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125. How to Protect Your Business in a Recession

How to Protect Your Business in a Recession

If you’ve been paying attention to what’s going on in our world right now, some people are saying another recession is on the way. I’m no economist and I don’t have a crystal ball so I’m not exactly primed to predict what’s going to happen…

I can, however, take my experience launching a successful business during a recession to share a few ways that you can prepare your eCommerce business for what might come. 

What You’ll Learn

  • How to recession-proof your business
  • How to make sure you have the funds to continue operating even if you see a dip in revenue
  • Why it’s important to anticipate what your business might need and get it in place before you actually need it

Episodes Mentioned

7. The #1 Reason You’re Not Able To Pay Yourself

42. Understanding & Speaking To Your Ideal Customer


Read the Full Episode Transcript

If you’ve been hanging with me for awhile you probably know that I owned a brick + mortar boutique. back in the day. You might also know that I did $650k in my first year in business. But what you might not realize is that I opened that store in the wake of the 2008 housing market crash. When tons of people were underwater with their mortgages, they were losing tons of money in the stock market, and worst of all, many of them were losing their jobs. 

And while the area my store was located was on the upscale side, it didn’t mean they weren’t affected. In fact, a lot of them worked on wall street and it was a struggle. 

Today, I’m taking lessons I learned from launching a business in a recession to share a few ways that you can prepare for what might come. 

Different industries will behave differently in an economic downturn

The first thing you should know that some industries are somewhat recession proof, like baby and weddings. Sure, people might spend a little less overall, but they’re still having babies and getting married. 

Some industries actually thrive during times of uncertainty, like alcohol and sex toys. Other industries like apparel and accessories will generally see a dip. 

There is a lot of variation here of course and there’s no way to know for sure how your business specifically will be affected, but you there are definitely trends and some common sense that should help you figure out which camp you’ll fall in. 

And even if you do happen to sell something that is likely to stay steady or even grow during an economic downturn, that doesn’t mean you still don’t want to prepare. 

#1. Get a handle on your numbers

Not just your sales numbers but how much money you have in the bank. If sales were to dip right now, would you still be able to pay your employees and yourself? If you’re not already familiar with these numbers, now is definitely the time.

Start building up a reserve in your business—6 months worth of expenses if you can. When things do get tough there’s nothing quite as comforting as knowing you’ve got money in the bank to weather the storm 

Depending on your business, 6 months expenses might seem like a lot. Too overwhelming like you could never save that much. But just let it be a long-term goal right now. Yes, the sooner you can get to that place the better, but don’t let the potential overwhelm derail you from that goal. 

Another option is to get a business line of credit. Typically, you’ll want to do that BEFORE you actually need it. When the economy isn’t doing well, banks tighten up the purse strings making it harder to get a line of credit, so if you secure it beforehand you’ll have it when you need it. It doesn’t cost you anything unless you use it and interest rates on lines of credit are generally much less than a credit card. I’m no expert, so do your own due diligence and research. 

Overall, the goal is to make sure you have the funds you need to continuing operating even if you see a dip in revenue. 

#2. Tighten your inventory

Some other things you’ll want to consider from a financial perspective is tightening up your inventory. This is usually the biggest culprit to lack of cash flow in a product-based business. If you haven’t been paying attention to what you’ve got tied up in inventory, now is the time. 

If you’ve got merchandise sitting on the shelves right now that isn’t moving, mark those down and do your best to clear them out. Don’t get emotionally attached to your inventory. Even if you only recoup the wholesale cost you spent on the product, cash in the bank is better than dust on the shelves. 

I talk more about inventory management in episode 7 of the podcast. 

#3. Lean into what you do best

Now this is ALWAYS a good idea, but it’s even more important during an economic downturn. Don’t pull your focus or funds away from the things that drive your business today. The time, energy, money and effort it takes to develop, produce, and test new products likely isn’t worth it when consumers are tightening up their purse strings. It’s going to be a distraction for you and for your customer. 

This doesn’t mean that you don’t launch your seasonal products for Q4, it just means stick with what you KNOW is going to excite your customer enough for them to spend their hard earned money on it. 

#4. You need to REALLY know your customer

You’ve heard me talk about this time and time again and that’s because it is so, so important. Honestly, it’s probably the most important on this list because when you truly understand your customer you can continue to create a business and products that you know they’re going to love, that you know they’ll continue to buy, even when things get a little tough. 

Honestly, that’s the main reason I was successful with my brick + mortar even though it was the greatest recession we’ve ever experienced in my lifetime so far. Because I knew what she wanted. I knew what she was willing to spend on different types of items. I knew what she wouldn’t spend her money on. Sure, I made some mistakes along the way and overbought in certain categories etc. I’m still human. But if I didn’t know my customer and what she was looking for I never would have been able to find the success I did. 

And you know what else? When you understand your customer and what they need, you know how to communicate that back to them. You know how to speak to them in a way that pulls on their emotional heart strings and encourages them to buy. Remember, people buy with emotion and justify with logic. So when you can speak to the emotional need or reason behind the purchase that they’re making there’s no reason why you can’t find success. 

If you need more support about understanding your perfect customer and how to talk to them, listen to episode 42 where I dive deeper into this. And don’t forget to use the Ideal Customer workbook in the eCommerce Badassery Resource Library. 

#5. Don’t stop marketing your business

When sales start to dip, marketing budgets are usually the first thing to go, but honestly this is one of the worst times to stop marketing your business, especially if your business is on the newer side without an established customer base. 

I know it can be scary to continue spending money when you see a dip in sales, but I encourage you to dig deeper before you make any knee jerk reactions. As long as the money you spending on marketing and advertising is bringing you a positive ROI, there is no reason why you should stop them. Because guess what… if you do you might see an even bigger dip in sales. 

Of course, this is not always true. You might find that putting your energy into product launches or TikTok brings you more profitable revenue than Facebook ads or vice versa. My main goal for you at this point is to make sure that you’re digging into the details and making informed decisions about your marketing activities vs. just saying hey, let’s stop spending money here. 

If money is really tight and you need to scale back your advertising try leaning into more collaborations instead. Remember, if you’re experiencing a dip in your business others small businesses probably are too. Why not pool your resources and get in front of each other’s customers. Sure, those customers may be spending less on your product but it doesn’t mean they wouldn’t be willing to spend on something else… and the same is true for the customers of that other business. 

#6. Don’t be afraid to let go of things that aren’t serving you

Whether it’s an employee, a product line, or a marketing strategy. If it’s not working, say goodbye. This isn’t the perfect example because it’s from a service-based business but a biz friend of mine just released 2 problem clients and while her revenue is down, profitability is up. On Instagram I talked about a client of mine who closed one of her brick + mortar stores last year. Her revenue was also down but so was her profit. 

Another client of mine, who sells a consumable product on subscription has a bi-monthly curated box that she also sold on subscription. A few months ago she let go of that curated box focusing only on her main product and the few boutique items she sells.  And yes, her revenue went down, but because she’s saving so much time, energy and effort not having to curate that box and dealing with shipping and all the other things that go into running that one product, her profitability hasn’t even suffered. 

In times of struggle, the simpler the better. 

There are so many tiny hidden costs in the things that we do and when you really dig in and do the math we realize that the thing we thought was so important to our business is actually holding us back from bigger and better things. 

At the end of the day, if a recession does come, the best thing we can do is be the scrappy entrepreneurs that we are and dig in. There are so many ways to weather the storm. So many levers we have in our businesses, so much that we can control. Don’t let the fear keep you stuck. 

It’s never too soon to prepare for the worst

I’m not saying it’s coming. The “experts” aren’t even saying that. I don’t say that to scare you. Just that in every business, to truly set yourself up for success you want to prepare for anything that might come your way. The more you can anticipate what you might need and get it in place before you actually need it, the more ease and success you’ll have in your business. 

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Hey, I’m Jessica!

eCommerce + email Marketing Strategist

I support scrappy female entrepreneurs with actionable steps & strategies to grow and scale the traffic, sales & profit in their eCommerce businesses. Learning from the top experts in the digital marketing & eCommerce industry she loves working with female entrepreneurs and teaching the secrets of 7-figure eCommerce businesses.

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