How to Navigate the Economy and Recession-Proof Your Business
Aug 21, 2024
In this week's blog post, we're diving into a topic that's been front and center during our mastermind office hours—WTF is happening in this business environment right now? If you’re feeling a bit lost in the whirlwind of economic shifts and the incoming election, you’re not alone. I often joke that my business has only ever existed during a recession, pandemic, or some other financial crisis. But wouldn’t it be nice to experience smooth sailing for once?
Typically, summer is a slower season for most businesses. However, with back-to-school transitions, an upcoming election, and the holiday rush, things are anything but typical. So, what’s really going on, and how can we as small business owners navigate these choppy waters?
I like to approach this from two angles: understanding what’s happening in the economy and then adapting our businesses to thrive despite it. Here’s how you can do the same.
Typically, summer is a slower season for most businesses. However, with back-to-school transitions, an upcoming election, and the holiday rush, things are anything but typical. So, what’s really going on, and how can we as small business owners navigate these choppy waters?
I like to approach this from two angles: understanding what’s happening in the economy and then adapting our businesses to thrive despite it. Here’s how you can do the same.
Focus on the Long-Term Plan (But Not Just Financially)
When thinking about your business's future, it’s crucial to have a long-term plan. But here's the twist—I’m not just talking about finances. Sure, money is important, but so is your time and energy. If you take money out of the equation, what do you actually want to be doing five or ten years from now?
I discussed this a bit in last week's post about the SLOW CEO Era, but it bears repeating: The goal is to create a long-term business roadmap and personal plan that can withstand the ups and downs. This means being clear on what you want your business and life to look like in the future, regardless of external circumstances.
For example, imagine you’re a small business strategist. Instead of constantly chasing the next client or project, you might focus on developing a business growth strategy framework that allows you to work fewer hours while still achieving your income goals. This might involve creating a digital product that generates passive income, building a team to handle day-to-day tasks, or shifting to a business model that aligns better with your desired lifestyle.
This is where my husband, Scott, comes in with some wise words. When I start to panic because things aren't going the way I want them to, he always reminds me that everything is cyclical. Nothing stays low or high forever—it's a rollercoaster. The key is to know where you are on the ride at any given time and plan accordingly.
Use The Data
Scott has a master’s degree in Economics and Education and handles all of our finances and support tasks. When we look at our business numbers, we aim for a 30-40-30 principle: 30% of revenue goes to payroll, less than 40% to expenses, and at least 30% is profit. This ensures that the business remains sustainable and that we can pay ourselves. We've been talking a lot about economic factors recently, which brings me to my second point: Use data to understand the environment you’re in.
We do this in two ways:
- Look Back Analysis: Review what has worked and what hasn’t in the past. This way, you can continue doing what works and stop doing what doesn’t. Regularly revisit this analysis to stay on track.
- Understand Economic Indicators: Economic indicators are vital tools that help you gauge the health of the economy and make informed decisions about your business strategy. While I learned about these in business school, I’ll admit that they haven’t always been top of mind. That’s where Scott’s expertise comes in handy, and it’s something that can help your business thrive in any season.
Key Economic Indicators to Watch
- Interest Rates: Interest rates have been rising steadily over the last year and a half, significantly impacting businesses and consumers alike. More people are carrying more debt now than at any other time in our nation's history.
By keeping your expenses below 40%, you ensure that your business remains profitable even as interest rates climb. This might mean reducing non-essential expenses or finding more cost-effective marketing strategies for small businesses. - University of Michigan Consumer Sentiment: This indicator measures how consumers view the economy—are they feeling more or less optimistic? Recently, there’s been a steady decline in consumer sentiment, which could signal a downturn in consumer spending. Understanding this trend can help you anticipate shifts in your market and adjust your strategy accordingly.
Know Your Numbers Inside and Out
The number one thing you can do to create a recession-proof business is to know your numbers. This means understanding your income, expenses, and how they mesh together. By knowing your numbers, you can make informed decisions about where to cut costs, where to invest, and how to navigate the ups and downs of the economy. The more you know your numbers, the easier those decisions will be.
If you’re an entrepreneur focused on strategy and entrepreneurship, knowing your numbers might reveal that a particular marketing campaign isn’t yielding a good return on investment (we discovered this with paid ads). Armed with this knowledge, you can reallocate your budget to more effective marketing strategies for small businesses, ensuring that every dollar spent contributes to your long-term goals.
Introducing a new private podcast series that’s just for you if you’re sick of all the Instagram BS! (or insert social channel of your choice). You can build a business without being a slave to the social engine. Grab the free series.
Proven Growth Strategies That Always Work
Despite the challenges of the current business environment, some growth strategies remain tried and true. Here are a few that have always worked for us:
- Focus on Value and Customer Retention: The 80/20 rule always applies—80% of your revenue likely comes from 20% of your customers. Instead of constantly seeking 10 new customers, focus on providing exceptional value to 10 that you already have. This not only boosts customer loyalty but also increases the likelihood of referrals.
Consider how you can enhance the customer experience to create raving fans. This might involve offering exclusive discounts, personalized services, or a loyalty program that rewards repeat business. - Income Stacking: This strategy involves diversifying your income streams so that you’re not reliant on a single source of revenue. It’s about getting creative and digging into what’s currently working for your business.
For example: If you offer consulting services, you might also create a digital course, write an e-book, or develop a membership site. This way, you have multiple streams of income that can support your business even if one area slows down. - Embrace Adaptability and Cost-Effective Marketing: When you find something that works, do more of it. Conversely, if something isn’t working as efficiently as you'd like, it’s time to adjust.
When you look at your expenses, are they giving you a return on your investment or do you need to adjust? Perhaps you’ve been spending a significant amount on paid ads, but the results haven’t been great. Instead, you might focus on organic marketing strategies like content creation, email marketing, or SEO to drive traffic and generate leads more cost-effectively. This is a personal example that comes from our business and experience!
Launch Tips for Success
Launching a new product or service in this environment can be daunting, but with the right approach, it can also be incredibly rewarding. Here are a few tips to keep in mind:
- Give Yourself a Longer Runway: Don’t rush the launch. Take the time to prime your audience, build anticipation, and ensure everything is in place for a successful launch. We like to work backwards in this way. We look at our calendar and see what worked, what we want our schedule to look like, and plan our launches accordingly.
- Position Yourself as a Thought Leader: Establish yourself as an authority in your field by sharing valuable insights, offering expert advice, and consistently delivering high-quality content so that when your audience is ready to buy, they find you.
- Launch with Momentum: Think of your launch like a Taylor Swift concert—create your own lane, build excitement, and own the momentum.
- Show the Math: Be transparent about how your product or service can save time, money, or both. This builds trust and helps potential customers see the tangible benefits of what you’re offering.
Have Fun and Embrace the Cyclical Nature of the Economy
The world isn’t perfect, and neither are you. If you’re having fun with what you’re doing, put it out there, see what happens, and pivot as needed. Remember, the economy is cyclical—what goes up must come down, and vice versa.
If you’re feeling overwhelmed by the current business environment, take a step back and reassess. Maybe it’s time to revisit your business growth strategy framework or explore new opportunities that align with your long-term goals.
Ultimately, the key to thriving in any business environment is adaptability, creativity, and a solid understanding of your numbers. Decrease your expenses, increase what is working, and consistently look at data. By focusing on these areas, you can create a business that not only survives but thrives, no matter what the economy throws your way.
About the author
Holly Haynes is a business strategist who loves a good plan and flow chart. She is crazy passionate about teaching women like you how to build your dream job and scale to 6-figures without sacrificing your weekends or priorities.
Connect With Holly:
