11 Jul How Your Business Can Thrive During The Next Economic Downturn
Today, the Dow crossed the 27,000 mark for the first time ever. The S&P is also at record highs. Excitement has turned to euphoria for many, as companies report record earnings quarter after quarter.
It’s easy to begin thinking things will continue this way long into the future. Many of us have become so comfortable in the lifestyles our prosperity affords, that we seldom consider what a downturn could mean to our businesses or personal lives.
The truth, however, is that on average, we see a fairly major economic downturn every 10 years or so. Of course, we all still remember the 2008 mortgage crisis, which devastated not only the United States, but had major global implications as well. That was 11 years ago, and we’re officially overdue for a correction in the market.
That said, most economists don’t see indicators of an imminent downturn. That’s great news, and I sincerely hope our economy continues to thrive for years to come.
However, it’s prudent to leverage the “good times” to prepare for when things turn negative. Whether that happens within the next 6 months, or 6 years, is irrelevant. Obviously the longer we have to prepare, the better off we’ll be. But what happens if we’re caught off guard? What steps can you take to ensure your business continues to thrive when we find ourselves in the midst of the next recession?
Increase, do not decrease, your marketing efforts. But be smart.
This is counter intuitive for many. Many companies make the opposite choice, and immediately slash their marketing budget. As we’ll discuss, there are ways you can use your budget more effectively, but the last thing you want to do is dial back on your outreach. Studies have shown repeatedly that companies that continue to invest in marketing actually see increased sales during economic downturns. Here’s why this works.
How SEO Can Save you from Financial Ruin
Say you own a small business in the Detroit suburbs selling musical instruments. On average, let’s say today there are 3,000 searches per month from people looking for local music stores. Your store ranks #2 in the organic search results. Not bad! Out of those 3,000 searches, 540 people click over to your website (18% of clicks go to the #2 listing). Your website is up to date, you’re centrally located, and you have a great selection of instruments, so 25% of those folks visit your store and make a purchase. The average lifetime value of each new customer is $100. That correlates to $13,500 in new business opportunities each month. Things are going well for your small business, and you love that you get to earn a living doing what you love.
Then, out of nowhere, the economy takes a nose dive, and 50% of musicians decide to hold off on new purchases. Our 3,000 monthly searches are now down to 1,500. You’re still ranking in the second position, and still have proportionate traffic in your store. However, this means that only 68 new customers walk through your door, slashing your profits down to $6,750.
Your living expenses haven’t changed. Your overhead hasn’t changed. You’re under water, and after 6 months, you have no other option but to shut your doors.
However, instead of simply maintaining the status quo, let’s say you saw the writing on the wall a month into the downturn, and decided to pull back on some of your low-performing marketing efforts, and reallocated $1,500 to a high-end SEO campaign. After a few months, you’re successful in moving from the 2nd to the 1st position in the search results.
Let’s take a look at the numbers, and see what effect that would have on your business.
There are still only 1,500 searches compared to the 3,000 we enjoyed when the economy was roaring. But we only had 18% of the clicks before. Now, since we’re in the #1 position, we have 33%. 495 people are clicking over to your website each month, and the same 25% visit your store and become customers. Of course, you have the $1,500 SEO campaign fee to cover, but since you were able to dial back on some of your other frivolous expenses, it ended up netting out at an additional $750 per month. This brings your net profits to $11,625. Granted, that’s still a 14% reduction verses what you were making before. But with smart expense management, you could get pretty close to staying on par with your previous profits.
Now, imagine that your competition wasn’t as smart as you were. Instead of investing, they followed the predominant psychology, and cut their marketing budgets. They forfeit their #1 position to you. Not only do they take the hit in terms of fewer searches, they went from receiving 33% of the clicks, all the way down to 18% where you were previously. They have lost nearly 75% of their income, and regrettably, are forced out of business. The last thing on their mind is immediately taking down their website, so Google continues to display them in the search results for months. Upon realizing the store is now out of business, website visitors hit the back button, and 50% of people click on your listing. The other 50% click on the 3rd listing. This means you have an additional 34 new customers that would have previously went to your competition. This adds $3,375 to your bottom line each month, bringing your total net to $15,000. This is a 10% INCREASE in profit!
Although the pie is smaller, you’re taking a significantly larger slice, and your business has actually seen increased sales during a time when your competition has been left destitute.
Of course, you’re an incredibly generous person, so you reach out to the owner and decide to make his $2,000 mortgage payment for the next 6 months to get him through this difficult time. That’s just the kind of person you are. Since you work with Brown Box Branding, the media curiously gets a hold of the story and you’re all over the news. It goes viral.
The timing was perfect, since a couple months before hand, we had recommended you build out an eCommerce section on your website. The site is fully live, right on time for the media frenzy, and online orders are flowing in. This adds another $10,000 per month in revenue. At this point, you’re forced to hire additional staff to meet the demand. You become the poster child of how to create new jobs during the worst downturn since the great recession. The media loves your story and continues providing free exposure.
Fortunately, hard times don’t last forever. And within a couple years, things begin to pick up once more. We’re not yet back to hay-day levels, but things are good. All those musicians who put off buying that new guitar are now ready for that upgrade. Because of your stellar reputation, you’re the only suitable choice. People know you’ll take care of them.
You not only survived the downturn, you thrived.
Don’t Wait for Disaster Before you Act.
The economy is what it is. It’s up, and then its down. We know these things happen in cycles. But instead of waiting for the next downturn before you make your move, why not begin now when things are good? Imagine if you had a 6-month or 6-year head start on this sort of strategy.
Don’t fall into the trap of believing that things will always be as good as they are right now. Plan ahead and make wise decisions. You don’t want to kick yourself later for not doing what you should have done today.
SEO is a long-term strategy. Typically it will take 4-6 months to begin seeing significant results. If & when the bottom falls out, you don’t want to be caught with your pants down. So take action today, and avoid taking the hit in the first place. As we’ve discussed, it’s better late than never, but a lot of the fear, uncertainty, and doubt can be avoided by making smart choices today.
If you’d like to learn more about how we can tailor an SEO campaign to your specific needs, get in touch! We love exploring options with our clients, and helping them accomplish their goals and dreams.