head to catherinelangman.com/episode-116 to listen to that one.

7. Don’t Cut Back on Marketing

In tough economic times, many small businesses make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing.

Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and choose to buy with you rather than your competitors, by getting your name out there. So don’t quit marketing. In fact, if possible, step up your marketing efforts.

But, here are a few things I want you all to keep in mind with your marketing right now:

  1. More than two years into this pandemic, the way consumers shop online AND the way they consume digital content has changed a bit. One thing is for sure – consumers feel overwhelmed and burnt out, so they’re looking for ways to escape that reality by watching entertaining content, particularly video content, AND they’re looking for a bit of certainty around results, so things like user generated content that showcases actual consumers using and recommending your products will be more impactful. This means that – to be successful with your marketing, or rather to get the biggest return on effort with your marketing – you need to get a system going to collect and create video content &/or user generated content.
  2. Use email marketing! Email marketing has THE highest ROI of any digital marketing strategy available, at 3800% (and that’s a recent statistic specific for Ecommerce).
    So definitely spend some money driving traffic to your website, but don’t just rely on ads to convert sales. Get those visitors onto your email list and make sure you’re emailing at least weekly, with content and offers designed to appeal to those three different types of buyer who are likely to be on your list. 
  3. Work on your Search Engine Optimisation – or SEO. The more you can attract free organic search traffic right now, the better! Not only is it free, aside from the time it takes to do the work, but organic search traffic usually converts at a higher rate compared to most other channels. 
  4. Keep paying for traffic, but make sure you are keeping track of your metrics to ensure that you’re getting a profitable return. A couple of days ago, I audited a Facebook ad account for a new client and found that they were spending hundreds of dollars a day on campaigns that did not make them a single dollar in revenue. You really don’t want to be doing that if you can avoid it!

8. Keep Personal Credit in Good Shape

Hard times make it harder to borrow and small business loans are often among the first to disappear. As I said earlier, that was my own experience with my first business.

But with good personal credit, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to, perhaps using non-bank online-only lenders like Moula.

To recession-proof your business, keep tabs on your personal credit rating as well as your business one and do what’s necessary to keep your credit ratings in good shape. That means, pay your own bills on time, and keep your personal credit card spending in check. 

There’s absolutely nothing that will make your small business one hundred percent recession-proof. But implementing the strategies I’ve shared in this episode to recession-proof your business will help ensure your online store survives the tough times and might even be able to thrive, grow and profit! 

That’s it for today’s episode. I hope this has helped you to feel a little calmer about heading into the unknown over the coming months. 

If you’re currently doing it a bit tough, or you’re just looking for ideas or support with your ecommerce marketing, make sure you join our free Rockstar  Productpreneur community. To join, all you need to do is head to catherinelangman.com/rockstar

Or, if you’re keen for some help with this stuff, please just give us a shout! Whether you need help to learn and implement these things, or you’d like to outsource to our team, just head over to productpreneurmarketing.com and you can book in for a free strategy session.