Recessions aren't inevitable, but their happening is usually outside of your small business's control. To protect your spa and limit economic impact, you'll need to recession-proof your business. Fortunately, this doesn't require a financial overhaul or tricky strategic switch—you can recession-proof your spa with just a few intentional steps from the experts at Funding Circle.
5 Ways to Recession-Proof Your Spa
Below are tried-and-true ways to protect your business from the current (and future) recession:
- Build Up Your Rainy Day Fund
- Reduce Your Trivial Expenses
- Maintain Your Marketing Spend
- Secure a Business Line of Credit
- Expand Your Revenue Streams
1. Build Up Your Rainy Day Fund
The COVID-19 pandemic likely depleted your cash cushion—and that's OK. That's what it's there for. However, you'll need to start rebuilding it to prevent future calamity from cleaning out your bank account. Start small. Put a portion of your monthly sales in each month. It may just be a little bit month to month, but it can make a big difference year after year.
2. Reduce Your Trivial Expenses
Look at your expenses to see which are need-to-haves and which are nice-to-haves. In times of economic prosperity and certainty, it's OK to splurge a little bit here and there, but it's a good idea to trim costs wherever possible amid a recession. Identify your non-essential expenses, and eliminate them from your budget. You can allocate these additional savings to other areas of your cash flow, or you could start dropping it straight into your rainy day fund.
3. Maintain Your Marketing Spend
We suggest reducing your trivial expenses, but that doesn't mean cutting all your costs. Many businesses are tempted to cut marketing spend when a recession comes around, but history shows us time and time again that this is a recipe for disaster. Maintain (or even increase) your marketing spend in a strategic way. The Excess Share of Voice Rule (ESOV) states that the more a company spends on advertising compared to its competitors, the more it will grow. Your competing spas will likely drop their marketing budgets, and that means you'll be able to grow your business for less money by maintaining your advertising spend. So break out your small business marketing budget planner, run the numbers, and figure out what channels offer the most bang for your buck.
4. Secure a Business Line of Credit
A business line of credit is a financial safety net for your business. You can secure a line of credit to finance ongoing purchases, cover a gap in your cash flow, or bail your business out of an emergency. Regardless of how you use it, it's a good idea for you to keep a business line of credit in your back pocket. You can tap into your line of credit whenever you like, and you'll only pay interest on the portion you use. When you repay the funds, you'll get immediate access to the full line of capital again, which means you won't have to keep applying for new loans time and time again. This makes a business line of credit the perfect financing tool to protect your business before, during, and after a recession.
That being said, do your research to figure out what type of financing makes sense for you. For example, if you’re looking for a larger chunk of change, competitive interest rates, and longer repayment terms, a SBA 7(a) loan might be a better choice.
5. Expand Your Revenue Streams
COVID-19 showed many businesses that you can't rely on a single revenue stream for your business's income. If we experience government-mandated closures again, would you have a way for your spa to keep making money? If not, it's time to diversify.
Think of alternative ways you could make money. Could you sell products online? Could you have a mobile spa that's not limited to a single location? Is there an opportunity to sell your knowledge online through training, courses, or mentoring? Get creative and have fun with this. Experiment with new ideas to see if they have the potential to be a new revenue stream for your business.