Can Your Small Business Survive the Recession?
This is how "Big Business" is going to survive and how you can too...
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External economic forces are a fact of life and we understand how fears of the uncertain can keep anyone up at night—but they don't have to.
The bright side of economic downturns is this: They happen all the time. They have warning signs. And history tells us how businesses have survived them, recovered, and continued to thrive. Yes, even small businesses.
Usually, during a recession, small business owners are the hardest hit and most vulnerable. A large reason for this is lack of knowledge on how to batten down the hatches, settle in, and wait for it to blow over. When there is a storm, there is always sunshine after, and that should be your focus during hard times. Why? Not for some hokey optimistic bumper sticker wisdom, but because it's one of the few times when you'll be as good as a fortune teller in business.
We know that recessions happen. We know that we recover from them and the opportunities that await are abundant.
Downturns Examined
Recessions inevitably occur in cycles, with the average period between downturns being 5-10 years (Forbes, 2022). We’re potentially on the cusp of the next one now.
The most recent economic recession was in 2020 at the start of the COVID-19 pandemic. The US economy entered a recession in February 2020, according to the National Bureau of Economic Research (NBER), the official body that declares recessions. This recession was triggered by the economic fallout from the spread of COVID-19. Lockdowns and social distancing measures put in place caused sharp declines in consumer and business spending, investment, and overall economic activity. The 2020 recession was very sharp but also very brief - it lasted only 2 months, making it the shortest US recession on record.
The most recent economic recession prior to the short COVID-induced recession in 2020 was the Great Recession, which lasted from December 2007 to June 2009. At 18 months long, it was the worst recession since the Great Depression in the 1930s. It was triggered by the bursting of the housing bubble and the destabilization of financial markets tied to complex investments in the real estate sector.
To summarize: The 2020 Recession was nearly 4 years ago, and the Great Recession was about 11 years prior to that. If patterns follow, we are approaching our next cycle.
When consumer spending shrinks, small businesses and creatives feel impacts quickly. Fortunately, by learning from multi-million dollar corporate experience navigating past recessions, you can proactively buffer your independent venture from the fluctuating economy’s woes. Let’s explore recession readiness tips to help your Etsy shop, Shopify shop or e-commerce side hustle survive and thrive through market uncertainty.
Streamline Operations
When money gets tight in households, non-essential spending on art, crafts, and creative works decreases. To counteract this demand dip, double down on operational efficiency without compromising quality.
For the savvy small business owner this means it's time to scrutinize workflows, inventory needs, packaging methods, and partnerships to identify waste you can cut back on. If you don't have a defined workflow? Now's the time to define it. And refine it. And refine it again. Until you have prioritized the most important needs and cut away any that don't serve your business during this sparse time.
Technology investments like accounting software, ecommerce platforms, or production tools can optimize processes too (Forbes, 2022). Work smarter by leveraging automation (or AI like Chat GPT), not harder.
Diversify Offerings
Carefully test introducing complementary products or services that appeal to your existing customer base. I call these the "Virtual Countertop Impulse Buy". Impulse or Ride-Along Upsell isn't just for brick-and-mortar stores anymore. By utilizing upsell tactics proven to work, this phenomenon can be recreated in the virtual environment of e-commerce to increase AOV or "Average Order Value" incrementally for your customers.
For example, an Etsy sewing pattern designer could experiment with fabric batches or pre-made kits. An abstract artist who sells original paintings via Instagram could offer prints, clothing, digital files, or workshops too, giving followers alternate price points to support them (Business Queensland, 2022). Widen profit streams so if demand drops for one offering, you have backup. We'll talk more later about the "Virtual Countertop"
Embrace Flexible Payment
During cash-strapped times, customers appreciate flexibility in financing their purchases from you (Kia Kokalitcheva, 2022). Explore payment installment options, layaway plans through services like Quadpay, Klarna or consider allowing crypto. Building fees into financing options or polite payment reminders helps ease potential administrative burden on your end. Go above and beyond on understanding clients' needs when money is tight for them too.
Analyze Analytics
Leverage free analytics through Etsy, Shopify, Linktree, PayPal and use them often! One of the most frustrating things about working for a corporate Ecomm business was the reliance on our data and analytics and the amount of reporting our teams were required to do. But this was key to our success!
and social platforms by studying traffic sources, audience demographics, bestselling items, average order values, conversion rates, and more. Identify opportunities to double down on what’s working and course-correct underperformers. Analytics help direct your strategy, marketing focus, product selection, and promotions through an economic downturn. Let data guide decisions (AllBusiness.com, 2022).
Retarget Lapsed Customers
Marketing is critical when consumer spending fluctuates, though budgets may be strained in a recession. Luckily, online platforms make retargeting customers who’ve purchased from you in the past efficient through email, social ads, and remarketing. Craft targeted offers and refreshers on what you sell to re-engage them. Let them know you appreciate their past support now when they return (Corporate Finance Institute, 2022). Stay top of mind.
Highlight Value
Prominently showcase why your products deserve continued marketplace demand despite consumers' stretched budgets. Communicate the craftsmanship, quality ingredients, artistic passion, customizability, sustainability merits, or made in America unique value. Share the human stories behind what you make. Enhance perceived worth so when consumers must prioritize where their dollars go in a volatile economy, they keep coming back (Forbes, 2014).
Collaborate meaningfully
Consider strategically co-designing products combining your specialty with another complementary artisan to make something fresh for both your audiences. Or organize a multi-seller popup exhibition where you share overhead costs and likely draw more attendees curious to see various vendors under one roof. Partnership is power (ArtsyShark, 2020).
Outperform on Customer Service
Providing phenomenal customer service always pays off by generating loyalty and word of mouth. But in tougher times when budgets and nerves may be more frayed, your unwavering friendly, flexible, helpful dealings with customers could make the difference in whether they return and recommend you despite external stressors. Be a bright spot for them (oberlo, 2022).
Stay Inspired and Motivated!
As an artist or creative selling online, your passion and talent fuels business success...even if external factors like a recession require temporary pivoting. Remember the old adage that from difficulty comes opportunity. Use any downtime exploring creative innovations or honing techniques to emerge even stronger for the recovery ahead (ArtWork Archive, 2022). Believe in the value you provide eager patrons regardless of economic cycles.
By proactively preparing with these tips, your Etsy, Shopify, or social commerce small business can survive and thrive through recessionary business cycles. Rely on your network and explore financial assistance programs too if needed. With grit, resilience, and faith in your offerings’ worth, you can weather this storm (Small Business Administration, 2022). The economic forecast ahead may seem concerning, but countless crafters and artists have persevered through past recessions, and you can too by leaning on crisis knowledge accrued from those who’ve endured them.
References: (Note some links may be behind paywalls or no longer in operation)
1. https://www.forbes.com/advisor/business/recession-preparation/
2. https://business.qld.gov.au/running-business/growing-business/preparing-business-downturn/preparing-small-business-economic-downturn
3. https://www.nbcnews.com/business/consumer/how-small-businesses-can-survive-recession-rcna51455
4. https://www.investopedia.com/managing-through-an-economic-downturn-4774344
5. https://corporatefinanceinstitute.com/resources/knowledge/strategy/retargeting/
6. https://www.forbes.com/sites/rogerdooley/2014/02/12/customer-retention-strategies/?sh=2b2e00451adb
7. https://blog.artsyshark.com/10-tips-artists-economic-crisis/
8. https://www.oberlo.com/blog/exceptional-customer-service
9. https://www.artworkarchive.com/blog/recession-proof-your-art-career
10. https://www.sba.gov/funding-programs/loans/coronavirus-relief-options