TEA 240: 3 Things to Do When Your Business Hits a Slow Season

Introduction to Slow Seasons

0:00slow seasons in your business are just inevitable. It's just part of business. And so the question isn't like when or if they're going to happen, but rather when they're going to happen. And so in this episode, I want to talk a little bit about what do you do when this actually happens? And we get to talk about this through the lens of not only our own business, because we've been in business for almost 13 years with the e-commerce alley, but through the lens of hundreds of businesses that we also get to work with, right? So we see ebbs and flows seasonally with so many different e-commerce businesses. And we have good ideas of when everyone's going to

0:34experience it just based on the industry that they're in. Some people, Q4 is really the best. Actually, I'd say that's a majority of people, but other people, it's actually the worst. So if you're a golf brand, you probably do really well in this summer. If you're a sunglasses brand, you're going to do really well in this summer, but Q4 isn't going to be as good as summer. And so it's not if you're going to have a slow season, it's when you're going to have the slow season. And what do you do within it? And so we're recording this episode because at the time of recording this episode, we are going, we're starting to head into summer. And I know for many e-com brands out there,

1:10summer is the summer slump. All right. It's going to happen for many of you listening or many of you watching on YouTube right now. And because we're heading there, especially for a lot of niches like quilting, crafts, home decor, some apparel, you're really going to, really going to feel that. If you sell snowboards, you're really going to feel it. You're really going to feel it. For all of you e-commerce brands that sell snowboards. If you sell like jackets and long clothes and you don't sell, you don't have anything for like warmer weather, you're really going to feel it. And so we're kind of starting to see this across

1:43clients now. It happens every year. We go into spring and, and then we start pushing a little bit into the summer and then like you start to see it. So I, we're making this episode because the danger isn't the dip itself that's happening. It's the decisions that you're making or you're not making during those days. That's really good. That's the most important thing here.

Managing Slow Seasons

2:02And so we want to give you three things to focus on during the slow season and the mindset shift that will kind of help you as you go through any slow season, because we're not immune to this. We experienced this ourselves. And I would say that how I responded in the first five years of business is a lot different than, you know, the previous eight years after those first five years. And, and so when we're going to go through three things, a number one is going to be how to manage your ad spend. So you don't bleed cash. Uh, during that number two, we're going to talk about where to invest your time and budget so that you can come out of the slow season stronger than you actually

2:34went in. And number three, we're going to talk about the mindset trap that makes a lot of people do dumb things. A lot of, a lot of founders make really bad decisions when there's chaos and they'll, and so what we'll talk through what those kind of look like. And this actually stems from a conversation that I had, and I'm sure you have them, but we have, we have, we work with a lot of econ businesses and we do coaching sessions on pretty much every day of the week. And I was on a session with a quilting business and he's in, and he's in the quilting itch. They, in the last year,

3:06when we first started working with them, they have, they're up over 600%. That's wild. March over March. I remember when they came in. Oh, and then they, they started really cranking multi six figures a month. Like, so they're just, they're awesome. They did a great job. They put in a lot of work. And so he came on this, he came on this call and he says, Josh, I'm freaking out. We've been chasing our tail for months. Just be just trying to main, keep up with fulfillment because we have so many orders coming in and now he's not hemorrhaging cash. He's not in a really bad position. His just performance of ads is not as what it was. He was running

3:40like threes to fours, three to four row ads, which is crazy for him on the front end. And then now it's dropping down to the twos, mid twos. So he's not losing money on acquisition, but he's just not as profitable. Makes a lot of sense. Right. And so he comes in and he's like, what do I need to do? I'm like considering exploring new options, new products, new this, new that. And you know, he's up still 600% year over year, but he's still going to experience the dip. It's just, it looks a little bit different. The numbers change, but you still experience the dip. Right. And, and so I'm going to give you three things that you could

4:10do. Number one is you need to lock in your ad spend percentage. So in this client's example, he was $35,000 a month or 35,000 the year before to cranking over $200,000 a month. And then this dip is, he's going to come into it. Now he's not backed out of 35 K by any means, but it's a lot lower than his peak season or his peak moments. And especially cause quilting we're going into the summer. Right. And most people think when revenue drops, we need to stop ad spend altogether. We need to like shift focus to other things. And so I told him, number

4:46one, this is non-negotiable in any business, in my opinion. And that is you have to commit a percentage of your revenue, your revenue to advertising. You have to commit a percentage. Now what that is, we have a couple of rules of thumb. We recommend that you take your gross profit margin. So go grab a profit and loss statement. This is like, I do, I teach a session to our clients at a workshop called the five minute CFO. Here's all you need to do. Take your gross profit margin, figure out what that percentage is. Most people are 50 to 60%. If

5:16you're less than 50, you need to try to get your gross profit margin up, probably go increase pricing. But most people are 50 to 60%. He was 68%. All right, great. 68% margin, gross profit margin. We then want after ad spend and after marketing costs, we want to have 30% left over for operating profit and taxes. And so we take gross profit margin minus ad spend equals 30. And then the gap you have between that is the maximum you can spend on advertising and marketing. Now he

5:49is 68%. So what does that mean? Well, it means that if he wants 30% left over to operate, he, the max he can spend on ad spend percentage is 38%. Now, the reason we like percentages is because it doesn't matter what your revenue is. A percentage is a percentage. So if your revenue is $100,000 a month, not 200, you still spend max $38,000 on ads that month. If it's 200,000, you spend max $76,000 in ads that month or in marketing that month. And so that's thing. Number one, when you hit a slow season, remember that right now you are planting seeds that

6:24you will harvest later. And maybe it's less fruitful in the moment, but it doesn't mean to stop doing it. If you pull back too much, and this is the, this is the big mistake most people make. Yeah. They pull back so aggressively. They stop altogether on our performances like break even or it's worse or whatever. And they kill everything altogether. And then you feel that a month from now, you feel that too much from now. And then it puts you in this, this vicious cycle that your mind is taking over. And so control the controllables and ad spend percentage is one of the most controlled things you can actually do inside your business. And so do that. By the way, breezeway helps with

6:57this. If you haven't checked out breezeway, go to breezeway.co. We'll have a link in the description. Breezeway is a great tool that like it integrates in, in the CEO dashboard, it pulls in your like meta, your Google ad spend. It pulls in, I think we're integrating with Amazon soon enough, but it pulls in all of your different platforms. And then it literally tells you a running day, 30 day ad spend percentage, because we know how valuable it is to know that to make decisions. Yeah. I actually just had a situation yesterday on a coaching call where I was looking at an ad account of someone and they had some ads. I went and looked at like a long,

7:30larger time span. They had some ads that were like far and above profitable for them. But when they were looking at smaller time spans of, of like seven to 14 days, those ads weren't looking very good. Unfortunately, it was, it was primarily, we believe because of meta's bad days, you know, meta just being on the fritz recently and they were killing these, these ad sets that were actually producing really, really profitable purchases for them. And this is just an example of where making decisions without either the full story or in this situation where you, you just start

8:05hitting things or you touching things or you're, you're doing things really instinctively, whether it's killing budget or killing ads that were once profitable for you in a slow season, doesn't mean that all of a sudden those ads just stopped working or your ad stopped working. You have to look at it holistically and say, Hey, this might just be a bad week. It might be a bad month. And I have to, I have to remember that it's going to come back.

Locking in Ad Spend Percentage

8:29Yeah. Yeah. So make sure that you control, lock in your ad spend percentage. That's, that's kind of a thing. Number one thing. Number two is to plant seeds that you'll harvest later. So if you know that right now buying demand is lower, any efforts you do from an acquisition standpoint is generally going to be less profit on day one. It doesn't mean you should, you should stop advertising. It just means control it and you're just going to expect less performance. So what do you do? Well, you need to plant seeds that will,

9:00you'll be able to harvest later that will amplify the effectiveness down the line. And this is particularly going to apply once you hit September, October, all the way through Q4, you're really going to reap the harvest. And so you need to plant seeds. Now there are three things I do to plant seeds. The first thing is lead gen. So if you know that right now buying behavior goes down, you sell quilts, right? Not as many people are doing quilts. So what if, and I told, I told him this, I said, what if you had an educational thing that you offered or something that you, some kind of a lead magnet that you did and you shifted 15 to 20% of your budget

9:35toward lead gen campaigns? Because if you can get sub $1 leads, which most of the time you can, that's the benchmark sub $1 leads. If you get 70, if you spent, if you got 75 cent leads and you wanted 5,000 new leads, it'd cost you $3,750 for 5,000 new people on your email list that are going to get your emails. You're going to warm them up. And then by time, warm them up, no pun intended until you get to Q4 and you know, you'll make that money back, but it's a long harvest. That's what I've learned about lead gen based off. It's a pretty, it's like a six to 12 month harvest, but you'll have a bigger Q4 if you plant now and you have to change your expectation

10:08based on that. So that's seed. Number one, start considering lead gen seed. Number two is organic content. Slow season is a great time to start or ramp up your organic, whether that's short form content, educational based stuff. You get into YouTube. Uh, I don't know if I know many podcasts for e-commerce businesses. Maybe don't go do that. Maybe find a podcast and go on. I was, I was talking to him. I'm like you, they do, they have so much stuff and like they can do so much educational stuff on quilting because that that's their own niche. And he was, he lit up. He's like,

10:43we've been our YouTube channel. We haven't done a whole lot on it and we really want to, and we have competitors are doing, I said, great. That is a great spot to go. Begin doing content. You're going to plant those seeds and you're going to harvest them a lot later. And then come the key though, is to commit to a volume that you can maintain when the busy season comes back. Don't be like, I'm going to stop everything. Go to like daily reels. And then as soon as things start picking up, you just stop because you organic needs that consistency. And, and so create a cadence that you can control. But I see number two is organic

11:16content. And the best part is here's how I do it. We, we basically have reels going out every day for us. But every, almost every reel that I film also becomes an ad. So it's like dual purpose. We have, I'm planting seeds organically, but those are also going straight over to the paid, the paid side as well. And from a quilting standpoint, my wife, Bree just got into quilting and she is consuming organic content. So I think that would work really well for them. Yeah. It's like almost every time I look at her, she's watching some video on quilting. I'm like, I did not know there was a market for this, but she is now in that market.

11:49Yeah. I don't know. And she will probably buy from whoever gives her the best information. Yeah. There you go. A seed. Number three to plant is product development. I think this one's underrated, but because you have like this breathing room in this slow season, this is where you can really start doing the things that you've wanted to innovate on, improving existing products, expanding products into adjacent, but relevant product lines. And this will just really prime you going into Q3, Q4, because during Q4, I mean, when you, when you add product launches

12:20in there, it's really helpful because then nothing is, it's not discounted. It's just, it's just new. And since it's new, it allows you to just create a lot more profit margin when the buying behavior is a lot higher. And so product development is seed number three that I would plant. So first thing to do is lock in your ad spend percentage. Second thing to do, plant seeds that you're going to harvest later. Now, third thing to do, and this is going to be more mental

Maintaining a Healthy Mindset

12:43is just don't let fear drive the car. It's really easy to go down the, the, the mental rabbit holes of nothing is working anymore. And like, this is where I once was in November. We had a record month. Why aren't we doing that every single month? And it's like, well, that's just because that's how seasonality works. And so the client literally said, I had to write down this quote. He said, it literally, he said, it gives me a heart attack every year, even though I know summer is coming. That's pretty funny. We still feel the feelings. We're human, right? So like,

13:16we hate, we hate it when things start to go down. This is the same thing for us. For us, the summer is slow. Like a lot of, a lot of people are vacationing and stuff like that. And, and we don't sell sunglasses or swimwear. So it's, it's kind of for us, but it's a trap because you know that it's seasonal you, but you also know the numbers will come back. And so you don't want to panic. You don't want to let fear drive because it's going to completely, it's going to completely ruin you. And it'll likely lead you to make bad decisions during those dips. And so what I recommend

13:48is that in this moment, have it, have the expectation. Guess what? We will be slow. And here's a really practical thing to do. Go look at the months of the year and say, go look at your profit and loss. You can look month over month. You could look at a nice chart on Shopify. Just go last 12 months. Look at the three to four months of the year that are the lowest dips. And in those months, just say, guess what? And go, you could go look at the last two years and say, Oh, is this consistent? And if so, then you should say, well, I'm going to expect these to

14:20be my lowest months. So here's what I'm going to do during that month. These three months, I'm going to look at April, May, June, or I'm going to look at like March, April, May, whatever those are. I'm going to look at these months and say, I expect these to be lower months. I'm so excited about those low months. Why first I get to breathe. Second, I get to do product development and projects and put more bricks in the castle that I've wanted to do, but I never have time to when we're busy. So busy is a really exciting thing, but busy is also stressful. Anyone who's listening to this and has experiences experienced this knows what I mean. You get into

14:52Q4. It's so exciting. The sales, boom, things start taking off. Revenue starts pouring in. You're having massive profit months, record months. You're so excited. You're running around like a chicken with your head cut off. All of this stuff that you normally do has gone out the window. Your calendar time blocking has just become a hot mess just because you're literally trying to keep up with the orders. You're so excited by all the cha-chings going off. Yet at the end of the day, you feel stressed. You feel overwhelmed because you know they're like, oh my gosh, I'm running out of inventory. Oh, this just sold out. And so there's this stress that comes with growth and it's like

15:25a good stress, but a bad, it's like a good stress. So you're like happy you're growing and profitable, but you're also stressed out at the same time. And so this is the time where you should set the expectation of, oh, I'm so grateful that we have slow seasons. So I don't run around like a chicken with my head cut off. So I actually can work on the things that will build greater foundation for where we're going. And internally, we call these bricks in the castle. We're always like, oh, that's another brick in the castle. That's another brick in the castle. If your team is not leveraging AI, guess what? That's a brick you should really put in the castle. It's going to create stronger

15:57foundation. Product dev, organic, all these seeds I've talked about are bricks in the castle that you will be able to have a stronger foundation so that when you go to the end of the year and now you have a bigger castle, you've grown, you could actually support and sustain that foundation. And so those are the three things that I recommend doing when you get into a slow season. Number one, lock in your ad spend percentage. You can actually control that. We recommend 15 to 30% of revenue going toward ads, sometimes a little more depending on your gross profit margin. Thing number two is the

16:30plant seeds that you'll harvest later, lead gen, organic, and product dev. And then thing number three is just don't let fear drive. Set the expectations, expect the slowdowns, and do what you need to do accordingly to put more bricks in the castle to prepare you for the next season. There we go. Yeah. I feel like when it gets into this time, this is a lot of what coaching sessions start to look like. And so if you're a client listening to this, maybe just go back and listen to it again,

17:00because we're probably going to tell you the same things on coaching as we just, as we just said here, because it's, you, you just have to, you have to fight through it. You have to hold, hold ground, fight through it and things will get better. Yeah, they will. And anyone who's listening, especially if you're a client, you're brilliant and you have great products and you have good stuff. Some people don't want it. Just demand is lower. And it is really hard though. Like there's the mental, it's just such a mental game. Like business is so mental. The mental fortitude required is so

17:31high. And I believe that's why most people fail because the burden becomes so great that they can't, they can't carry it. And so encourage you, surround yourself with other entrepreneurs, get in some kind of a group, get in a community, something with other people that are going through the same pain so that you can like fight beside each other, lock arms and say, Hey, we're all in this together, but we all know that winters come to an end. Summers eventually come to an end as well. If summers are bad for you. Usually winters are bad, but in e-commerce,

18:02I'm talking metaphorically and literally all seasons come to an end. So you've got this. We encourage you stay focused and we appreciate you. We'll see in the next episode.

18:21We'll see you next time.