How to Recession Proof Your Small Business
This blog post won't be like any other you see from me: it has no offers, no case studies, nor anything for you to buy. What you will hear from me is advice you won't get from anyone else (pay special attention to recommendation #3).
Today, I'm sharing with you how to protect your business from the recession caused by COVID-19. I'm not interested in debating whether you think it's real, who's fault it is, or anything else political. What I am doing is helping you survive when your revenue plummets.
Use the table of contents below to jump to the section you're most interested in:
If your small business hasn't yet been affected by COVID-19, it's only a matter of time before it happens. I spoke on the phone today with a potential client who, in her own words, said she was essentially "jobless," as she had three clients cancel their contracts with her. All due to a slowdown related to COVID-19.
Many of you, but not all, know how Socialmediaonlineclasses.com, my previous business, started. During the 2008 recession, my husband's business died (he is a residential homebuilder). It literally happened overnight: Friday he was busy with projects; Monday, it was like someone had unplugged the phone from the wall. People just stopped calling.
I had just self-published an expensive four-color book, and my marketing budget went to keep his business afloat. Yet, I was able to go from unknown to top 10 on Amazon and sold out in 6 months. I went on to another printing, and sold 9X what most publishers do.
So how did I do it? How did my husband's business fare? That's what's next . . .
Lessons from 2008: How to Outlast the COVID-19 Economic Slowdown
Here is how you can recession-proof your business, shared with you by way of lessons we learned from the 2008 recession:
#1. Maintain Cash Reserves
In Jim Collins' book Built to Last, he says one of the key factors to any business' longevity is how much cash they have on hand. The longer your business can last without significant revenue keeping it afloat, the more likely you'll be able to outlast any economic slowdown.
Cash reserves definitely helped our businesses: we're avid savers, and have lived a total of four years on our savings: two during the 2008 recession, and two years previous when my husband was starting his business. The biggest predictor of how successful a new business will be is how much working capital it has: without it, they'll need to take on more debt.
"One of the key factors to any business' longevity is how much cash they have on hand."
#2. Reduce Expenses
Great! You have cash reserves!
But, if you go through them in a month or two because you have too many expenses, what did that get you? Reduce your expenses to the absolutely essentials: what do you need to keep your doors open? Anything else is optional.
Yes, we had cash reserves on hand, but I wasn't using them for advertising or any other "pay-to-play" form of marketing. Instead, I focused on long-term marketing that would generate results for years, not days or weeks. My favorite? Email marketing: you earn $32 for every $1 you spend.
This 1-minute video explains why we use ActiveCampaign email marketing for our own business and our clients:
"When budgets are tight, focus on marketing offering the highest return on investment (ROI): email marketing. You earn $32 for every $1 you spend."
#3. Pivot Your Business
Pay attention to this advice: it's the most important of this entire blog post . . .
Ok, you've got cash on hand and reduced expenses, but how do you keep the revenue coming in when people are scared to spend? Here's what NO ONE ELSE will tell you: there's not one damn thing you can do to change that.
And here's the story of my husband's business illustrating that point:
During the 2008 recession, we brainstormed every marketing tactic we could think of to sell his homes: give away a car when you sign a contract? A cruise? Reduce the price? And far more.
But, the reality was this: no amount of crazy promotions would make it possible for buyers to sign a contract if they had lost their job or couldn't sell their existing home.
Buyers were stuck. Even if they wanted to buy my husband's homes, they couldn't. And people in the position to buy a second home without selling their existing one? They wanted deals so ridiculous we would have lost money. What they wanted wasn't feasible.
You may be in the same situation: if you're a restaurant, AirBnB/cabin/hotel, or anything to do with face-to-face interactive business, you're definitely going to see a slowdown. So you need to pivot. Even if you have an online business, you'll see a small slowdown, as your clients' incomes will be affected.
My husband went from building custom homes to remodeling existing ones: after all, if you can't sell your home, you'll be staying in it longer and want to make some changes. That pivot kept him in business.
"If consumers are stuck, they can't buy what you're offering. If your marketing isn't generating revenue, pivot your business model instead."
How can you pivot your business so that it keeps revenue coming in?
I don't think this slowdown will last as long as the housing recession of 2008: this is entirely due to a pandemic, not economic factors. As soon as we have a COVID-19 vaccine, global economies will return to normal.
That may not happen until 2021, however. Why? A vaccine is about one year out, and while the virus will slowdown in the summer, it will be back in the fall.
But you've got this: you started your business because you're smart, know your audience, and serve them better than anyone else. I know you can do this, and I'll be backing you all the way (and yes, praying too. I'm a praying person, and I literally pray for my clients. Surprised? It's not something I normally talk about, but if there's ever a time to do it, that would be now).