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This one is crazy long, so I included an audio version.

Let me know if you like it!

If you want to skip the exposition - all the good sales tips are in the lower half of the newsletter.

Paul Dickau · Ep - 03 - How To Survive A Recession

Intro

Earlier this week, the stock market crashed quite a bit.
On Monday, this question came up in all my Kick-off Meetings:

“What the f#ck do we do if this becomes a recession?”

Well - let me tell you what the f#ck we do. But first, let’s make some sense of the situation.

What the hell happened?

The Big Tech Sell-Off:

On Monday, many big investors sold their positions in the US tech sector.
This increased the supply of tech stocks on the stock market, which lowered their price. The sold-off companies lost a ton of value very fast. This triggered a chain reaction:
Many smaller investors sold their shares once they fell below a certain value - usually what they bought them for.
Other people would sell their shares for later buy-back at a lowered price.
The result? A downward spiral.

Growing Supply vs. shrinking demand = falling prices.

Then the problem started to spread:
The fear of an economic downturn kept creeping in. Many investors began selling their shares in other companies as well. This created even more supply and even less demand. And it got worse. On any other day, many people would have been jumping at the chance to buy these stocks at the cheap.

But on this day, they had a problem: Liquidity

(scary chart is scary!)

The Blood Bath in Japan

It’s a worthy detour, I promise. For many years, the Japanese Yen was a very cheap currency. This meant you could borrow large amounts of yen without problem - and exchange it for dollars. Over time, the Dollar would increase in value relative to the Yen. Once it was time to pay back your Yen-loan, you changed your Dollars back to yen at a better rate than what you got them for. This paid for your interest - and then some. It was a real-world infinite-money glitch. And now it’s over. Because in July 2024 the Bank of Japan raised the key interest rate.

This made it more expensive to borrow Yen, which meant you got fewer Yen for your Dollar. All of a sudden, debtors had to pay back a lot more than they had anticipated. This forced them to sell off assets to pay their debts - and it sucked a lot of Dollars out of the American market. And it also created even more supply without a buyer, dropping stock values all over.

(suddenly, you were getting a lot less for your dollar)

A Perfect Storm

Let’s summarize the situation.

• On Monday we saw a rapid decline of share prices paired with low liquidity.
• Investors were unable (or unwilling) to buy the falling stocks at a fast enough rate.
• All this is mixed with panic, greed, confusion, and conflicting information.

It created a perfect storm.
But it’s not a recession. Yet.

Not A Recession (yet)

Many news outlets have predicted a recession in 2024. But news outlets predict recessions all the time - because they make money from your fear. To tell if we are heading for a recession, we need to look at the indicators.

We are seeing some symptoms of a recession. But we aren’t all the way there yet - but it’s getting scary out there.

The broken business food chain

Recession is bad. Okay. Everybody got that. But how do falling tech stocks lead to you, the friendly neighborhood founder, going bust?

By breaking the “business food chain”:

• A huge tech company has to cut costs, so they cancel their contract with a large recruiting company.
• They also start doing mass lay-offs. Pressured by investors, other tech companies follow suit.
• The huge tech company was the large recruiting company’s only client.
• Replacing huge clients takes a long time. So the large recruiting company goes bust.
• When the large recruiting company goes bust, it still has an open invoice with a medium marketing company.
• This invoice never gets paid.
• The medium marketing company now has a large hole in its cash flow. Until they can get a new large client, they will reduce their spending as much as possible to survive.

And this makes them afraid to invest in you.
A recession disrupts the established flow of money.
As making money becomes hard and spending money becomes risky, most companies will prefer to keep a strategic reserve instead of investing in further growth.
A recession makes every new contract feel extra risky to your clients.

What selling in a recession feels like

From a ground-level perspective, it is hard to tell if you are in an actual recession.
At first, it looks like the natural ebb and flow of deals.
Only that one day the tide recedes and never comes back.

The first bad sign is that deals take longer to close.

As budgets get tight, more decisions need to be green-lit by committee.
Buying decisions get pushed into the next quarter.
If you work with small businesses, you've seen this.
Very often they are waiting for a deal to go through before they can sign your deal.
Now they are waiting longer, which means you are waiting longer.
Long deal cycles also bring another problem: Delayed Feedback.
If it takes long to get a definitive answer, it takes even longer to make meaningful improvements.
So make sure to build rapport with your buyers so that they will keep you in the loop.
Communicate early and often to defuse concerns.

The second bad sign is that response rates go down.

Where communication was at first only slowing, it is now stopping completely.
Stakeholders will start ghosting you mid-deal.

• If you do cold outreach, the feedback will be crickets.
• If you do SEO, you will see search volume shift away from your keywords.
• If you pay for ads, you will find your Customer-Akquisition-Cost going up.

If you see this happening, get back into rapport with your audience as quick as you can.

Pick up the phone!

Try running more direct outreach with higher volume and more variation.
Reduce the number of moving parts in your funnel.
The faster you can get feedback, the quicker you can make meaningful adjustments.

The third (and worst) sign is that stakeholders disappear.

The Head-Of you spent weeks building rapport with? Laid off.
The C-Level-Person that promised to get back to you? Busy putting out fires.
The Founder who meant to sign your deal? He’s away sweet-talking investors to give him more money.

At this point, you start becoming powerless.

Their behavior sends a clear message:

• You are not a priority right now.
• They’ve got more important things going on.

(But call them on the phone, anyway. Just in case.)

How to react to a recession:

There are two ways to survive a recession:
Preparation and reaction.
Being prepared is more desirable.
But let’s face it:
If you felt properly prepared you wouldn’t be reading this article.
If you want to react to a recession, you need to make working with you less risky for your clients.

This means:

• building trust,
• taking on more responsibility,
• and being more reliable than the competition.

It also often means being cheaper than their DIY solutions.

Up-Selling

If you suspect a recession may be on the horizon, try up-selling your clients.
You can also offer them prolonged contracts at reduced rates.
Yes, losing out on a bit of revenue might sting, but it’s better than losing a client altogether.
You can also try and sell them different services for which they would otherwise have to hire someone else.
Many companies would rather outsource work than commit to an employment contract.
Example: If you are already doing their ads, offer to do their creatives as well. Give them a special price if they lock it in for the next 12 months.

Build rapport with clients

It’s hard to fire somebody you care about. Make sure your clients care about you. If your client worries about the future, try figuring out a joint strategy. Be a strategic partner, not a position on the spreadsheet.

Reduce Risk.

You don’t have to work for commission only. Yet a results-based component to your fee-structue can be a great facilitator of trust. Guarantees are another way to reduce the risk for your clients and to put some skin in the game. But beware: Everyone will be throwing ridiculous guarantees out there. Clients will be wary of them. Make sure yours are believable.

Go the extra mile. Then go another.

It’s not enough to fulfill your part of the contract. If your client is not seeing results from your work, they will not re-invest. Go above and beyond to help your client succeed.

Crank up the ad-spend

Paid ads are the quickest way to force eyes on your offer. You may want to wait a bit and see how things develop - but you are mistaken. That’s what everybody is doing. If you wait, the ad channels are already filled with your needy competition. Be first. Get that extra client early, even if it’s costly.

Diversify

Looping back to the broken food chain metaphor:

Find different “food sources”.

Diversifying your target audience or services is a way to access extra revenue.

There are two dangers here, though.

• Pivoting into a new area may be more costly than you first imagined.
• The competition will already be dug in hard and they are more experienced than you.

Likewise, other companies will try to access your niche if they deem it profitable. Be prepared for competition.

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All these strategies come with a frog to swallow.
That’s what makes them work.
You swallow the frog so the client doesn't have to.

The worse the economic downturn, the bigger the frog.
The better you get at devouring amphibians, the better you can react to a recession.

How to prepare for a recession

If you found what you have read so far alarming (you should) - there are some ways to prepare. A lot of this will be uncomfortable.

There are still frogs to swallow.

But when preparing, you are swallowing the frogs for yourself.

Stop relying on your network for new business (i.e. build lead-gen channels)

Don’t get me wrong. Having a network is great!
But you should treat deals coming from your network as the cherry on top of your ice cream.

They shouldn’t be your only source for deals.

Because: A recession breaks up the business food chain.

It eliminates players in your network. It destroys their business and freezes their spending power. And at some point, the flow of money doesn’t reach you anymore.

Be religious with your follow-up

If sales were a religion, the first three commandments would all be “Make sure to follow up with your clients!”.
It’s a lot easier to re-engage existing contacts than opening up new people, so make a habit of it.
Never have a contact without an actionable next task and a do-date for the task.
Make sure you have some form of auto-reminder turned on.
The least is snoozing their last email so that it pops back up in time.
But if your email inbox looks like a hoarder’s house, you should instead put it in your calendar.
The best way is - of course - a CRM.

Build a clean CRM Process

Having a well-curated CRM can be the antidote to most of your sales problems.
Not sure whom to follow up with?
Not sure what you talked about on the last call.
Forgot the client’s name?
Look it up in the CRM!
If you don’t have one, get one.

Move from founder-driven sales toward building a sales team.

If you are a founder and you hate sales - you will hate it even more during a recession.
And even if you love sales you will be busy putting out fires elsewhere.
Having someone dedicated to sales success on your team is an absolute game-changer.
There is one problem, though.
Many founders are afraid to go all in building a sales team.
So they hire very junior people or students to keep costs low.
This does not work.

Unless you are yourself an excellent seller - and you can commit most of your time to training them.
Let's be honest. You can't.
Because you are a founder and you have shit to do.
Another fatal error is hiring a salesperson on a pure commission basis.
Those guys won’t stay around when the selling gets tough.

Instead, do this:

• Hire 2-3 junior salespeople.
• Hire a fractional head of sales to train and onboard them.
• Create a very challenging, but motivating work environment.
• Focus on building a strong outbound culture.
• While the newbies sharpen their skills, you can create a new lead stream.

Diversify your deal-sourcing

“One Channel, One Offer” is a common adage when building a new business.
And it’s true - but not if you are preparing for a recession.
If your main deal source takes a hit, your business should not grind to a halt while you fix it.
You don’t want your sales team to be twiddling their thumbs while your marketing fixes the problem.
If you already have an inbound channel, add an outbound channel - and vice versa.
'If the inbound leads are good, your sales team can do less outbound.
If the inbound dries up, it's good to have salespeople who can drum up business on their own.

Re-evaluate your Product, Solution, and Offer.

This should be the first thing you do.
But when I put it first on the list, everybody skips reading it.
That’s how underrated this tip is.

Re-evaluate your product and offer.

Your product must solve an “Oxygen Problem”:

• recurring
• always the highest priority
• deadly if neglected

Your solution should be:

• quick
• end-to-end
• 100% under your control

Your offer should be:

• as expensive as possible
• but still an absolute no-brainer
• as risk-free as possible

Many founders don't like reading this, because their offer does not meet the requirements. But if you can stand a healthy dose of reality, you will be able to make the necessary adjustments and/or pivot.

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I know, all this sounds like a lot of work - that's because it is.

But it does not have to be. Because I can do it for you.

Click the button to find out how I can help you!