Starting a small business comes with its fair share of challenges no matter the state of the economy, but starting a business in a bad economy can feel like even more of a marathon. That being said, it is still very possible to start a great small business in a down economy and in some cases, it means that you have a tighter handle on your finances and a better business plan.
If you are thinking about starting a business in a depressed economy or times of economic instability, here are some things to keep in mind.
1. You Can Be Successful
Recessions are challenging times for individuals and businesses, but you can definitely be successful in a down economy when starting a business due to a few things:
- Less competition: A lot fewer people tend to start businesses in a recession so if you are determined and focused, you likely will not have to compete with as many other businesses in a down economy.
- Things are cheaper: Many overhead costs are less expensive in a recession. Things like rent, furniture, and materials are likely to be available to you at a discount.
- Customers are likely to stick with you: Customers that find you during a recession are more likely to be loyal for longer. This is especially true if you can provide goods and services at a competitive rate to other businesses.
- Other businesses limit innovation: In recessions, a lot of established businesses tend to stop innovating, giving you the space to innovate and take some of their market share.
2. Keep Financing Top of Mind
Before you apply for any loans, have friends, family and trusted advisors look over your business plan. Make sure it is rock solid and that you haven’t missed anything. Some good people to review your plan include: friends who own their own business, loan officers at a bank you do business at, or an accountant (but don’t forget to get a price estimate for reviewing the plan with an accountant).
In addition to securing financing, make sure you have a backup plan and a second backup plan in case you don’t hit your initial revenue projections. You will also want to build up six to 12 months of cash reserves and budget carefully. You want to make sure you can pay your rent, insurance, utility bills, and food costs. Also take time to gut check your current bank balance to make sure you are ready to take the jump.
3. Don’t Forget to Market Efficiently
Marketing is a key differentiator between successful companies and companies that don’t make it and this is even more true in a bad economy. You want to find your niche when it comes to marketing. Take your customer base and slice them up into smaller and smaller segments so you can zero in on your customer profiles. This will help you more efficiently market your business to each sub-category
You should also be keeping an eye on your competitors. What is and isn’t working for them? How is their messaging being received? How can you adapt the things that are working for them to your business?
Try to dedicate 3 to 6 hours a week to marketing. Half of that time should be spent on active deployment and tactics and half on research and analysis.
4. Start Small, But Have An Expansion Plan
Starting small is always a better option in a down economy. Be as efficient as possible with your choices about locations, staffing and more, but make sure you have a growth plan. Keeping things affordable and agile, will give you lots of flexibility to grow while making sure that you keep things easy to manage while you are getting started.
5. Embrace Technology
Technology can make a monumental difference when you are starting out. A few things to keep in mind:
- Expand your market by selling online
- Try email marketing instead of print marketing
- Get ideas from fellow entrepreneurs by following online blogs and news sites
- Optimize your website’s SEO to get more hits on search engines
- Consider podcasts and webinars to reach more people
6. Keep Your Costs Low
The number one most important consideration when starting a business in a down economy is making sure that you keep your costs as low as possible. There are a lot of creative ideas that you can use to keep them low, such as:
- Using the economic situation as leverage when negotiating rents, equipment costs and more. If you can prove that you can pay on time and in full, you might be able to get better rates.
- Buy supplies from businesses that are closing or need to reduce their inventory. This is especially helpful with technology.
- Online comparison shop for the best business credit card so you can maximize your rewards, points, and perks.
- Find a bank that meets all the needs of your small business. Make sure to consider if you actually need a bank with brick-and-mortar locations or if you can keep things online.
Starting a business is exciting and hectic all at the same time and starting a small business in a down economy can give you some unique benefits if you plan well. In some cases, starting in a recession can make you even better equipped to grow and succeed in the future.