How to Prepare Your Product Business for a Recession If you're a product-based business and nervous about a potential recession, this is how you should prepare.
By Katie Hunt Edited by Chelsea Brown
Opinions expressed by BIZ Experiences contributors are their own.
Have you ever gone through a severe weather warning? Whether it was preparing for a blizzard, a hurricane or maybe even needing toilet paper during a pandemic, the panicked rush to the local grocery store is a sight to behold. Shoppers frantically drive carts and carry bags piled with canned goods, paper towels, toiletries, batteries, water gallons, pet supplies and so many "essentials." The checkout lines are swarming, the urgency of the situation creating an "every man for himself" mentality.
It's chaos preparing for potential chaos.
As an BIZ Experiences who has survived two recessions and a pandemic, I am well-versed on that out-of-control feeling. The one when it seems like you are standing in that line, but rather than checking out the essentials, you are waiting for your business to take a huge hit. When you feel like you are just biding your time before your number is called, and your provisions for your family and business fall short. You see other businesses forced into laying off employees, and you see the remaining employees with carts so full, they can't possibly manage the workload.
It's a miserable line to stand in. But here is the good news ... you don't have to wait in that line. You can prepare your business and "stock up" before the chaos hits.
Related: How to Recession-Proof Your Business
Fear of an economic downturn causes people to panic. Typically, business owners respond in one of three ways:
They make rash decisions: Staff and expenditures are severely cut, which causes future production to be hurt and creates problems for the company. The company's growth begins to slow (and in some cases, stop).
They make no decisions: Some business owners bury their heads in the sand and expect the recession to pass by. All of their growth and progress halts, and their hard work is forced to a standstill. Even when the recession passes, these are the companies that struggle to gain the momentum to return to "business as usual."
They innovate: Rather than succumbing to panic, business owners take this time to reevaluate and make changes to their companies. They build their ark by setting their priorities, focusing on customer experiences and relationships, and providing new opportunities and products. These innovative businesses not only survive but grow and thrive in the future.
Recessions and downturns can be scary, especially for an BIZ Experiences experiencing it for the first time. Let's dive into the four essentials to innovate during a recession.
Essential #1: Acknowledge that changes are going to occur, and set your priorities
You don't have to change your mission or your vision — those are the backbone of your company. However, you might need to make adjustments and changes to your short- and long-term goals. Since we don't know how long the recession will last, change agility is more important than ever. We need to be ready to quickly adapt our expectations, financial goals, anticipated outcomes and future plans.
Make a list for yourself of your top priorities. In this recession, what are the pieces I don't want to have fall through the cracks? For me, it boiled down to three main things:
My team
My clients and customers
My podcast
Related: 4 Ways Your Business Can Take Advantage of a Recession
Essential #2: Determine your financial status
What is your break-even point?
Take a look at your revenue and income. Do you have a buffer with your profit margins, and if so, how much can keep your business going if revenue decreases?
Just like we should have personal savings in case of an emergency, try to have a savings account in your business to help cover any dips in revenue. Nate Nead, managing director at InvestNet, recommends a cash reserve of at least 6 months' worth of business expenses. You will need to maintain your cash flow and cover your expenses, and having business savings will help.
What are you spending money on currently?
Look at where you are spending money, and see where you can cut costs conservatively. Don't become the business owner that starts slashing haphazardly. We are going to trim the budget, not exterminate it.
Maybe switching suppliers would get you better prices on raw materials, or you could remove some tech subscriptions you no longer use. You might even consider investing in some tools to help increase your productivity and efficiency, paving the way to save money in the future.
What products are bringing in the most (and least) revenue?
You only have so much time, money and resources. Now is the time to look over your product mix with a realistic eye. If you have low-performing products, discontinue them. Double down on your best-sellers with great profit margins. You need to allocate your time, money and resources to where it is most profitable.
Essential #3: Stay connected to those in your industry
A recession is not the time to isolate yourself. Reach out and connect with your support system — a coach, peer group or other BIZ Experiencess. If you don't have a group or a coach, find one or hire one! The input and experiences of others will help you keep a pulse on your industry. What is working? What isn't? What changes are other BIZ Experiencess making to keep their businesses in good shape?
Successful product-based BIZ Experiencess value the importance of community. Having people to bounce ideas off of and share struggles and tips enhances your mood, mindset and your business decisions — and those are going to be crucial during the recession.
Related: How to Maintain a Growth Mindset Even During a Recession
Essential #4: Keep your customers happy
Now more than ever, you need to be visible to your customers, so don't pull back on your marketing strategies.
Here are some ideas on how to do that:
Find out who your top-performing customers are, and put an emphasis on building and maintaining those relationships. Make sure you are delivering on your promises, as their satisfaction is what keeps them coming back.
Keep communication consistent. This could be putting out monthly emails, sending out handwritten notes, engaging and connecting on social media or creating TikToks. Whatever strategies you use, make them easy and enjoyable, because that will come through on the work you do. When you feel good, your customers will feel good too.
As you prepare to take on this recession, remember you have accomplished difficult tasks in the past — you can "skip" these recession "lines" obstacles in the months and years to come. Using these essentials can help your business not only survive, but thrive.
