And Set Yourself Up For Success
Are you like many entrepreneurs across the U.S. (and the world) worried about your business during these crazy coronavirus times? Are you wondering how you can recession-proof your business for future tough times? If so, grab hold of these safety net tips before your livelihood goes under.
Cash Is King
Businesses that fail during recessions are highly leveraged and swimming in debt. In emergencies like these, hold-off spending all your money on inventory so you can use cash on hand as a sail to weather you through the storm.
Shorten Your Stock
Because recessions mean slower sales, reduce your inventory. In times like these, product investments pose greater risks. To reduce risk, stay safe and trade inventory investments for cash cushions that will sustain you through slow seasons.
No one is racing to Amazon for car accessories so shift your focus to food, medication, toilet paper, and other items that everyone needs regardless of their budget. This is also a great opportunity to open new accounts. Amidst an economic downturn, businesses are more open to Amazon sellers. Take advantage of the lower barriers to entry and show brands you’re still in business!
Eliminate Unnecessary Expenses
Per Tip #1, now is the time to trade investments for cash. Avoid investing in software systems, courses, travel, and anything else that boosts your businesses’ outflow. If there was ever a time to stay stingy, it’s now.
Get Access To Capital
Even if you don’t need credit now, banks are about to tighten the reins so grab a line of credit while it’s still available and you’ll at least have the option to use it further down the line. Also take advantage of government loans like these now that everyone’s eager to help out businesses.
Focus On Your Strengths
Now is the time to stay in your lane, whether that be private label or wholesale. It’s also important to emphasize your skills to suppliers desperate for sale-boosting services. If you’re great at snagging discounts or profitable products, do more of that and save your bottom line. Use this time to hone your skillset and emphasize what separates you from the rest of the pack.
Everyone understands the hardships faced by small business owners during times like these. It’s always smart to approach suppliers about temporary discounts on products and rent. Remember, if you never ask, the answer is always no.
Pay Your Debts
If you’ve got debt, you don’t have cash on hand (see Tip #1). So pay it off and focus on earning cash cushions.
Know Your Numbers
If you don’t have a professional bookkeeper, get one. If not, make sure your accounting is accurate. Otherwise, it’s impossible to know what’s hurting or helping your business’s bottom line. If your profit margin or ROI is shrinking, it’s time to switch your strategy, but if you don’t have accurate profit or loss statements, you’ll never know that change is needed.
Bonus Tip: Don’t Quit Your Day Job
This one’s pretty self-explanatory. Now more than ever, it’s essential to have a safety net. As a rule of thumb, wait to quit your day job until your side hustle has secured you 3-6 months of savings and you can pay yourself.
Don’t just survive the recession – help your business thrive in spite of an economic downturn! It sounds impossible, but if you follow these ten tips, you’ll be swimming far ahead of the pack when waters inevitably return to normal.
If you’re working hard on your Amazon venture, Todd is leading a group coaching course to help you build a successful business. Join the waitlist now.
As always, leave a review wherever you’re listening and share this information with anyone who needs it to stay afloat. Happy selling.
Resources From This Episode
Outline of This Episode
[00:19] Todd’s introduction to this episode
[03:35] Cash is king
[05:35] Shorten your stock
[07:18] Invest in essentials
[12:26] Get access to capital now
[15:05] Focus on what you’re good at
[17:28] Negotiate better terms
[20:49] Pay off your debt
[22:45] Know your numbers
[25:35] Keep your day job
[29:12] Todd’s closing thoughts on this episode
Speaker 1 (00:01):
Welcome fellow entrepreneurs to the Amazon Seller School podcast where we talk about Amazon wholesale and how you can use it to build an eCommerce empire, a side hustle or anything in between and now your host, Todd Welch.
Todd Welch (00:19):
What’s up everybody? Todd Welch here, Amazon Seller School. Welcome to episode number 17 and today we’re going to talk about the top nine ways that you can set your business up for success during a crisis like we’re going through now with the Corona virus or any recession that we have to deal with. Unfortunately, recessions are a reoccurring every about eight to 10 years typically this current long run that we were in of almost 12 years of economic success in the United States is really one of the longest runs that we’ve ever had in this country. Unfortunately, it is coming to an end here. At least it appears it’s going to be for the time being due to the Corona virus and the unfortunate effects that is having, of course on all the people out there, but then also the economy due to` everything shutting down, so we’re going to have a recession.
Todd Welch (01:28):
It’s just a matter of how long that recession is going to be, but there’s lots of good things that you can do in your business right now to help whether this storm and any other storms in the future. Now I’m hoping that the economy will bounce back fairly quickly after the Corona virus starts on the downward trend and we get that under hand because this is more of an artificial crash of the stock market and the economy. It’s basically a forced crash, so hopefully we can bounce back a lot faster than we did back in 2007 2008 which was from the housing issues that we had and basically the banks setting up in doing a lot of really bad loans, which got us into that big crisis. So we’re going to dive into, like I said, the top nine ways that you can set your business up for success and actually maybe even grow during this recession and especially be set up for after the recession to explode in growth.
Todd Welch (02:40):
Now. Before we dive into that, I just wanted to read a quick new five star review over on iTunes from the Valeria V she or he says, great podcast. Thank you for sharing your knowledge. It is very helpful. Thank you Valeria. I appreciate you being a listener and I appreciate you leaving a five star review. If you haven’t left a review for the show yet, make sure you head on over to iTunes or whatever platform you’re listening. Leave us a review and I’ll read that on an upcoming show and if you want to see the show notes, the transcript, or any of the links that we talk about in this episode, head on over to amazonseller.school/17 since this is episode 17 and without further ado, let’s go ahead and dive into the top nine ways to recession proof your business. All right.
Todd Welch (03:35):
Number one, keep cash on hand during hard times. Cash is definitely King and the more cash you have available to you in the bank, the more you’re going to be able to whether any issues that come your way. A lot of businesses that go under during a recession are highly leveraged. They have a lot of debt, they don’t have a lot of cash. Maybe they have a lot of accounts payable that they have to deal with and a lot of receivables money that’s coming in but has a long time frame before they’re receiving that money. So if you’re able to keep a lot of cash in the bank in case something happens in case the sales really slow down on you to help you weather the storm, so to speak, that is going to be your best options. So don’t be spending all of your money on inventory.
Todd Welch (04:38):
If you’re in the Amazon world like we’re dealing with, don’t spend every last dollar that you have. Make sure you have reserves in the bank because I’ve already seen a 20 to 40% decrease in sales in some of my products and we’re just in the early stages of this recession that’s coming. As more people lose their jobs and businesses go out of business, there’s going to be just less spending overall in the economy. So your sales numbers in general are going to go down. Of course it depends highly on what kind of products you’re selling, but in general they’re going to go down. So the more cash you can keep in the bank to weather those lower sales, the more longevity or the higher probability you’re going to have of making it through this recession. So keeping cash on hand, like I said is definitely King.
Todd Welch (05:35):
And that leads us into the number two way to recession proof your business. And that is going to be shortened the stock days that you have on hand. So this is specifically for inventory based businesses like ours. In the Amazon world, we’re carrying a lot of inventory. So you might carrying 30 60 maybe even 90 days of inventory of your products. Since we’re going into this recession, you don’t know how well your products are going to continue selling going forward. So now is the time to start shortening those quantity on hand days. So if you’ve been doing 60 or 90 days, maybe reel that back into 45 or even 30 days. If you’ve been doing 30 to 45 days, maybe reel that down to 25 days to 20 days or maybe even 15 days, depending on the product. You’re going to have more time periods where you’re out of stock, but you are making sure you can keep more of your cash on hand in your bank account instead of having it in inventory that you could run into issues selling.
Todd Welch (06:51):
So like I said, you’re going to have more out of stock, but you’re going to have less risk and have more cash in the bank so that you can hedge your bets, reduce your risk, and push through the recession. So you’re going to want to turn your inventory faster over and over so that you can make sure that the products that you’re selling are going to keep selling and you’re not going to be stuck with a lot of inventory. Way number three to weather this recession is to target essential products and open new accounts. So you may be in a niche that you’ve been targeting and perhaps it’s a niche that is not going to do very well in a recession. So you have to think about what people are going to continue having to buy, even if they’ve lost their job or having issues.
Todd Welch (07:46):
Maybe they’re not bringing in as much money into their household. They still have to buy the essential. So things like food, toilet paper, dog food, dog products, medications, maybe some vitamins and things like that. Those are essential that people are going to have to continue to keep buying or most likely will continue to buy. Maybe they’ll reduce their purchases a little bit, but those areas versus other areas like let’s say sporting goods or crafts or audit, some automotive stuff, people are still gonna have to have their cars running. So there are certain things in automotive that will continue to sell well. But if it’s like accessories and add on things that people add onto their car that are not necessary, then those are going to go down. So think about the area that you’re currently selling in and the essentialness of those products. Are people going to need more of those products or the same amount during a recession or are those kinds of things going to get cut and shift your gears possibly into opening new accounts with companies that sell essential products?
Todd Welch (09:03):
One thing that’s really good right now is businesses are actually a more open to new Amazon sellers or new businesses opening accounts to sell their products. We’re in a going into a recessionary period and businesses are getting scared. They’re getting worried, rightfully so, and so those barriers are starting to come down to entry when everything is going good like we’ve had for the last 12 years. Businesses can be more picky with who they allow to sell their products, but now that we’re going into a down period or recessionary period, those businesses are going to reduce those barriers of entry. So now is the time to be contacting those brands and those suppliers and distributors and opening accounts and your success rate is going to go up because those businesses, like I said, are not going to have as high a barrier to entry. For example, I contacted a brand and got a reply just today and she said, I’m so happy to see that businesses out there are still moving forward and looking to grow.
Todd Welch (10:18):
Here is how you can open an account with us and start purchasing our products. So she has obviously seen a decrease in the number of businesses that are reaching out to her to open accounts and she was probably getting worried that maybe her business is going to go under. And so she’s looking for more ways to sell her product. She’s more open to me coming in and selling their products. So take advantage of that. Take advantage might be the wrong word. I’m not saying take advantage of it as in a bad way, but use this opportunity to expand your business, grow it open new accounts, target those essential goods and things that people are going to need no matter what. The fourth way to recession proof your business is eliminate any unnecessary expenses, so during this recession you’re probably not going to want to be flying off to conferences.
Todd Welch (11:17):
Those would be unnecessary expenses, maybe not buy expensive courses and things like that and less. It’s something that can help you open those new accounts, increase your profit directly and things like that. Any kind of software or services that you’ve been paying for, go through your accounting and look at all of those expenses. Are they absolutely critical? You want to limit the amount of outflows from your business. You want cash coming in, not as much cash going, like I said, was shorten Those stock days, you’re going to want to eliminate any unnecessary expenses to keep more cash on hand in your bank account and make your business as lean as possible. The leaner you can get your business without sacrificing the quality of your service. The quality of your products in your ability to supply those products, you’re going to want to do that so that you can decrease your expenses as much as possible.
Todd Welch (12:26):
The fifth way to help recession proof your business is get access to capital now before it gets harder. During good times, banks make loans easier. It’s easier to get credit cards. It’s easier to get money to grow your business and keep your business moving forward. So now is the time at the beginning of the recession before it gets to a point where banks start locking down credit. Credit cards start locking down credit. So get access to that capital. Now open up a new credit card. Even if you don’t use it, go to your bank and ask for a line of credit, even if you don’t have to use it right now. Get access to it before it starts getting harder to open those new accounts. Take advantage of government loans. So during periods of recession and crisis like this, the government tends to want to help and bail out companies, help people.
Todd Welch (13:31):
And as of the recording of this, they are supposedly in the U.S going to pass a $2 trillion economic package for the recession from the Corona virus that we’re going into right now. And that’s going to include unemployment funds and loans to businesses that you potentially don’t even have to pay back if you’re using it to keep your employees. And as well as what I just applied for was an SBA disaster relief loan specifically for the Corona virus, which is going to have very low interest rates and you can get up to $2 million depending on the history of your business. So there are some qualifications for it, but I applied for it. I’m going to get access to it even if I don’t use that money that I get from them at three and a half percent or whatever it’s going to be. It’s basically an insurance policy that I can keep in my bank and if things really hit the fan, I have access to that money when I need it.
Todd Welch (14:39):
So get access to capital. Don’t just go out there and blow the Capitol. Just because you get $100,000 into your bank account does not mean you should spend it, but have it and have access to it in case you really need it because when things get really hard, credit is going to tighten up. It’s going to get harder and harder to get access to that, so get access to it. Now, the sixth way to recession proof your business is to focus on what you’re really good at now is not the time to be shifting gears. If you are selling private label products, now’s probably not the time to shift into wholesale focus on your private label products. If those are doing well, if you’re currently doing wholesale, don’t be starting to look at retail arbitrage or private label or things like that. If you’re already running a business and it’s doing well, it’s doing good.
Todd Welch (15:34):
Focus on what you are really good at in the wholesale world. If you’ve gotten really good at opening up accounts with brands, helping them improve their listings, focus in 100% laser on that because like I said previously, it’s going to get easier for companies to allow you to open those accounts and maybe improve their listings. They’re going to want your help to increase sales because they’re going to be most likely losing sales across the board depending on what area they’re in and even though target essentials that I talked about earlier, those sales overall are going to decline once people start losing their jobs and fall on harder times. If you are really good at working with distributors, negotiating discounts, working with your sales representative and finding and analyzing those giant lists, finding profitable products in their focus in laser in on that, like I said, focus at what you are really good at and become the absolute best at it because in times of recession, people who are not good at their business or businesses that are not good, they are going to fall by the wayside.
Todd Welch (16:54):
They’re going to go out of business. So you want to be the absolute best at whatever you’re doing and take advantage of this recession to make yourself even better. Hone your skills and provide better service to your customers that you’re already working with and new customers that you’re bringing on and that will help your business survive over other businesses that may be struggling during these hard times. The seventh way to help your business during a recession is negotiate better terms. So you probably have a lot of suppliers and brands that you already work with. Maybe some distributors that you already work with. Maybe you have a warehouse or a retail store, so you are renting from a landlord. You definitely have utilities like electric, internet, cell phone, things like that. Negotiate better terms. Right now is the time to start doing that. As things get difficult, businesses are going to be doing more extreme measures to try to keep money coming in and keep tenants in their warehouse or in their retail space if it’s a landlord.
Todd Welch (18:20):
And so they’re going to be more open to giving you discounts on all of their stuff. So if you’re working with brands and distributors, call up your sales rep or the owner of the business and say, Hey, I know things are getting really bad out there. Businesses getting tough. Would it be possible for us to maybe get another 5% discount on your products? Or maybe we could get longer terms like net 60 net 90 net 45 something like that. Or if you don’t have net terms currently maybe net 30 to help with that cashflow crunch. That can happen during hard times in the wholesale world of Amazon, in any kind of eCommerce where you’re selling products, we always have that cashflow problem, right? So having those net terms can help with that. Getting that discount on those products can help your profitability and help improve your business and now is the time that they’re going to be more open to doing things like that and giving you those discounts.
Todd Welch (19:27):
If you have a warehouse retail store, reach out to your landlord and say, Hey, things are getting tough. I want to make sure our business is going to make through this. Can we get a discount on our rent? For the warehouse or the store and then just be quiet and see what the landlord says and you might luck out and get a discount there. It doesn’t hurt to ask. One thing that I like to live by is if you don’t ask, the answer is always no. If you do ask, maybe you get a yes, maybe you get a no, but you increase your odds 100% by asking because if you don’t ask, the answer’s automatically no. Same with utilities. Call up your electric company, your cell phone, your cable bill, everything. Tell them you know the recession is hurting your business. Is there any wiggle room in pricing that they can give you to help you get through this recessionary period?
Todd Welch (20:29):
And again, you may very well be able to get some discounts in those areas and that’s going to, again, back to the number one thing that we talked about, help you keep more cash on hand, more cash in the business to keep your business healthy. Number eight, to help you narrow your recessionary period or a crisis, pay off your debts. Now, this might seem in contrast to number five, which was get access to capital where I told you to take out loans, open credit cards and things like that. Having access to the capital is different than having the debt. So if you have access to $20,000 on a credit card, that is not debt because you have not used that. If you took a small business administration loan, SBA, as I said earlier, having that money in the bank is not debt because you could immediately pay off that money.
Todd Welch (21:27):
Now, if you start using that money, then yes you are going into debt, but paying off any debts that you have, if you have an Amazon loan, pay that off. If you have credit cards, make sure you’re paying those off every single month. Keep your debt low because having debt and cash in the bank just offset each other. So if you have debt, you really don’t have cash in the bank because stuff hit the fan. So to speak, to keep it family friendly, you’re going to have to pay back that debt the bank is going to, or the if you had to declare bankruptcy in your business, for example, the money in the bank is going to go towards paying your debts. So having debts plus cash in the bank does not really equal having cash on hand. So you want to pay off those debts and have the money in the bank, but have access to those loans, have those lines of credit, open those credit cards open if you did need them to help you weather the storm.
Todd Welch (22:31):
So try to pay off any debt, get down your debts and have the cash on hand like we’ve talked about over and over. And the ninth and final way to help your business, whether the recessionary period is to know your numbers, finances, accounting. It’s not a fun topic for a lot of people, but if you don’t know your numbers, then you are not running your business properly. I can guarantee it. If you’re not getting a balance sheet and a profit and loss statement every single month to look at to see where you’re losing money, where you’re spending too much money, where you’re making a lot of money and what your bottom line profitability, your profit margin and your ROI is, then you don’t know if what you’re doing in all the previous steps is helping or hurting. You have to have your numbers in order. So if you don’t have a bookkeeper, I highly recommend having a professional bookkeeper that can do your books for you and give you a balance sheet and a profit and loss statement every month so that you can look at that, see what your bottom line numbers are.
Todd Welch (23:52):
And if you’re in wholesale world and you made 15 to 20% margins, bottom line, then your business is doing good, you’re healthy. But if you start seeing that number drop down to 10 or 5% or maybe even negative, then you know you need to work on something, you need to cut your expenses and focus on higher margin, higher ROI products that you’re selling. So without knowing your numbers, there’s no way for you to actually know how your business is doing in good times, let alone bad times when it’s even more critical to keep tight reign of your numbers. Make sure your Mark profit margins are high and your ROI is high. So if you’re doing it yourself and you can’t afford a bookkeeper, make sure everything is accurate. Everything is going in your books so that you know that that bottom line number is wrong.
Todd Welch (24:52):
There’s a lot of times that businesses are doing their own books and they’re not accountants, they’re not bookkeepers. They think they’re doing it right. Then they get a professional bookkeeper or professional accountant and the accountant tells them, sorry, you’re not actually making money or you’re not actually making as much money as you thought you did. So knowing your numbers is absolutely critical. It’s not fun, it’s not sexy, but it is fun to look at that balance sheet and your profit and loss statement and see the profit that you did make and be able to back up your gut feeling of how you did with real world numbers and know that your business is actually doing well. Now I’m going to throw in a 10th one here that I just thought of and that is keep your day job. If you have a job currently, this is not the best time to leave your job if you’re in a position to not get laid off and try to make a jump into doing your business full time.
Todd Welch (25:57):
So if you have a day job, keep your day job through this recession and make sure you know your number is in number nine before you actually do make that jump, make sure you are taking the money out of the business and putting it into a savings account for maybe three to six months before you make the jump to doing your business full time and take out what you’d need to pay yourself. So then you’ll know if your business is actually profitable enough for you to work in it full time and still be able to grow your business. That’s a really good way to limit your risk because then when you do make that jump to go full time, you have three to six months emergency fund in your business sitting there. If anything goes bad, you’re not going to start taking that money out.
Todd Welch (26:49):
You’re just going to have that three to six months, so if your business stopped, you’d have three to six months worth of money to pay yourself. Why you’re either recovering the business or finding another day job if that’s something you had to do. And also if you are in your business and you are doing it full time, your business starts going backwards, starts decreasing in revenue and income and your profit starts going down and you’re struggling. Don’t be afraid to take a job if you have to. There’s lots of jobs right now with Amazon and grocery stores and things like that that are paying $20 $25 per hour because of the time that we’re in and the crunch that we’re in. So if you’re really worried about that, then take a job and keep putting all the money back in the business that’s going to help you grow faster as well.
Todd Welch (27:47):
It’s never fun to go backwards. Trust me, I’ve done it. I’ve had to do it. It’s not fun, but that option is there if it’s something that, you have to do to help you, whether these bad times, because if you can keep your business going and growing during these recessionary times, then when we come out of this, you’re going to be in an awesome position because a lot of businesses are going to go under. A lot of people are not going to start businesses right now because they’re afraid and if you can put your business in a successful position now, I hope, like I said in the beginning that this is going to be a short recession. I believe that it will be, but it’s impossible to predict these things, so we have to set yourself up for a long recession that potentially could be one or two years in length before we get back to a growing economy.
Todd Welch (28:43):
Hopefully it’s more like six months, but it’s impossible to say. So focus on your business, make sure it’s healthy, have your cash on hand, and just keep moving forward and growing your business during these hard times. When we get out of it, I promise you will be sitting pretty and you’ll be in a position to leapfrog ahead of anyone else who did not set themselves up for success during the hardest times. So I hope that helped you guys out there. That is what I’m doing in my business during these hard times and I hope it helps you guys. Again, if you can share this podcast or YouTube video, if you’re watching on YouTube with your friends that could use this information that would be greatly appreciated to help us grow the show and grow awareness and help other businesses succeed during these really hard times.
Todd Welch (29:41):
Again, also leave us a review over there on iTunes or whatever platform you’re listening to and you can check out the show notes at amazonseller.school/17 get links to like the SBA disaster relief that I talked about, the loan that you can sign up for and any other links that I talked about in this episode. And I’m also working on a small group coaching package that I hope to release sooner rather than later here where I’m going to take a handful of people who are in the beginning stages of their Amazon wholesale business and are already on the right track. We are going to work together and build our businesses to success. So within three months we’ll have profitable brands and suppliers and products that we’re working with and selling on. Amazon will be set up for success going forward. So if that’s something that would interest you, make sure you head on over to amazonseller.school/group and you can get on that waiting list. So with that, that wraps up this episode. I hope everyone out there is staying healthy. Your family is staying healthy and you are avoiding this Corona virus that’s currently out there. And I really hope you can keep moving forward with your business through these tough financial and economic times. So with that, this is Todd Welch with Amazon Seller School, signing off. Happy selling everybody.
Speaker 1 (31:18):
This has been another episode of the Amazon Seller School podcast. Thanks for listening, fellow entrepreneur and always remember success is yours if you take it.