3 Recession-Proof Business Techniques to Increase Profits Immediately

During economic downturn times in which recession is the word of the rule, people tend to be more cautious with their spending. This directly affects small businesses as well as bigger ones. Businesses need to create a recession-proof strategy to thrive and survive. Companies are forced to review pricing strategies and cut back costs in order to keep growing - or even existing, in some cases.

One of the most popular modules at the Birthing of Giants Fellowship Program, our five-day flagship course for the owners of fast-growing companies, is called “How to Turn Your Moneymaker into a Better Moneymaker.” Over a half day, business owners learn the economic techniques that allow businesses to increase their profitability and thrive through periods of growth and contraction. During the week, the business owners work alongside the experts to customize these strategies for them.

Here are the 3 most popular techniques that produce the fastest results to thrive even during a recession:

1. “Good, Better, Best”: a Recession-Proof Pricing Strategy with a Twist

This strategy involves the creation of tiers, or “good, better, best.” When you price a product or service based on building value for your customers, it pays off in several ways.

First of all, it allows you to charge more for a better version of your product. Second, it helps you make a profit from each customer by allowing you to charge more for the higher tier of your product. Third and finally, when people are willing to pay more for your good and best products than they are for your lower-priced items, they’re likely to buy more often.

“Good, Better, Best” pricing is a classic strategy. Steer your clients towards a “Better” offering by sandwiching it between a “Good” and a “Best” offer.

By making the first step free or inexpensive and then charging people as they want to go further up the ladder and get a better value (and profit) per purchase, you get customers who are not just buying on price but also paying because they think they’re getting a great deal.

This is especially important when you consider that 88% of consumers say they would be less likely to buy from a business that raised its prices during recessionary times. Pricing based on value increases the chances of customers coming back, which can help increase sales numbers and profits during these tough economic times, thus, have a higher chance to thrive.

When Christopher Roth ran this strategy at his A/C home repair business, Climate Control Experts, in Las Vegas, he added a twist. His classic “Good” offer would have been a “value” A/C unit that was inexpensive but good quality. His “Better” would be the same unit with an annual service contract and his “Best” would be a better, more expensive unit with the annual service contract and a “priority repair” status if something went wrong with the unit at any time.

Notice that his “Better” and “Best” options included a service contract that generated recurring revenue for his company. Through labor resource planning, his service revenue became his most profitable revenue source and when it came time to sell his company, the buyer valued his recurring revenue at 5x more than his one-time revenues from the sale and installation of A/C units.?

What’s your “Good, Better, Best” pricing strategy that incorporates recurring revenue? Don't have one yet? It's time to start!

2. Cost Cutting During Recession Can Turn into Business Revenue Generation:

Amazon’s most profitable division, Amazon Web Services (AWS) was never on the company’s original business roadmap. Amazon’s e-commerce business required loads of servers and the company got so good at maintaining hosting facilities that it started to rent them out to other companies, eventually developing a “pay-as-you-go” cloud platform that became “Amazon Web Services.” In 2021, Amazon’s e-commerce “cardboard box” business” generated $20 billion in profits on $469 billion in revenue while its AWS division generated $26 billion in profits on only $74 billion in revenue.?What a way to thrive during a recession!

How can you turn your current cost centers into business profit centers? Here are some ideas:

• Can you acquire your vendors?
• Do you have extra space you can rent out to another company? Or a roof you can lease out to telecom companies?
• Do you have equipment that other companies can use?
• Can you turn your tech investment into digital products for others, even your competitors?
• Can You Turn a Service into a Product?
• Can you provide your expertise as staff to other companies (a staffing agency model)?

3. Don’t Forget the Power of Pricing Strategy…Again, with a Twist

While you’re turning static revenue into recurring revenue and costs into revenue, don’t forget that the most direct path between two points is a straight line. If you want more profit, you need to raise your prices. The math is simple:

If you raise your prices by 10% and your profit margin is 10%, then every $1 price increase drops $1 right to the bottom line! Afraid to pull the “price increase” trigger? Think about this: using the same math, you can even afford to lose 10% of your revenue and see no effect on your current revenues. But everyone has already raised their prices in the face of our inflationary environment, right? Not quite. Think about different pricing strategies that can help you raise prices:

• Cost-Plus Pricing: a pricing method where a fixed percentage is added on top of the cost it takes to produce one unit of a product (unit cost)
• Competitive Pricing: a pricing process of strategically selecting price points for your goods or services based on competitor pricing in your market or niche, rather than establishing prices solely on business costs or target profit margins
• Premium Pricing: a strategy that involves tactically pricing your company's product higher than your immediate competition
• Bundle Pricing: a strategy where companies combine complementary products/services together and offer them at a single (often reduced) price
• Freemium Pricing: where a company offers their basic products or services to users at no cost and then charges a premium for supplemental or advanced features
• And, of course, as described earlier, Good-Better-Best pricing.?

How to Create My Own Recession Proof Business Strategy?

The participants in the Birthing of Giants Fellowship Program work closely with experts in pricing alongside peers in other fast-growth industries to generate hundreds of ways to implement these strategies using our “One Year From Today” methodology. This 5-day program regularly generates six- and seven-figure profit boosters for the 100 business owners that are chosen to participate each year.?

Join Birthing of Giants for a free webinar on 3 Recession-Proof Business Techniques to Increase Profits Immediately - taught by both experts and Birthing of Giants Fellows on 12/15/2022 at 1 pm EST.

Register Now and Save Your Spot on the Recession Proof Webinar!