When staring down the barrel of a full-blown Recession, it’s easy to let fear paralyze you. The stock market is hitting record lows, the unemployment rate record highs, and you’re caught in the middle. Often feeling lost, helpless, and terrified to make the wrong move.
If you’re like most small business owners and have found yourself on the proverbial short-end of the SBA stimulus program stick, these five strategies for entrepreneurs will give you a fighting chance for survival. They are the exact methods I used to grow my company from $500,000 in sales to $5 million in sales during the 2008 Recession.
Strategy #1: Embrace NEW Opportunities
While this isn’t a “throw everything at the wall and see what sticks” moment, it is indeed an opportunity. There are countless companies that have not only survived a Recession, but they have thrived.
One example is Netflix. They chose the Great Recession of 2008 to transition from mail order DVD’s to online streaming. As cost-conscious consumers opted to cut the cord to save money, Netflix’s new product offering became an attractive option. Their customer base grew exponentially which caused their stock price to soar 57% bringing a much-needed cash injection. This bold move solidified Netflix’s position as a breakout success in the entertainment industry and the rest is history.
Lego is another Recession success story. They didn’t create a new product offering, but sought new opportunities in other markets. While in the throes of Recession, they launched aggressive expansion initiatives into Asia and parts of Europe. This jump across the pond created a 63% boost in profit growth. Not only did Lego survive the Recession, the 75+ year old company broke their own sales records.
While companies like Netflix and Lego thrived during the Recession, others were born from it. Popular disruptors such as Venmo, Groupon, Uber, Slack, and Square all launched during the Great Recession of 2008 that spanned over 18 months.
But what if you’re not a huge corporation? Are you doomed to fail? No, absolutely not. As a small business owner who not only survived the Great Recession of 2008, but a divorce and debilitating health crisis ALL at the same time, I can personally attest that a Recession does not mean certain death.
Back in 2008, I was Founder and CEO of Glamajama. A high-end luxury children’s brand with celebrity clientele, high profile mentions in the press, and prestigious retail partnerships with Nordstroms, Barneys New York, and over 500 boutiques across the United States and overseas.
At that point, I had poured nearly three years of blood, sweat, and tears into growing that company from the ground up. Those humble beginnings spent reading “How to” books while sipping lattes at Barnes and Noble did little to prepare me for what was ahead.
I was incredibly naïve about what was really going on economically in the world and how it would ultimately affect me and my kitchen table startup.
Looking back, I can’t help but believe that was a blessing of sorts. Instead of reading the doom and gloom headlines, I asked lots of questions. I talked to my customers. I reached out to my retail partners. I became obsessed with finding the opportunity and silver lining in it all. If you train yourself to look hard enough, and don’t let yourself be blinded by fear, there is ALWAYS opportunity in hardship. At the end of the day, that’s what entrepreneurs do. They find the opportunities. It really is that simple.
As I took a hard look at my business, I started piecing together my strategy. The United States was getting hit hard by the economic downturn, but it hadn’t hit other countries just yet. For example, my boutiques in Japan were still selling the brand in record numbers.
To capitalize on that opportunity, I worked to reinforce key relationships, sought out expansion partners, and aggressively pursued new business. This first step kept the lights on and ensured I still had cash flow as I worked to pivot the business model.
Secondly, I noted our strengths. The Glamajama brand name was strong. Our customers were raving fans and we always had extremely high sell-through rates in the stores. That wasn’t the problem. The problem was that fewer customers could afford our $40 price tag. That is an important distinction.
Why does it matter? Because it’s easy to overgeneralize and fall into the trap that “nothing is working!” when that isn’t the whole truth. As the old saying goes, “don’t throw the baby out with the bath water.”
Get granular, define exactly which key principles are no longer viable.
For us, it was the pricing. Our customers were no longer shopping in high-end boutiques or department stores. Instead, they were shopping at big box retailers like Target. With this newfound direction and mandate, I started mapping out my survival plan. I researched what products and price points did well at Target and brainstormed how I could pivot to become an attractive brand partner for them.
As a fashion brand, this meant creating a new lower-end brand, Baby Glam. The new line was just as trendy and fashion-forward, but utilized more affordable cotton blends, had fewer decorative touches, and stressed easy care. By launching a second tier brand, it kept us from cannibalizing the existing brand. I was careful not to tarnish its high-end appeal.
While Glamajama was a fashion staple for birthday bashes, photo shoots, and igniting envy at the playground, Baby Glam was for everyday romps around the playpen.
Armed with a solid track record of retail sales, a restructured manufacturing plan, and a key understanding of what Target looked for in a brand partner, I made the pitch.
Within three months, the Baby Glam line had made its way to Target.com to test and soon thereafter we started a rollout into over 1,800 of the Target brick and mortar locations.
At the beginning of the Recession I was struggling to scrape by with just under $500,000 in sales. A year later, we had hit nearly $5 million.
I’m not sharing my story to brag, but inspire. If I, a self-taught entrepreneur with zero experience in business OR fashion and zero financial support could pivot and survive, YOU can too.
Don’t let fear paralyze you, find opportunities ripe for the taking.
Strategy #2: There’s Strength in Numbers
Recessions are terrifying. They wreak havoc on your business plan and force you to second guess just about every business decision you have ever made.
- Should I have gotten that loan two years ago?
- Can I afford to restock our inventory right now?
- Is it time to start laying off employees?
Each of those questions are gut wrenching. However, YOU are not the only one asking them.
There are thousands of other business owners just like yourself losing sleep over those exact same questions.
Your chances of surviving the storm are much higher if you huddle together. Instead of looking for ways to out maneuver your competitors, how can you collaborate with them? For example, instead of scraping together your last few dollars to hit that mandatory 500 piece minimum on your inventory reorder, can you split it 50/50 with another vendor who uses the same product?
Or what about marketing and advertising expenses? Instead of placing an ad for your restaurant, maybe contact a few other complimenting (not competing) vendors to create a fun pop-up shop opportunity at your location. Each vendor can promote the event to their respective audiences and the group benefits. It’s a great, low-cost way to expose your restaurant to new customers all while supporting other small businesses.
And finally, when business slows down cutting back on employee hours is a necessary evil. This can be ESPECIALLY painful if you’ve worked hard to achieve a healthy workplace culture and have reliable staff that feel like family. While layoffs are often inevitable, you can soften the blow by helping them find odd jobs with other small businesses that may still need help, just not the expense of a full-time employee.
This helps lessen the hardship on your employees and keeps the goodwill strong so that they will (hopefully) be happy to return once you’re back on your feet.
Strategy #3: Protect Your Cash Flow
While you should always keep a close eye on your expenses, during a Recession you need to be especially ruthless. If it isn’t a necessity, axe it. If it is a necessity…
- How can you get it cheaper?
- Can you renegotiate with the vendor for a lower cost?
- Are they offering payment plans to help offset the financial burden on their customers?
All too often entrepreneurs hesitate to renegotiate contracts and vendor arrangements out of pride. No one wants to admit they can’t pay their bills or need help.
My biggest piece of advice? Stop making it personal.
This is not about you, not a reflection on your leadership ability, or a measure of how much you “like” your vendors – this is about numbers. Take all the emotion out of your thought process and focus on the spreadsheet. If it’s not in black and white on your printout, it doesn’t exist. Thinking in these terms will help you be more objective when tackling those columns bleeding red.
Once you’ve taken the emotion out of your financial decisions and have axed what you can, next up is protecting your cash flow. Break out a calendar and track when each and every penny is going in and out of your business. Are the majority of your expenses going out in the beginning of the month leaving you cash-strapped the second half of the month?
If so, brainstorm ways to smooth out your cash flow. This could be reaching out to your landlord to ask for a two week grace period on your lease, or contacting your credit card company to change the due date on your account. It could also be as simple as changing your pre-Recession workflows and habits.
For example, have you always purchased your inventory restock orders on the 5th? If you’re consistently low on cash at the beginning of the month, an easy fix would be moving those orders back to the 15th.
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This emphasis on protecting cash flow and being more mindful of not just your expenses but their timing can be life changing for both you and your business.
If this is a new concept for you, I highly suggest you try out the budgeting tool, YNAB. And no, this isn’t the same ‘ol budgeting nonsense where you arbitrarily guess monthly dollar limits and then eat PB&J sandwiches the rest of the month in an attempt to hit them.
YNAB takes a more empowered approach to budgeting by forcing you to put your money to use BEFORE you even spend a dime. This way, you know exactly what is due, how you will pay for it, and be able to proactively manage your finances. This type of a money mindset shift is especially valuable during a downturn.
Strategy #4: Strengthen the Brand
As a busy entrepreneur we all have those “someday tasks”. With business slowed, that someday is here. A couple great examples of someday tasks is updating the copy on your website, creating new products shots, or finally putting together that media kit for publicity outreach.
There are also activities you can tackle that will directly impact your bottom line. One example is scrubbing that email list you’ve neglected over the years. Let me explain why this is such an important task.
First and foremost, auditing your list will help you be more mindful of who your ideal customer is, which can then guide your messaging. It can also be an eye-opening metric into your inbound marketing efforts.
- Are 80% of your email subscribers from 5 years ago?
- If so, what changed?
- Did you purposely stop collecting emails or is your new lead generation campaign simply not resonating with your audience?
- Or even worse yet – did your opt-in form stop working 6 months ago and you’re just now finding out?
I can’t even begin to tell you how common that last one can be! The truth is, email service providers charge by the size of your subscriber list. If you have a few hundred (or thousand) subscribers that haven’t opened any of your last ten emails, there’s a good chance they’re doing more harm than good.
And it’s not only the financial cost you should be concerned about. Email providers assign your domain an email reputation score based upon your open rates, email click throughs, and complaint reports.
The lower your score, the less likely it is your email will actually end up in your subscribers inbox. However, when you scrub your list your email reputation score can increase which in turn helps you reach a greater number of subscribers.
To recap… By cleaning up that old email list you’ll end up paying less for more people to receive your message.
As a side note, the benefits of scrubbing are not limited to your email list. The same concept and principles apply to your social media presence as well.
For example, the Instagram algorithm determines how many of your followers will see your posts depending on how much engagement your account has.
If your posts consistently generate a high number of likes and comments, you will be handsomely rewarded with more reach. However, if your posts fall flat and rarely encourage interaction on the platform you might be only reaching 1% of your followers. Increasing your reach on social media is crucial as it means more eyes on your content which directly translates into more sales opportunities.
Reach matters! People can’t buy what they can’t see.
Have a business profile? Log in to your analytics and check your statistics. Always aim for a minimum engagement rate of 3% without the need for boosting or “tag to win” strategies.
If you routinely have low engagement, it may be time to scrub your follower list.
*Note: Please do NOT use an app for this, it is a violation of the Instagram terms of service.
Strategy #5: Sales Funnel Optimization
I’ve been a marketer in one capacity for another for over fifteen years. As an entrepreneur promoting my own business, as a contract CMO, VP, and as an agency owner. Different roles, all with very different clients and industries.
The common thread? Most think marketing is some “black box” that can only be analyzed when it crashes and burns. Heck, I even thought that myself!
The truth is, marketing is not about having a crystal ball…
It’s about leveraging data and harnessing consumer insights to make smart decisions that are both scalable and quantifiable.
Are there indirect benefits of marketing that can be hard to quantify? Absolutely! But there’s plenty you can quantify as well. If a marketer tells you differently, they’re just being lazy. Want a real-life example?
Recently a client needed help creating a sales funnel to launch his new product. He had about 20,000 on his list, but was getting very little engagement. After a thorough audit and survey, I knew why he wasn’t getting the results he wanted. Only about 17% of the list was experiencing enough “pain” to warrant a purchasing decision.
His current open rates were hovering under 10% and his click-throughs just under 1%. If you do the math, with 20,000 subscribers the best case scenario was 3.4 of them purchasing the product. Not great numbers, huh?
After a month of research, scrubbing the list, and crafting a highly engaging email win-back campaign we were able to get those open rates up to ~ 50% with ~ 4% open rate. Impressive, right? But it gets better!
I knew that many of the leads on that list had been poorly targeted so we launched a Facebook campaign to bring in fresh leads. The campaign generated new leads at just under $2 with 87% of them experiencing a high degree of “pain”. This high degree of pain and sense of urgency meant they were far more likely to purchase and engage with our sales messaging.
Let’s re-do the math! IF that original 20,000 subscriber list had been created with a better strategy from day one with ~ 50% open and 4% click-through and 87% expressing an interest in purchasing, that would have translated into 348 potentially purchasing the product. 3 customers vs 348 customers – which would you rather have?
Bottom line: LEVERAGE DATA + HARNESS CONSUMER INSIGHTS = $$$
When you market smart, every dollar spent guarantees a result. In a perfect world, that result would be directly deposited into your bank account. In the not-so-perfect post-pandemic world, we need that dollar to either a) move your prospect further down the sales funnel or b) provide valuable data that can be leveraged to optimize marketing efforts. If you’re curious about the tools I used, you can find them here.
And let me be clear, when it comes to surviving a Recession as a small business owner – smart marketing with a proven and measurable sales funnel isn’t a “nice to have”, it’s an absolute necessity. The harsh reality is that marketing dollars will be few and far between, you MUST make every dollar count.
Be honest with yourself…
- When was the last time you mapped out your customer journey?
- Do you have a sales funnel in place that can be measured?
- As a prospect moves from initial awareness of your product/service to successfully completing a transaction, what are the common bottlenecks and drop off points?
- Is your conversion rate at or below the industry standard?
If you don’t have those answers, then ask yourself another question – why not? If you’ve simply never checked, now is a great time to start digging under the hood of your business.
Sketch out a diagram of your sales funnel and jot down your conversion rates for each and every step. Afterwards, identify which parts of the customer journey have the greatest number of drop offs. Set aside time to brainstorm how you could improve that break down.
Remember: Your sales funnel is only as strong as your weakest link.
Did I lose you? If you can’t answer those questions above because you lack systems and are relying on a hacked together sales funnel, you’re in trouble.
For a business to survive a Recession (and scale in general), you need to know, “when I put X amount of money into the front end of the funnel, I get X amount of money in return. Each customer costs me $X and their lifetime value to me is $X.” If you can’t answer those questions, give me a shout.
The time to speculate whether we will have a 2020 Recession or not is over. The Recession is ALREADY here. COVID-19 has forever changed our economy and will continue to force us to embrace a new normal. We need brave innovators and entrepreneurs willing to embrace the unprecedented opportunity that lies in the wake of the chaos.
Ideally, I want you to see these five strategies as a mandate. To understand that strengthening your business benefits far more than your bottom line. We need small businesses to survive so that we can stabilize the economy and chart a path toward recovery. Together, we can put our 30+ million unemployed US citizens back to work. Let’s do this!