Last week, the “powers that be” officially deemed us in a global recession. Naturally, this creates a sense of immediate panic among small business owners. For many makers (and small businesses in general), sales have been rapidly declining for the last 6-12 months. We have seen repeated posts in our group of people asking what is selling, how to get more sales and general concerns about the post-pandemic era of restrictive spending that is upon us.
Recessions are part of the ups and downs of this crazy world. They impact all developed countries at the same time because commerce is heavily intertwined on a global scale. As a business owner, we should always be actively planning for them to happen and how to safeguard our business. Unfortunately, many hobby-based businesses are not structured as a business but rather, a hobby, and this drastically impacts their bottom line during turbulent economic times.
In this blog series we are going to talk about the many aspects of handling a recession as a business, but the first step is to answer the question of how your business can even survive.
The Facts of Business
Did you know that 57% of Fortune 500 companies were founded during a recession?
Believe it or not, a business is more likely to be successful if it started, pivoted or changed course during a recession than otherwise.
In fact, many of us do not even realize that platforms like Etsy and being a maker-made business with tools like vinyl plotters and sublimation printers, were not really a thing BEFORE the last recession. Etsy was founded in 2005 – the same year that we faced multiple hurricanes in the gulf coast, destroying refineries and starting the tipping point to a recession that was made official in 2008. It was a few years into Etsy’s existence when the Silhouette Cameo was released (2011) and suddenly crafty people were making gifts and profits by leveraging the skills they had acquired. These were not businesses built out of boredom. These were people trying to make a living and support their household after multiple years of crippling costs of everything. The last recession exploded the success of maker made businesses – especially those selling online – and we are poised to capitalize on that once again.
I’m sure you’re thinking – sales are down, maybe even dismal – there is no way that my business can be successful in this recession. Think again. The success of a business is not linked to the economy as much as it is linked to the business owner’s willingness to pivot, creatively problem solve and plan. Declining or stagnant sales are normal during a recession, but completely drying up to nothing is not. Sales that plummet are the result of poor business structure which may include your products, selling platform and/or marketing strategy.
Simply put, a recession is not the death sentence of your business but it is the time when you need to reevaluate the way you are doing things and make changes that help your business survive through these times.
What Step Should You Take First?
Chances are that you did not start selling your maker goods because you didn’t need the money. For many households, the prospect of a few hundred dollars a month is the difference between making it or breaking it financially. Your household may even be completely dependent on your income contribution from maker sales. Financially stability is critical to any business or hobby that wants longevity. Too often, the importance of financial stability is overlooked. Makers have a few good months and instantly devote that money to fun purchases instead of savings and financial planning. To be honest, this type of mindset is not your fault. In the United States, in particular, there is a lack of financial literacy and a drive to do and have things over financial peace. Just because this may be your situation or may be the status quo doesn’t mean you cannot make a change.
Was I the beacon of financial responsibility during the last recession? Absolutely not. I was barely and adult. If you’ve heard me ever talk about my own story, then you know those were some rocky years. The last recession – and starting a business during that recession – taught me a lot about how to plan for the future. Have you ever noticed that you don’t see me taking some crazy lavish vacation or buying a bunch of expensive stuff? It’s because that last recession really taught me the difference between things that I wanted and needed in life. My biggest takeaway was that I both wanted and needed to have financial stability on my own terms that would make it through turbulent times like pandemics, recessions and general life crisis’.
The first step to take is to have a hard look at your business finances. Most of us have completely unnecessary expenses or expenses that we can minimize by taking advantage of annual discounts.
Here are some examples:
- If you are currently using a subscription-based platform for post automation on social media, consider cancelling it and manually posting OR look for an annual discounted rate that may be available.
- If you are currently using a subscription-based design/editing software like Canva (which is not a design program) or Photoshop/Illustrator, consider cancelling and signing up for a one-time payment or free software that gets the job done (such as Affinity Designer or Inkscape).
- If you have memberships to different stock, font and clipart websites – consider cancelling those that are not used regularly. Compare and contrast the offerings on bigger sites like Design Bundles and Creative Fabrica. Opt to take advantage of all the freebies that you can plus any bundle deals or discounted membership options.
- For necessary expenses, like website hosting, look for any discounts for advance pay. For example, I saved 66% ($7200) by paying for 36 months when I changed my website to a dedicated server, last year.
- Look for access longevity options. For example, I sell digital designs with a design membership. You can sign up for my membership right now for a deeply discounted rate and get 6 bonus months free. That is 18 months of membership for $89.99 (with the code SUBTHAT). No other costs for the next 18 months. You’ll notice that many platforms are offering different types of annual deals at a discount to their audience. Why? Because we want you to be successful. Your success is our success. Also, because not everything sells, these types of memberships are more beneficial so that you aren’t losing money left and right when you purchase designs, elements, assets and more.
- Shop sales, bundle discounts and freebies as much as possible. Places that are not offering bigger all-inclusive deals have likely increased the number of sales they are offering. Take advantage of those as well to help cut costs.
- Get rid of materials that are collecting dust, not benefiting your business. You have most likely impulse purchased more than a few blanks that are not selling. Head over to your favorite destash group and unload them – plus any other materials that don’t fit your business niche.
Reframe your mind from thinking that it’s only $10 here or $20 there. Those dollars add up. Your business does not need excessive convenience overhead. Choose what is necessary and trim off what is not. This simple first step can help boost your business funds immediately and set you up for less revolving expenses over the next 12-18 months. The average length of a recession is 11 months. It takes an additional 6 months for spending to start to normalize on a broader scale. Your focus should be on changes relevant to these next 12-18 months for that reason. In context of the current recession, this means to expect to feel this recession through summer 2023.
What Change Should You Make Second?
Hopefully you’ve been listening to us this year, but if not, the next thing you need to do is niche down your business. Be sure to review our blog series on this topic for more in-depth information. As I said then, I’ll say again, niching down your business is no optional if you want to make it through this recession. If you are a hobbyist who isn’t dependent on the income from making – then you do you, boo. However, if you are one of the many people who needs the income from their craft just to get by, then you need to make the decision to make a change to your business product structure.
Contrary to popular belief, there is a customer for ever product. The biggest reason why your business is failing is because you are trying to market every product to everyone. Your business has nothing special or unique to offer (unless you have exclusive, high-quality designs) and this translates into a lot of competition and little sales. I live in a military town, every hobby housewife is making Starbucks bling cups and the same generic Freddy Halloween tumbler. They are fighting with each other over undercut pricing because customers know that they can get that product anywhere. It’s like Walmart and Target. If I don’t like the price of something at Target, I’ll just go buy it at Walmart.
You are better than Walmart. The products you offer and the skills that you have are better than Walmart. Stop trying to be Walmart – seriously.
When you refine your niche product and design style of your business, you open up opportunity. You are able to focus on marketing to your ideal customer and attract the ones that want your product and are willing to pay your prices. Without focus, your business is trying to sell to everyone and hope that someone will buy -like a door-to-door salesman. With focus, your business is inviting the right customer for you. Those right customers are more consistent and translate into more sales by default.
Recessions are the optimal time to restructure and even rebrand your business. Consider making this change.
Ask Yourself What Else You Have to Offer
Businesses that start and survive recessions are focused and financially stable, but they also know to pivot. When the pandemic started, I talked about the importance of pivoting. Your current customer base may not be able to sustain your business – especially if you sell locally only or do not have a niche focus. The good news is that there are always more customers.
We tend to perceive the world through a lens colored by our own experiences. If we are struggling and see our sales our down, we assume that everyone who could be our customer is struggling. This isn’t the case. Does the recession change most people’s spending habits? Yes. But that does not mean that it stops them. This was one of the lessons I took away from the last recession and having a business. People are more likely to decrease subscriptions, dining out and impulse shopping at the grocery store than they are to decrease discretionary spending on gifts and experiences. Our mindset shift during a recession questions what adds value verses what is temporary.
As business owners, we want to think like our customers and potential customers. What else can we offer? Gift sets, for example, allow us to combine a single product like a set of glasses with additional items like drink mixes to create a valuable gift-worthy idea that meets our customers needs. However, what you can offer is not limited to just the product that you currently offer; you have to think outside of the box.
If you sell t-shirts, consider hosting t-shirt parties. If you sell mugs, consider offering a coloring page event where you scan a child’s artwork and print it on a mug. If you sell home décor, consider creating décor tips and monetizing your content. If you sell candles, consider offering DIY kits for home. If you have a sublimation printer, you always have the option to offer transfers – or dive into selling screenprint transfers to vinyl crafters. If you have equipment that someone else doesn’t, consider offering fulfillment (I do this!).
If you have completed the Affinity Designer or Affinity Photo Masterclasses, consider offering your new skills in the form of services. Perhaps you want to offer watercolor family portraits or faceless portraits or logos for businesses. If you sell digital designs in general, consider the many, many other ways which your skills can be monetized beyond your current industry (hint: downloadable invitations/cards, quilting patterns, embroidering files, promotional materials for local events, freelance gigs, ect).
You have skills and talent that have value during a recession. If you have extra funds, consider devoting them to learning new skills that you can monetize. During the last recession, I leveraged my many skills to create income. From freelance writing to logo design to social media management and more. Just because you don’t have the ability to do something at the highest level does not mean that you don’t have the ability to offer it at your current level. I encourage you to look at the world around you and ask yourself what you have to offer that can help them. There are opportunities everywhere that can be part of your business and help you get through economic downturns. These do not have to be things that you do forever. They simply help support your main business and keep you moving forward.
Your business can absolutely survive a recession. It is not without some planning, changing and strategizing on your end. Take this time as we are entering into the fourth quarter to really refocus and refine how you are operating your business. Get creative in creating solutions that work for both you and your customers. Each and every person is endlessly powerful – leverage it accordingly.
Businesses that survive a recession, above all else, are consistent in what they do. Consistency is critical to the success of your business in general but even more so during a recession. The difficult part about consistency is that we often look for immediate results. When we don’t see them, we think that our efforts aren’t worthwhile. Consistency creates results in a slow and steady burn type of way. It isn’t instant. It is what you see after a month, six months, a year, ect. Just because sales are down does not mean you should stop putting in the effort. Keep putting in the effort and trust the entrepreneurial process.
Join us next week as we continue on with our Recession Talks series.