Keeping Your Business Afloat During Tough Economic Times
If you've watched the news, followed the US elections and the accompanying political rhetoric, talked to other small or micro business owners or just gone to the grocery store, you've probably noticed a shift in the economic environment. No doubt it's gotten you to thinking about your own business and what it means to you in terms of sales and the future of your business in general.
The news media is all over "how bad it is" with tales of high unemployment, bankruptcies and an "uncertain future". Of course, it's their stock in trade to incite worry and stress — how else will they get people to continue watching?
It's true that there are changes in the economy and things are different than they were a year or two ago. There does seem to be less disposable income overall, and that can affect businesses that sell to consumers. Some of the larger retail chains are in trouble; Sharper Image, Levitz Furniture, Mervyns, Linens 'n Things and others have gone into bankruptcy.
On the other hand, that's not necessarily bad for small and micro businesses like ours, whose overhead is relatively low and who sell relatively inexpensive products that are still generally affordable. Someone who can't afford a new car this year may still be able to afford a nice bar or two of handcrafted soap, and may have an even higher personal desire for a small item that helps relieve other tensions in their life.
There is also the fact that businesses that take the necessary steps to survive during tough economic times are in an extremely positive position when times get better. Their business models are strong and sleek, their stability demonstrated and they are already out in the market when people start buying more. In fact, some say that the perfect time to start a small or homebased business is during a "bad economy"!
A prime example of that is the Method Brand of household products. The founders of Method, Adam Lowry and Eric Ryan, started making products in their bathtub in the middle of the last recession. The products were good, they made sales and got their business established. Then, when economic times were a little better, their established business and unique marketing looked good to investors ... and the rest is history.
The question is, what can you do to survive the tough times? How can you modify your business activities so you get the best possible return?
In the rest of this article are some tips and strategies you can use to get through a sluggish economy and even make your business better in the long run.
Keep a Positive Attitude
People, including customers, want to be around positive people. They want that all the time, but especially when they are being bombarded by negativity. Keeping your own attitute positive will not only make your life happier, it will attract customers and others you can network with.
According to Michael Beck, executive coach, trainer and professional speaker, when it comes to working on your attitude, "extraordinary times call for extraordinary measures." He recommends a first step of cutting out the negative messages.
- Stop watching TV news and reading the newspaper. In this day and age you'll hear the important things anyway, but there's no need to seek them out (along with all the negaive news and stories).
- Avoid negative people. Negative people pass on their negativity. Instead hang out with positive people!
There is also the physical aspect of your emotional level. Work on your physical energy level so when you are working you can be as productive as possible.
- Get enough sleep. For a typical adult, that generally means six to eight hours a night.
- Eat right. Take supplements if needed. A good diet and added dietary supplements will give your body the energy it needs.
- Exercise. Regular physical exercise can help your body reduce stress and tension.
If you take care of you first, then you will be able to take care of your business.
Increase Personal Contact & Customer Service
With your increased positive attitude and good physical engery, work toward improving your service to your customers. Positive, personal contact can go a long way toward increasing sales. In these days of low phone rates, email and internet, it doesn't take a huge financial investment to increase the level of customer service.
- Check your website. Make sure your website is up-to-date, friendly and provides good customer service and information. Website visitors are much more inclined to order when they have all the information they need.
- Personally contact website customers. When a customer orders from your website, send a personal email or even call. That personal touch will certainly result in a happier customer and may result in more sales through referrals.
- Contact past customers. Touch base by phone or email and see if there is anything you can do for them. Phone wholesale customers to find out if they have questions about the products or need advice on how to sell them. Products like eCampaign (www.lmhsoft.com) or online services (www.icontact. com or www.constantcontact.com) make it easy to send out emails to your customers.
- Maintain a positive and friendly attitude. At craft fairs, shows or other places where you have one-on-one customer contact, maintain a positive, friendly and helpful attitude. Even if they don't buy, they'll remember you and appreciate your help. Utilizing the Why Handcrafted Soap? brochure (available in the Members Only Website area) can be a nice touch, not only educating your customer, but giving them your name and address for future contact. Whenever you are dealing with current, past or potential customers, networking contacts or other soapmakers, keep your attitude positive, your demeanor friendly and your service and helpfulness at the highest possible level.
Improve Your Knowledge & Skills
Whatever you can do to improve your knowledge of your business and industry and your own personal skill set will reflect in your business. According to the Small Business Administration, one of the mistakes you can make during recessionary times is to reduce training budgets.
- Follow industry blogs. You can stay informed about the industry by following industry blogs. The HSCG blog is a good source. Also look online for other blogs that provide information you find useful. Subscribe via RSS feed to make it easier to keep up-to-date with what's posted.
- Get information from vendors. Check websites of vendors and suppliers for how-tos, recipes, demonstrations and product ideas. Subscribe to their newsletters and eNews publications.
- Become an HSCG Certified Soapmaker. Studying for and taking the exams will improve (or at least reafffirm) your soapmaking skills. (See more info on the HSCG Soapmaker Certification program.)
- Attend local gatherings. Local gatherings generally provide how-to demonstrations and a great opportunity to network with local soapmakers.
- Attend the HSCG Annual Conference. With 3 full days of educational presentations as well as hundreds of soapmakers, it's an excellent way to improve your knowledge and skills.
As you become more knowledgeable and skilled, you will have the tools to more quickly and easily understand and resolve any difficulties you encounter.
That will grant you more time and energy to concentrate on the positive, creative and fun aspects of your business (and life).
Being aware of what's happening in the industry overall will give you more certainty and prediction of things that might be coming that you should prepare for. Regulatory changes can wreak havoc on a business, but it is much worse if you are blindsided and don't see them coming. If you have an idea of what the future holds, you can prepare yourself and your business and will ultimately be much less adversely effected.
Promote Your Business
Do everything you can to get information out there that your business exists and that you can provide beautiful handcrafted soaps and whatever other products you make!
Many effective ways to promote don't have to break the bank; they can be done with little or no cost (except your time).
- Network, network, network! Wherever your go, whatever you do, be outgoing and mention your handcrafted soaps! You never know who needs and wants soaps or gifts, or who knows someone who wants corporate gifts or is a buyer for a local department store!
- Network with other soapmakers. Often you make a product or fragrance they don't (or vice versa) and you can refer to each other. That type of customer service doesn't go unnoticed by the customer in the long run.
- Utilize social marketing and networking sites. When you are involved with social marketing and netowrking sites, you can increase attention and interest in you and your website. If done well, you can create more actual business and sales. Be careful not to waste time, but be effective in your use of these tools. If you are seeking to increase business and traffic to your website, you need to search out "friends" who are potential customers. (Soapmakers rarely buy soap from other soapmakers!)
- Send out press releases. When something good happens in your business, if you release a new product, attend a conference, or receive an award, send out a press release to local news media (radio, television, newspapers). For online publication, see https://www.free-press-release.com and other similar websites.
- Create and use print materials. A simple brochure, business cards, discount coupons and other items you can hand out, include in orders you ship and/or mail to exisiting customers or prospects are all valuable.
Online print services, such as Uprinting.com or Vista Print offer excellent prices on color print materials, even at low quantities. Professionally printed materials are generally much cheaper per piece than using up ink and paper to print from your home computer—and higher quality as well.
- Be Creative! Review how you contact your prospects and customers and look for ways that you can get your message out to them. Local publications, classified ads in the hometown paper, home parties - all are possible creative and inexpensive ways to communicate.
According to the Small Business Administration, historically many businesses reduce advertising and promotional expenditures rather than slash fixed costs during hard times. However, studies have shown that those maintaining or increasing outlays for promotion and advertising during slowdowns wind up outselling those businesses that cut back.
The SBA recommends:
- Avoid gimmicky and clever advertising—center your message on the benefits and advantages of your product rather than making emotional appeals.
- Use direct response advertising techniques with hard-hitting copy in simple but convincing language, a special offer the prospect will find hard to pass up and a strong call to action.
- Avoid ads that look like ads. Make them appear to be vital messages to the consumer offering them the most for their money.
- Stress quality and durability (but don't actually use the words "quality" and "durability" as they have degenerated into advertising cliches).
- Study advertising research thoroughly. Know what works best and spend every dollar carefully.
Introduce New Products
Introducing new products, or revamping old products into somethng new, is another way to get attention from past customers and attract new customers. Often new product releases (or old product re-releases) can be done with little or no financial investment.
Use existing ingredients and packaging to create new products.
Most soapmakers have ingredients lying around that were purchased and never used. Those are the ones that you can utilize to increase your product line without much initial cost.
Have a dozen 4 oz cranberry red bottles and sprayers that never got used for the special project you planned? Create a special, limited edition room spray!
A bit of left over fragrance from a batch of soap? Make a few bottles of lotion and package it as a limited offer set of a bar of soap and the lotion.
Have some unused specialty oils? Utilize the HSCG Lye Calculator to formulate a batch of soap that uses up those small amounts.
Take an honest look at your inventory of ingredients, fragrances and packaging and see what you can come up with to use the things that have been sitting on your shelf for way too long. You can turn that earlier investment into cash if you make up products using what you have.
Next we'll take a look at what steps you can take to monitor your finances and make good financial decisions.
Carefully Monitor Your Finances
In good times it's important to monitor your income, expenses, assets and liabilities and know where you are. In tough times it's even more important! Entrepreneurs and small business owners have the advantage of being nimble and quick, able to change and adjust much more quickly than "big business". However, in order to adjust when needed, you need to know when it's needed.
- Review your budget on (at least) a monthly basis. Check your income and expenses; look at what products have and haven't sold. Review your profit margins. Make sure you know how much you need to make in order to cover your fixed monthly expenses.
- Maintain a positive cash flow. Above all, you need to make sure your income is over your expenses. If it's not, then do all you can to increase income (see earlier tips in this article) and lower outflow.
- Watch receivables closely. If you have customers who owe you money, keep a close watch. Follow up if they haven't paid on time. Late payments may be an early warning that the customer is about to cut back on purchasing.
- Evaluate all expenses. Review any services to see if they are still needed (especially check on-line memberships or services that charge automatically). Review phone charges and cell phone plans to see if they can be reduced.
- Trim the fat. If you need to further reduce expenses (or even if you don't have to), look for ways that you can trim off unneeded any "extras" from your budget.
- Lower materials costs. Research the costs for your materials and supplies and see if they can be lowered by negotiating lower prices, ordering in higher (but still useable) quantities, or changing vendors. Maybe you can replace a current ingredient or supply with something of similar quality and appearance, but lower cost.
- Refinance debt. If you can lower your interest rates on credit cards or loans, do so.
Make Sound Financial Decisions
Base your financial decisions on hard data, not on guesswork and "hope." In addition to knowing your current financial situation, knowing the "return on investment" for any financial outlay is not only prudent, it's key to future financial viability.
- Know the ROI on every expenditure. Take the time to evaluate the return on investment for every major (and minor) expenditure. Will it make you money in the short term? In the long term?
- Treat your time as an investment. You only have so many hours in the day, so many days in the week. Spend your time wisely, doing the things that will bring you the most immediate return. Now might not be time to spend hours inventing a new, untried product — instead spend that time promoting the products you have that sell.
- Monitor returns on every advertising dollar. Whatever amount of money you have put into advertising, make sure that you are getting returns. Stop any advertising activity that doesn't bring in more business; increase advertising that does produce more sales (enough to more than cover the cost of the advertising).
- Take advantage of lowered prices. Sometimes during economic downturns, prices on big items (capital investments) come way down. If it's something you actually need and you can get a good return on your investment, purchasing at lowered prices might be a good idea. For example, auto prices are coming down and dealers are offering exeptional incentives. If you actually need a new vehicle for your business, and have the cash to cover it, purchasing now might be a good idea.
- Increase Reserves. In order to ensure future prosperity, increase the amount you have in savings.
Put a little bit in every month, with the goal of having at least 2 - 3 months of expenses set aside in case you ever need to use it.
Despite the "gloom and doom" professed by the news and political pundits, a downturn in the economy does NOT signal the immediate and complete collapse of small businesses, including those of handcrafted soapmakers. In fact, statistics show that small, innovative businesses have a far better chance of survival and expansion because they can adapt faster and more effectively.
Yes, it's true that consumers can be negatively impacted by what they hear in the news, and may adjust their spending habits somewhat. They tend to spend more carefully and reduce "unnecessary" expenditures.
However, in this day and age, nearly everyone understands the importance of "de-stressing". The greater the stress level, the greater the need for a way to de-stress. More and more, people will be looking for relatively inexpensive ways to calm, destress and relax. Movie night, at $100 with dinner and popcorn, may be outside their budget, but a refreshing shower with handmade soap, a marvelous lotion or a soothing scented bath is still affordable.
You can provide those things. Tell the world!
(Originally published in Soap Guild Journal of September, 2008.)