There’s a commonly held myth that the beauty industry is recession proof.
The so-called “lipstick effect” – where clients will still spend on beauty services and products even if cash is getting low – is true, but only to a point, so what can we do when we’re looking a recession right in the face? We can call it quits and go home, but where’s the fun or profit in that? We can pour ourselves into our businesses, burn the candle at both ends, even add a second candle to burn at both ends, but that’s no guarantee of success (it is a sure path to burnout though). Or we can think strategically and develop a plan that’ll carry us over the rough waters of a recession and into better days beyond. We’ve got three tips to help you survive a recession, so take notes (or just bookmark this post), class is in session.
Planning
The first thing you can do is the simplest: make a plan. A solid plan will help you take emotion out of difficult decisions (and let’s face it, in a recession you may need to make difficult decisions) and allow the facts – financial facts, broader economic facts, the facts of business and personal responsibilities, and more – guide your decisions.
Budgets and financial forecasting are key elements to a plan that will guide you through a recession. This means it’s time to get cozy – and get real – with your books. Set up a time to meet with your bookkeeper or accountant to go over your current and forecasted finances, and get to know your ledger sheet by heart. Do you have a “rainy day” fund or emergency money set aside? It may be time to funnel more money that way (and if you haven’t started one, start one today, it’s never too late). Can you analyze your expenses and income and direct your work or marketing efforts into the most-profitable channels?
Your mission, vision, and values are also essential elements in a recession plan. Staying true to your vision, hitting those goals and success markers along the way, and sticking to the values that drive your business will help you strategize.
When you plan, be sure you establish milestones that indicate your business’ financial health. Each of these milestones should have concrete actions attached to them. How many clients can you lose and retain current profit or staff levels? What happens when you drop below that number? Is it time to reduce your workforce or operating hours? Is it time to get aggressive with marketing? A good plan and well-established milestones will help guide these and other decisions.
Honesty
Honesty is key in any successful relationship and that includes the relationship you have with your employees, so be honest with them. Be honest, open, and frank with your team about the current state of business and your forecasted future. Business success, especially in salons and spas, is built on the success of its employees, so if they have a clear picture of where things stand and the milestones indicating where things are headed, they can help. How? With hustle. With heart. With innovative ideas.
If your employees know you’re concerned about a recession and they see you hustling to ensure the business thrives, they’ll hustle too. Doubly so if you open up to them and let them know it’s time to switch into high gear and hustle. As they fill their books, profits stay steady. As they upsell retail and cross-sell services, profits can increase. As they push to keep their earnings and profits high, yours will be buoyed too.
And if your employees know, they might have innovative solutions to cash flow problems, to spreading the word about their (and your) business, and show you a new path to profits while you serve your guests exactly what they want. Every idea is worth considering, though not every idea is worth pursuing. Your experience with your guests and past business success will help guide you here.
This does mean you may need to have a hard talk with your team, filling them in on next steps that include reduced hours or temporarily eliminating positions. Some members of your team may welcome this news and see it as their opportunity to pursue another project, strike out on their own, switch careers, or even relocate. Each of those scenarios has its pros and cons, but the bottom line is that you may be able to reduce your staff before it’s too late and with no hard feelings as employees take the chance to do something new.
Diversity
How many ways does your business make money? Could you use a few more income streams? If you diversify your income streams instead of relying on one or two paths from your clients to your bank account, you can absorb recession-related losses more easily.
This means growth, at least to a small degree. If you don’t sell retail, this may be an opportunity to bring in a small line that resonates with your clientele. If you don’t conduct those essential fact-finding consultations before a service, this is your chance to do it right and boost your upsell and cross-sell potential with each guest. If you’re a salon and your clients have been asking for manicure/pedicure services, this is your chance to turn that unused back room into a mini nail spa (which can be done with a minor investment in the space).
Look around your community. Are there “gaps” that you could fill or partnerships that would bring awareness (or even profits) to your business? Imagining partnering with a retirement community to provide their residents with styling two days a week. Those two days happen to be your slow days, so you send a couple of employees to your new “satellite location” to provide the new clients with a list of basic services. Could you provide the same to a homeless shelter or women’s home? Often organizations like these have a budget to pay service providers like you and even if that income stream is shallow, it could be the thing that boosts your reputation and standing in the community, earning you new clients.
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