Get ready for a doozy!
We’ve been talking about the economic shifts and the effects that are having on businesses, especially online sellers and brands.
We talked about a trifecta effect which is made up of inflation (which will likely continue to increase), a recession, and changes in shopping trends to more in-person.
That adds up to a big market shift for e-commerce brands. It can feel like you’re on quicksand and not sure where the bottom is.
So how should brands respond? What are the first things they should do and how can they get into a good financial place?
This will be a short series which will cover these steps.
The steps include:
👉 Reduce Costs
👉 Increase Revenue
👉 Build a moat
Each email will focus on one aspect of how to respond with the PRIMARY GOAL of navigating a down economy while staying profitable.
And by doing the exercises I suggest, you might become more profitable than ever.
So before I write about each step, it’s important to understand the exercises I lay out here will save your business one day.
They should be done even when the sun is shining, but most businesses don’t do this until it’s too late.
And remember: your one goal is PROFIT. Nothing else. And in a very bad economy, your goal becomes: Stay Alive (while all the businesses around you die).
So let’s dive in.
Reduce Costs
We recently did this exercise in one of my businesses to make sure we were staying profitable. And here was my experience:
Us: “We can’t cut anymore without it being detrimental to the business.”
Advisors: “Yeah that’s what everyone says. Everyone cries in their coffee and says ‘I can’t get it any lower, I NEEEEED these things on this budget.’ …when in reality, you don’t need them to keep the business alive. They are wants, not needs. You need to get it under THIS number. Don’t care how you do it, just get it done.”
Us: “But we can’t get it any lower, we tried.”
Advisors: “Don’t care, figure it out. Anything above that number is not acceptable. This is serious.”
Us: “Ok we’ll look at the budget… AGAIN.”
Advisors: “Remember, only keep the expenses that you need in order to NOT GO OUT OF BUSINESS. Nothing more. No “nice to haves”.”
2 days later…
My husband and I are sitting at the kitchen table, with physically printed spreadsheets… and highlighters.
We sent them these photos and said “Look! We’re having a spreadsheet date.”
My advisor replied with…
Several hours later…
Us: “Um.. Ok… so we shockingly did get under that number. That was the most painful thing I’ve ever done in business.”
Advisors: “Great, now implement the new budget ASAP. You aren’t allowed to add any more costs to that budget sheet. This is the new budget going forward.”
Several months later, the business is more profitable than it’s ever been.
Takeaways:
Here’s what I can tell you…
First, if you don’t have a budget where you list out every jot and tittle of every expense, that’s the first thing you absolutely must do.
There’s a lot to say on the finance side of things, but you MUST have all your expenses listed out on a spreadsheet.
Separate them into FIXED costs and your VARIABLE costs.
Next, you’re going to pretend you’re not the business owner.
You’re going to pretend you’re the advisor who has zero emotional attachment to anyone or anything in your business.
As an advisor, you’re going to suggest calculated moves with zero emotion.
What would the guys on Shark Tank say if they looked at this budget? Be cold and ruthless with it.
You’re operating on the premise that you can only keep items if it prevents you from going out of business.
Everything else is actually a “want”.
And if you can’t tell the difference, that’s half the problem.
Implementing this cost-cut won’t feel good.
It will feel like you’re taking things away.
You may have to cut employees’ hours or even lay people off.
People costs are often one of the biggest categories for businesses.
It’s easy to overhire when times are good. It’s a mistake.
Costs do rise as you become more successful and you need to build out a team and the infrastructure of the business but be careful that you don’t lose your precious profit.
Keep a steady eye on those margins.
Every app, every tool, every hire, every shiny object is potentially taking away from your dreams… which is the whole reason you got into business, right?
Profit is all that matters, everything else is vanity.
Do the HARD grown-up thing, and cut your costs like there’s a zombie apocalypse and the only thing that will save you is profit.
Tell me in the comments if this post moved you. And if it did, what are you going to do?
If this post inspired you, please share it with someone and post on your socials!
