Running a product-based business in a recession
Recessions, downturns, and slow times in our product-based business can be scary. But they don’t have to be!
In my 5 years of business, I have experienced seasonal downturns and the pandemic. This will be my first “official” recession as a product-based business, so I’m taking what I’ve learned from my previous downturns and, not only applying them but, sharing them with you!
My hope is that you’ll find some nuggets of inspiration that will get you through these challenging times.
Due to many variables in the product-based space and economy, I cannot guarantee any of these tips or ideas will offer success or profit. Consider and implement these suggestions at your own discretion.
My retail and wholesale sales numbers have been down month-over-month since the end of last year, which is the first key indicator that a recession might be looming – if it’s not already here.
As a product-based e-commerce business that relies on sales to survive, this is a really scary place to be. If no one is buying, where will my next pay cheque come from?
Instinct is to panic. Maybe even to host sales, offer discounts, or run ads to gain reach. But when those best efforts fail, you can bet your self-esteem is going to take a hit and you’ll wonder what you’re doing wrong.
It’s not you. Or me.
Stop beating yourself up because you’re not the only one experiencing some pains due to this recession. I’m right there with you.
And guess what else…we have NO control over the economy. Nor can we force people to spend money.
Have I left you feeling hopeless yet? Before you feel too hopeless let me pull you back by telling you there is a lot we CAN control. And dare I say, there are opportunities to be uncovered during this time. (Atleast that’s what I’m telling myself)
If we accept the situation for what it is and refocus with creative action it will help us and our e-commerce business weather this recession storm.
First, we must let go of what we THINK our business, and this time in our business, should look like.
Next is some creative action.
Review & Analyze Numbers
My e-commerce sales are relatively seasonal, due to the nature of my designs so I start expecting slower sales from December to February. I’m looking at this recession as no different.
During this time, I review how the year went and analyze how I can do better and what should change in the new year to improve margins and continue to see growth. With the recession, I’m working with a little less data but diving deeper. Which I’ll get into shortly.
This starts with pulling sales data from my Quickbooks reports which captures every sale I’ve made and every expense from that year (or time period I choose to analyze).
The reports I pull are the following:
NOTE
For the sales by product category & class to pull accurate data, you must set this up and start assigned classes as income is recorded. Discuss this with your bookkeeper.
Here’s a tutorial on setting up Product Categories in Quickbooks.
Profit and loss
This report will show me how much income I’ve made and how much I’ve spent, with my total NET profit.
It will also show me WHERE I’m spending my money which informs how I might cut back.
Sales by Product Category
This report will show me the percentage of sales, broken out by product category
It also shows me what designs within that category are performing best & worst
Sales by Class
This report will show me my streams of income (since that’s how I’m using it) and how well they are performing
Once we have that basic review, we must make some decisions. But what and how?
Find new income streams
How many income streams do you have? And are you putting all your eggs in that basket?
Income streams are different methods to which we earn money in our business. If we only earn money from one source, and that source sees a dip or ceases to exist one day, our business is heavily impacted.
By diversifying our income streams, we avoid having those circumstances impact the flow of money into our business. It also allows you to shift focus as streams pick up or slow down.
What are those income streams for you?
Are there other income streams you can discover that will help balance your business income in times like these?
What kind of services or products are in demand right now that you can cater to which doesn’t require a large investment?
Most likely many income streams will be affected with recessions but it’s a great time to assess what those are for you and how you can diversify for future stability.
During the pandemic, my wholesale sales tanked as shops closed up and scrambled to get online while my retail sales sky rocketed. Had I not sold retail, I may have been in trouble.
During this recession, I’ve shifted focus from my own new product releases to freelance and helping others in their business.
Double-down and discontinue
Look at product lines, designs, and streams of income to decide which ones are doing well and which ones aren’t.
Depending on those metrics, double-down to capture more income with a strong selling product line, design theme, or income stream. Discontinue “dead weight” to free up some cash for other things or free up your time to focus on streams that have a stronger return on investment.
Reduce bad expenses. Invest in good expenses.
Increasing income is the obvious solution. But in a recession, it’s not easy. So, let’s look at adjusting our numbers in the expense category next.
Reducing costs in a recession is a great way to save money in the short term. However, pulling back too much or pulling back on the wrong thing may impact your business in the long-term.
And investing?! Really? In a recession? Yep! But it might not be what you think!
While your competitors are pulling back and reducing expenses or services for those short-term gains, you can be reducing and investing the right things to get ahead in both the short- and long-term.
We do this through diving deeper into our expenses; Identifying the bad and good ones and asking some tough questions.
Bad expenses
Bad expenses are ones that might be frivolous or don’t directly offer positive gains for your business or customers. A couple of examples might be, subscriptions you’re not getting full benefit from. Changes to your website that doesn’t improve how a customer might navigate your site. Aesthetic upgrades to your physical shop that doesn’t really benefit customers or foster increased sales.
Good expenses
Good expenses are either time or money invested in areas to improve your overall business and customer experience for the long-term. A couple of examples here might be, offering a useful product line that is in demand or creating valuable content your customers can benefit from and is “ever green” like blog posts or YouTube videos. These things only serve to expand your catalogue, reach and improve SEO, and help your customers, which are both a short- and long-term gains for your business.
Tough questions
The tough questions come in after those are identified. And both will be different for everyone based on each individual business, their audience and needs, desires, or wants of that audience. Some tough questions to ask:
Is this a want or a need right now?
Is this an aesthetic or critical improvement?
Is this a frivolous investment of time / money?
Will this serve my customers right now?
Do I use this (subscription) often and is it crucial to driving sales or managing my business?
Some letting go may be required as your plans are adjusting to the current market conditions and finding other ways to offer value. Don’t worry, this is just temporary. You can always return to it after the dust has settled.
Or hey! Maybe it’s the best thing since sliced bread and you want to continue on this new path for the foreseeable future?!
Which brings me to my next idea.
Explore new offerings that serve
Buyer behavior changes. Buyers’ wants and needs change. A recession is a great time to find new opportunity and tap into how customers are navigating it and how those buying habits are changing. More importantly, how you and your small business can show up to the table and serve your customers in a new way.
Some research will be required to determine what your customers are buying, how they’re buying, and where they’re buying which will inform where and how you might find the opportunity.
You could do a general search online to get some general ideas. Speak to peers and colleagues. Or, contact your best customers to get their insights.
Investing in inventory might not be something you want to do right now so consider how you might take what you already have and package it a different way. Or, maybe lean on collaborations with others to expand your reach. Or, maybe you could offer digital downloads or workshops that offer value to your customer base in a new way.
Greetings from Home postcards circa 2020
A pandemic story
During the pandemic, I was lost with what to do and what to sell. Everything shut down. No one was buying anything.
Since souvenirs were generally what my customers looked for on my site, and because no one could travel, I designed a set of Stay at Home “travel” postcards that featured 5 rooms most people were visiting more often during that time. At first they were just for fun and released a small amount in my shops. They got some traction and I couldn’t keep them in stock! They were featured in 2 publications in the span of a few months and kept my business afloat during that time.
This moment in time is a bit different so I’m exploring how else I might serve my community through blog posts, templates, even freebies!
Consider what else your customers need and how you can help.
Offer value-add, not discounts
While it’s easy to encourage sales with a discount, in a recession the overall sentiment is that people aren’t buying. So is a discount going to really help? And, more than likely EVERYONE else is offering a discount too, so you may not capture the attention you’re looking for.
But hey, maybe I’m wrong! It’s definitely worth a go.
A better option might be to add a little extra. This not only avoids devaluing your brand or offerings, but it continues to build loyalty and encourage new customers to try your brand out! As a bonus, it might even help you stand out from the crowd.
When Gary Vee sells his NFTs, they are attached to a physical “value add” item like a 1/2 hour call or tickets to see him speak in person. This doesn’t cost him much (if anything) and only serves to add more value to his customer. In turn, increasing the value of his NFTs and ultimately, improving his bottom line.
Research, learn, and create
It’s not often we get down time running a business. And in a recession, we can be forced to since there’s no saying when things will pick up.
When we’ve done it all and not sure what to do next, I like to:
research new products 🧐
learn a new skill 🤓
design for upcoming releases so they’re ready to go 🤩
create new offerings and “evergreen” content 😎
I’m currently researching new products I want to bring in and sending out customer surveys to get an idea for what they’re excited about.
I’m learning more about running a business in a recession which is helpful and important for the sustained success of my business.
And, I’m creating new things that excite me which will open up a new world of product and content when I’m ready to invest.
All of these things “fill the bucket” and are “investments” in ourselves and business. Hopefully, without much cost and long-term benefits. They will also offer new information and inspire new directions which may have been untapped otherwise.
While recessions are scary, and this being my first one (outside of seasonal downturns and the pandemic), I like to think it can open the door to new opportunity and benefit our business in ways we may never have thought of otherwise. Even if we use this time to rest and reflect.
So keep your chins up my friends! We’ll get through this together.
Have any tips of your own that might help? Share in the comments below.
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Art & Design | Small Business | Inspiration | Product | Spotlight
