A recession is a part of the economic cycle; they’re unavoidable. As a business owner, it’s in your best interest to prepare for the economy slowing down at some point.
The following are not only good business practices, but they also help make your business more recession-proof.
1 – Improve profit margins
Most makers are already worried the prices of their handmade products are too high. But increasing profits doesn’t have to mean raising prices.
Having good profit margins is all about working smarter and finding time and/or money savings anywhere you can.
Look at everything you spend money on and every task you spend time on for your business.
Then look for small ways you can do each cheaper and/or faster.
Every penny and minute counts.
If there are 10 items you spend money on to make a product, and you find a way to reduce each expense item by $0.10, you’re reducing costs by $1.00/product.
If you make 20 products each month, you’ll save $20/month and $240/year.
Chances are, there are more than just 10 things you spend time and/or money on in your business.
Imagine you can find a way to reduce costs for each of them by just $0.10.
You can save your business a lot of money over the course of a year and increase your profit margin.
Always be looking for ways to reduce your costs.
You may also work on increasing the perceived value of your business/products, so you can justify increasing your prices without raising costs.
Better branding, photography, descriptions, packaging, etc. can all make your products seem more expensive than they are. And when they seem more expensive, people are willing to pay higher prices.
Of course, there must be a balance. You don’t want to spend more money on your product packaging or several more minutes per product writing descriptions, only to be able to rise prices high enough to cover the extra costs.
Your added efforts should allow you to raise prices higher than it costs to implement them.
To improve your profit margins, start by making sure you’re pricing your products properly.
Please don’t follow the popular pricing formula: Materials + Time = Cost, Cost x 2 = Wholesale Price, Wholesale Price x 2 = Retail Price.
That does not work for most handmade businesses and is most likely making your products either overpriced, or leaving you with very little profit.
Here’s what to do instead: The Right Way to Price a Handmade Product (Step-by-Step Formula)
2 – Offer (semi) Essentials
There are some businesses that are lucky enough to be (almost) completely recession-proof (e.g. people always need toilet paper).
Unfortunately, most handmade businesses aren’t selling essential products; they’re selling luxury products.
No one needs a pair of earrings, or a piece or art, or fancy face creams. Those are wants.
A pair of earrings will never be an essential item, but there are ways to make them semi essential, or at least less of a luxury/splurge item.
You don’t want to venture too far outside your niche, but you can explore new products that are a little more essential to your target market’s lives.
- Jewelry – people may spend less money on accessories during a recession, but they still have people and occasions they need to buy gifts for. A jewelry business may shift their marketing towards gift giving.
- Bath & Body – consumers may cut back on luxury skincare products during a recession, but they still need to wash their hands and face, shampoo their hair, etc. A business selling face creams and serums may focus on more essential skin care products during a recession, such as face wash, shaving cream, body wash, etc.
3 – Broaden your target market
It’s important to focus on serving a specific group of people, which is your target market.
In most cases, you shouldn’t target a completely different market.
However, within your existing target market, there may be a range of people you can serve.
Or, there may be an adjacent target market that’s easy for you to serve.
For example, if I sell yoga products, my current target market may be people who go to yoga class or practice yoga at home. But I could branch out slightly by targeting yoga teachers. It may require me introducing a few new products, but mainly, I would simply need to change my marketing message and strategy.
If I create children’s products, my current target market may be moms of a specific age group. I could expand upon my current target market to include moms of different age groups. Or perhaps start targeting dads or grandparents with my marketing.
When selling art, sales may slow due to a recession and homeowners cutting back on home decor spending. However, there will always be people selling their homes. Staging plays an important role in sellers getting top dollar for their homes. An artist may consider selling sets of framed prints to staging companies. Or perhaps even renting their art to homeowners and/or staging companies.
Don’t venture too far away from your existing target market, but do explore variations of your target market that your current products would also be ideal for. Or, a group of people you could target by introducing new products that fit seamlessly with your existing ones.
4 – Offer a range of price points
When you offer products that have a wide range of price points, it makes it easier for consumers to find something that fits their budget.
To create lower priced items, consider offering:
- Smaller sizes of your existing products
- The same products made in different materials
- A no-bells-and-whistles version of your products
- New products that compliment your existing products (e.g. a bag vendor could introduce wallets)
For example, a bath and body business may create a minimalistic line of products that use minimal ingredients, with no fancy fragrances or packaging. They could also offer a refill program that allows local customers to bring empty bottles back and have them refilled at a lower price than buying a new bottle.
It’s also important to keep in mind, recessions impact everyone differently. Some people may run businesses/have careers that thrive during recessions and thus, they don’t feel the need to watch their budget.
If you only offer low priced items, you don’t have an option for people who can, and want to, spend more.
You’ll find a lot of ideas for introducing lower priced products and higher priced products in the following articles:
- How to Create an Entry-Level Product for your Handmade Business
- How to Use Up-Selling to Sell More Handmade
- How to Use Add-Ons to Sell More Handmade
5 – Build relationships with customers
As consumers, when we get to know the people behind a business, and we make a connection with them, we want to support them and see them succeed.
For example, if you know your neighborhood’s pizzeria is having a hard time making ends meet, you’ll likely choose to order pizza from them, even though Pizza Hut may be faster, cheaper, and more convenient for you.
Make sure your customers are more than just a paycheck to you.
When you care about your customers and the value they’re getting from your products, your customers will feel that.
And when they feel cared for by you, they’ll care for you too.
To build connections with your customers, stay in touch with them, provide great customer service, and put them first.
Also, let customers get to know you, so they care about you, the business owner, not just the products you sell.
Sharing the personal side of your business through About pages, blog articles, and newsletters can help your customers get to know you and make a connection.
6 – Focus on ROI
During a recession (and anytime really), it’s important not to spend time or money on tasks that don’t generate a return on investment, or that generate a low return on investment.
A good return on investment means you make more money back (because of a task) than you spent on a task.
That includes your time.
If you want to be paid $20/hour and you spend an hour posting to social media, you should see enough sales to cover that $20.
So many small business owners spend hours on Instagram each week, without knowing if that time actually helps them make sales.
It can be hard to track the ROI of social media, because it’s often not one post that leads to a sale. Most people who find you through social media will need to see several of your posts before they consider buying.
However, you can track conversion rates.
Consider a “conversion rate” an action your target market takes that gets you one step closer to making a sale.
That may be a click on a link that brings a social media follower to your website or shop, a social media follower signing up for your newsletter, or even a comment or DM from a follower asking questions about your products.
A “like” is not a conversion. Nor is a follow. Liking and/or following doesn’t require a time or money investment from someone. Each take two seconds to do (or undo).
If you’re not seeing conversions from your social media posts, it’s time to change your strategy or reduce the time and/or money spent marketing on the platform.
This applies to any business task you spend time or money on.
Track your conversion rates and start spending less time/money on tasks that have a low ROI and more on ones that have a good ROI.
The Success Planner goes deeper into ROI, how to track and calculate it, as well as other metrics that are essential if you want to build a successful business.
7 – Build multiple revenue streams
When your business relies solely on the sale of your products for revenue, it’s in a risky position.
If people stop buying your product during a recession, your business has no other way to earn money.
On the other hand, if your business has multiple revenue streams, it’s likely one will keep earning when another dries up.
Revenue stream examples
Teaching your craft
You’ve, no doubt, become an expert at your craft. You know tricks and tips the average person or even beginner doesn’t know. Consider creating an online course, an ebook, or finding a local business that might hire you to teach a lesson.
Introduce a new product or service
Consider the skills you’ve developed building your business. Is there another product or service you can make/sell because of them?
For example, perhaps you’ve gotten really good at:
- Taking product photos – you can sell product photography services to larger retailers
- Designing websites – you can sell website design services or sell website templates
- Writing content for websites – you can become a freelance writer and write articles on subjects you’re passionate about.
- Etsy SEO – you could offer SEO services to other small businesses or sell a course on Etsy SEO.
There may even be a service you can offer that your existing customer base would be interested in.
For example, an artist may offer a consulting service for people who need to find art for their walls but don’t know how to choose pieces. You might include a home visit and consultation and then a shopping trip to local galleries. Even if they don’t buy your art, you’re still making money by selling your services.
Create an affiliate program
Your raving customers can be your best sales people. Consider creating an affiliate program to incentivize existing customers.
Each time they sell one of your products, they make a commission. You earn less per sale than if you were to sell the item on your own. However, through affiliates, your products are able to reach people you don’t have access to.
Is there another business that compliments your’s? You may be able to work together and help each other make sales.
Think of smoothie bars in gyms. The smoothie bar gets to market to the gym’s customers, and the gym has the potential to get new members when people come in to grab a smoothie.
You may offer to promote another business through your website or at craft shows if they agree to do the same.
For example, a business selling bath and body products at craft shows may pitch a partnership to a local spa. The bath and body business could use a small section of their craft show table for the spa’s promotional material, and agree to stick a coupon for the spa into each shopping bag. In turn, the spa may agree to display the vendor’s bath and body products at the spa’s checkout counter (without taking a commission of each sale).
If you’ve been working on your inbound marketing for a while, and have a blog that attracts hundreds of readers each day/week/month, you can place ads on your blog and make money each time someone sees or clicks on an ad.
8 – Develop a good marketing strategy
When you have a solid marketing plan, you can simply keep it going during a recession, and your target market won’t tune you out.
Marketing should continue, even when sales slow down.
A solid marketing plan uses a mix of inbound and outbound marketing tactics, with a heavier dose of inbound marketing.
You can find a full explanation fo inbound and outbound marketing here, but think of it this way:
>> Outbound marketing makes you (the business owner) the equivalent of a needy friend; always asking for something.
>> Inbound marketing makes you the equivalent of a helpful friend; always offering to help.
When your marketing is full of value, rather than constantly asking for a sale, your target market will pay attention to your marketing, even during a recession.
Sure, they may not buy as often, but your business will stay top of mind and at least has the opportunity to make a sale.
If your marketing simply shoves products in your target market’s face and asks them to buy, it will be the first business to get an unfollow, unsubscribe, or mute.
Then you have zero chance of your marketing reaching that potential customer or making a sale.
Think of ways you can make your marketing helpful, at all times.
During a recession, everyone is a little stressed. At these times, try to find ways for your marketing to help lower stress levels.
For example, a business selling handmade bath and body products might share the following marketing message:
“Self care doesn’t need to stop just because you can’t make it to the spa. Here’s how to treat yourself to a spa-worthy pedicure at home.”
Link to an article titled “How to give yourself a professional pedicure at home”. It would be a detailed step-by-step guide that shares the tools/materials required, one of which is the foot soak salts the bath and body business makes and sells.
A jewelry business may share the following marketing message:
“How you look impacts how you feel. Just because your wallet needs a break from dinning out doesn’t mean your style needs one too. Here are 5 restaurant-worthy meals you can make at home, on a budget, and the perfect date-night-in outfits.”
Link to an article with budget-friendly dinners and outfit inspiration for dining in (which would include the business’s jewelry).
An art business may share the following marketing message:
“Simply looking at photos of nature can be enough to lower your stress levels. Here are 5 free photos of nature you can use for your phone or computer’s screensaver.”
Link to 5 of the artist’s images people can download for free and use as screensavers, as well as original prints they can buy if they love an image and want to hang it in their home.
These types of marketing messages are much more interesting and valuable to your potential customers. And they’ll appreciate that you’re helping them find ways to stretch their money when times are tough.
No business is completely bulletproof; all will face challenges and ups and downs in revenue. But don’t wait for a recession to hit to start making your business more recession-proof. Start implementing these tactics now so your business can weather any storm.