Starting a Business During a Recession: 5 Things to Consider

Some people might think twice about starting a business during a recession . Economic downturns are not known for business growth. It’s mor...

Some people might think twice about starting a business during a recession. Economic downturns are not known for business growth. It’s more a time of reduction in activities and a loss of expendable income. However, even in recession, people will always need services and products.

Recessions can be tough but they can also be an incredible opportunity for a startup business. With many existing businesses buckling under financial strain, a fresh new approach from a new player can be just the tonic the economy needs.

Not only that, it could be just what you need to do. Being in control of your own destiny is uplifting and exciting. Your own business can be a ray of sunshine and hope in a time of financial hardship. Working for yourself can be a challenge but also a welcome release from the shackles of working for others.

Five Things to Consider When Starting a Business During a Recession

Having made the decision to grab the business bull by the horns, there are 5 important things to think about before you take the giant leap into self employment during a recession.

#1 What Business Should You Start?

You can start any business during a recession.

However, being in an economic downturn will make some business ideas more of a challenge than others. With a limited supply of expendable income, the focus and spending habits of your customers will change. In order to get up and running, your business must change to match.

Consider what it is you have to offer. Is it something people need? Or is it a luxury they may want? There’s a whole world of difference between the two. A trip on a speedboat across the local lake might be great fun but, if it costs more than a week’s groceries, buying food will win every time. People need food for basic survival. The speedboat trip is something they might want but can do without until the good times return.

If speedboat trips are your business, you must find a way to make that venture a need. What else does it offer? Instead of selling speedboat trips, can you adapt to give people something they will find useful in the new reality of low employment. Like a new skill for instance.

Starting any business in a recession is tough. To be successful, your business must take the needs of your customers into consideration.

Think about your location and how the recession has impacted the people around you. What can you provide for them to make their lives easier? The key to any business, in or out of a recession, is identifying a need and supplying the solution.

#2 Attracting Your Customers

There are three things to remember in a recession.

Firstly, customers love quality service. Secondly, they also like to be made to feel special. If you can offer them both by creating the best customer experience they have ever had, they will flock to your business in eager anticipation.

Actually deliver on your promise of a service that’s second to none, and they will be singing your praises to all their friends.

Thirdly, keep it simple. If you can’t give them the Earth, don’t promise you can. Customers do not like being ripped off. Especially not in a recession when finances are tight. Only offer what you know you can successfully deliver. Otherwise, customers will be running you and your business down to all their friends. And their friends’ friends.

In a recession, that’s one ever increasing downward spiral you can do without!

You’ll also want to consider how to attract customers through your logo design, website and social media. Once you decide on your business one of the first things you will need is a logo design and online presence. Most likely you’ll have plenty of competitors and you’ll need to stand out from the crowd. A quick affordable way to buy a logo design is by using an online logo maker or you can go the traditional route and hire a logo designer. Whatever you decide, make sure your logo is a powerful one.

#3 Value For Money

Recessions can be a great equalizer. Whether it’s a large corporation or small Mom and Pop business, each organization will face difficulties in economic crashes. Most of which will revolve around the cost of products and services.

Most businesses are set up to make an income for the owner and their family. When things are going great, excess income can create profit leading to more wealth for the owner. In times of recession, profit margins go out of the window. Owners’ income reduces as they invest more personal funds to support the business through periods of low customer engagement. Sometimes, it’s hard to break even.

It’s a catch 22. The more funding invested into a business struggling to survive, the less expendable income available to purchase goods and services from other businesses. Creating a knock-on effect throughout the marketplace.

A recession is one of the hardest economic challenges you will ever face. You need to lower your expectations. You won’t be able to charge your ideal price whilst in the midst of financial strife. Customers need a bargain and are looking for value for money. Their hard earned cash is in limited supply. They want to spend it wisely.

As the new kid on the block, you need people to take a chance on you over a company that has been going for years. A low cost, budget friendly price is your key to opening the door to business success.

Keep that price consistently low throughout a recession, the more likely your clients will become repeat business.

The longer you can keep trading, the more chance you will have of surviving well after things have picked up. By the end of the recession, you will be a known brand with a quantifiable history of good quality at a reasonable price.

#4 Keep Overheads Low

As a new business starting up in a recession, you need to avoid an over reliance on finance or credit by supporting yourself. The ability to self-fund plays an important role in ensuring the success of your business when times are good. During a recession it’s essential.

It can be tempting to take on too much when you first start out. That top of the range multi-user computer system with built in VOIP switchboard capabilities sounds great on paper. Coupled with the integrated security system and ability to bar entry to anyone without an ID pass, it’s an offer too good to refuse, right?

Well, in reality, if you are working alone from your house, all you really need to start up is a cell phone and a laptop.

When a business is just starting out it’s important to keep overheads down. A fully integrated computer system in a high priced office complex may be a great status symbol for your business. But, it’s going to cost you a fortune. If you don’t get any work in, that money will be coming out of your own pocket.

One of the best ways to ensure financial self-reliance is to set a budget. And stick to it. Calculate how much you need for basic daily business costs. Make sure you can cover those costs from your existing funds. To help with the startup phase, ask customers for a deposit or for payment up front.

The more you can support yourself, the less debt you will saddle yourself with. The less debt, the better your chances of surviving in a recession.

#5 Employ Local People

Recessions and redundancy work hand in hand. Usually the first thing a business will do to cut costs is reduce staffing levels. This creates an increase in unemployment for the local area. Local people losing paychecks is bad for the community.

It’s great news for you though. With newly unemployed skilled workers ready and waiting for the next job opportunity, you’ll be able to tap into a valuable resource of talented individuals to help your business shine. Better still, creating jobs for locals will help you win over the community. They’ll be more likely to give you a call when they see you are supporting them.

Starting a business during a recession can be more than a little bit challenging. It could also be the best thing you ever do!