A couple months ago, a friend of mine got downsized at her coporate job and told me she wanted to start her own biz.
“Awesome!” I said. “Doing what?”
“Party planning,” she said.
“Hold up, I told her. There’s gonna be a market correction.
Get closer to the money.”
In my last post – which you should definitely read if you haven’t already, as it sets some important context for this one – I laid out these six facts about recessions:
- Recessions are natural corrections, that happen on fairly predictable timetables
- We may be entering a recession right now…
- …but there was always a good chance (1 in 3) we would have, anyway!
- Recessions kill businesses that are bloated, risky, and fragile.
- Spending slows, it doesn’t stop.
- Recessions can create new opportunities for you to sieze.
Today we’re gonna talk about the second half of this listicle, aka the factors that will make or break a business born in economic darkness.
🧱 You’re going to learn my brick-stacky strategy for reducing risk.
⚠️ You’re going to learn the two rules you MUST obey to start/grow a business in a recession (and see exactly my party-planning friend was setting herself up for failure).
✅ And you’re gonna take home a cheat sheet of smart decisions you can use to create your own success during a recession.
Grab yourself a coffee and hold onto your butts, because I’m about to infodump three years of business-building into just a few paragraphs.
There’s a lot to get through — but it’s crucial info because these are the choices that set me up to build the profitable and durable seven-figure business I’ve got today.
Here’s the timeline…
- I started a new consulting biz with my husband, Thomas
- Together we designed, built and launched our first software as a service, Noko Time Tracking
- We grew Noko from $0 to $27,000 its first year
- …and did a lot of consulting to fill in the rest of our income goals
- I hosted a 3-hour teleconference call about bootstrapping my business… and charged for it
- With Alex’s help, I turned the guts of that 3 hour event into a 12-week paid course called Year of Hustle
- We grew Noko from $27,000 to $106,000
For two years I was… consulting; researching, writing, designing and shipping a book; delivering workshops; designing and launching a SaaS; and preparing to teach some of those biz skills to folks ALL AT THE SAME TIME.
It was… a lot.
But I made it work because I had decided to quit consulting (safely!!), no matter what.
Build your business SAFELY by stacking the bricks
Evvvvverything I preach, I also practice! By strategically stacking the bricks of time and money…
The consulting and workshops provided enough income to carve out time to work on products.
The infoproducts — the book, the workshops, 30x500 née Year of Hustle — provided infusions of cash we could live on while we waited for the slow growth of subscription income.
Even at the height of the 2008 economic crash, we grew nicely…and that wasn’t an accident. Here are the core strategies we used to recession-proof each part of the business:
We offered great value for money, simply by being two people!
Our main competitor, as it were, was Stamen, a medium-sized firm with a premium price and a lot of employees to keep fed & watered.
We were smaller, sure, but we showed how we could be faster and cheaper. And “cheaper” is relative: we did very well, pocketing the whole hourly rate ourselves instead of losing most of it to costly overhead and hungry mouths to feed.
We were again able to price them very affordably ($500 or so a head), because we did everything and there were no other layers.
We were flexible, online, no travel required. That made us much cheaper for companies who wanted to train their team, to make them more skillful and effective, and to retain their talent.
Our technical ebook wasn’t just any old technical book about a programming language, it was laser-focused on site performance.
Thomas did a load of original research for the book, but it was based on stuff he was having to do for clients, so we got to double dip. My sales pitch for the book? All about how slow sites and apps lose customers.
My initial teleconference call was basically me telling business stories with lessons. I charged $99 a head, and a whopping 8 people bought tickets.
It was a deliberate test: I knew the folks (chiefly fellow designers and developer) who had been reading my site were struggling with creating products nobody wanted, spending tons of time for no results, but would they pay for that specific knowledge?
I knew that developers paid for books and courses and tools… but would they pay to learn about business? The answer was yes, and the overwhelming feedback was “More, please!”
So I recruited Alex into my project and together we designed a 12-week program with lessons and exercises, that became Year of Hustle. The first round, we charged $499. Later rounds were complete and revised, and we raised the price and rejiggered it over the next decade. (Decade!!)
Each component of the business was built on the last. Strategically, and financially.
People think I’m impetuous, a risk-taker; I quit my first real job after just 3 months, I hopped every year until quitting to go back to consulting, I then abandoned consulting even though my career was skyrocketing and, at the time, it was paying far more than my products.
But every move I made was deliberate and risk-reducing. I built products while I consulted. I focused on things that people would pay for. I did my research… I studied what people did that did and didn’t work… I listened to the internet watercooler, and I ran tests.
Hell, I worked to build a whole secondary audience, so I could learn while building my business, and then turn around and teach what I’ve learned to people like me for money. (Hi!!)
My strategy in a nutshell:
- free myself incrementally
- build only things that will sell
- target a customer base I could already reach
- diversify my income streams
This disciplined approach is why my businesses flourished in the depths of the greatest market crash since the 1930s.
Coincidentally it’s also the approach I’ve been teaching all this time.
Which is why my advice for starting and growing your business in a recession is actually the same advice I give every day.
There are two rules to follow to start or grow a business in a recession…
Rule #1 - Get close to the money
Think back to my friend who was recently downsized
Is party planning a bad business to get into, objectively? No! Lots of people make a fine living this way.
But during a recession, people hunker down with their spending. They think harder (and longer) before putting money into fun stuff and nice-to-haves…
Inexpensive delights, fun experiences, and distractions can do well with consumer audiences BUT ONLY IF you are already out & about and making sales because busy people juggling stress and anxiety are more likely to return to products that comfort them with familiarity rather than seek out new things.
I personally wouldn’t start a consumer business ever, but especially not during a recession.
The key is to become a part of the value-producing machinery of your customers’ economic lives, whether they’re a multi-person business, or a value-minded consumer looking to get a raise, a better job, or a better return on an investment.
Deliver real value and help folks do the math.
Remember that during a recession, there is still money circulating in people’s pockets and businesses’ bottom lines. The problem is that everybody is more cautious about spending it.
So if you can help people earn more, save more, or get more shit done faster or better, your product will be recession-proof.
Rule #2 - Run Lean
If you deliver real, solid value to your customers, but your business is complex, your running costs are high, your margin is slim, and you can’t survive a small dip in sales… I have some bad news: You’re one of those “inefficient” firms that’s likely to sink in economic slow times.
There’s a good chance you will find yourself unable to afford to stay in business.
Yes, even if your product is sound and people keep buying!
The lower your fixed costs, especially, the more efficient your operations, the plumper your balance sheet… the more flexible and drought-resistant you can be.
Out-surviving your competitors is a great way to thrive in a recession.
It also means you’ll be more profitable, in a strong position to buy the things and hire the people you need to grow when things pick up.
- Get closer to the money. Understand clearly where your audience feels they are wasting money/time/resources. Understand where they believe they are inefficient on ineffective…and are seeking to improve. Therein lies business opportunity!
- Run lean. Keep your fixed costs lowwwww so you can avoid unforseable (or unchangable) dips and out-survive the others.
Now, if you’re a regular reader, you know I’m not about issuing diktats. I believe in the power of actually, you know, understanding how the world works so you can make informed decisions and choices and tailor your actions accordingly.
So, in the admittedly somewhat epic lines of text above, I’ve explained what recessions are, how they work, the choices I made during a depression to build a profitable and healthy business, and the two core principles you’ll need to become recession-proof yourself.
Rapid-fire Recession Proofing
Now — with that mental model in hand! — here’s a rapid-fire selection of advice from across the Stacking the Bricks universe that you can apply wherever you are in the process.
If you’re pre-product, or worked on a product that isn’t selling… start yourself on the right foot:
- Choose and study a business audience — one that willingly spends money to get value. This can include professionals who work for companies, but have the ability to invest in tools and resouces that make them better at their jobs.
- Make sure you design a product that either explicitly deals with money, either directly in terms of making money, saving money…
- …or indirectly in terms of saving time, making time, increasing efficiency, or longevity, cutting out layers, producing more for less, etc.
- Follow all my usual 30x500 steps of Sales Safari to really understand your market, building trust with your audience by creating ebombs, make a product people actually want, and build a marketing engine that doesn’t rely on ad spending.
- Design a product / pick an opportunity that will be relatively inexpensive to run (few staff, inexpensive tools you can buy off the shelf, etc)
- Learn to weave the value message into all of your copywriting, your pricing, ebombs (educational marketing content), etc.
If you have an existing product and are making good sales…start making decisions now to protect your future:
- Get flexible. Changing times require changing approaches.
- Make sure your product is already close to the money, built for an audience that happily and easily pays for value, and who spends their own money to grow (vs burning investor dollars).
- If your audience isn’t one that happily and easily pays for value (aka thinks like a business), figure out if any of your customers do, and which audiences they belong to… so you can focus on getting more of them and less on the others.
- If your product itself is not already close to the money, figure out how you can get explicit about value: either directly in terms of making money, saving money… or indirectly in terms of saving time, making time, increasing efficiency, or longevity, cutting out layers, producing more for less, etc.; feel free to get creative but always be truthful.
- Learn to weave the value message into all of your copy, pricing, ebombs (educational marketing content), etc.
- Create and produce some epic ebombs helping your customers get more value in general, and tie that into your product (like, hi, you’re here right now; it’s honest, it’s helpful, and it works!).
- Remember that it’s worth the investment in stuff that other people will be too distracted, pressed, or panicked to create, and people remember those who help them out.
- If you’re currently relying on ads or other paid acquisition for growth, start investing into learning how to accelerate organic growth with word of mouth, referrals and SEO.
- Focus heavily on retaining the customers you already have — it’s far easier to keep a customer than get a new one.
- Analyze your hard costs for waste. Try to decide what you’ll cut before you find yourself scrambling for savings. It’s a lot easier to plan cuts gracefully (especially when people and their lives are involved) if you do it before your back is against a wall.
Don’t panic. Stay focused. Start investing your time and energy into creating a viable future for your business now.
There's more where that came from
We email every Wednesday with the latest insights from our business, our students, and our research. Drop your email in the box below and we'll send new stuff straight to your inbox!
Absolutely no spam, ever. We respect your email privacy. Unsubscribe anytime. Huzzah!