Starting a business is a daunting and confusing task in itself but in a tough economy, things can become even more difficult, requiring would-be entrepreneurs to triple their efforts. That’s partly because a tough economy puts pressure on credit markets, and potential customers are more careful about how and where they spend their money.
As a business owner, you need to be strategic, smart and careful about the steps you take to start and grow your business. Building a business in a tough economy or recession isn’t impossible, but it can be difficult. Recessions are notorious for closing the doors to new and established businesses alike. In this article, we’ll give you steps on how to start and grow your business in a tough economy or recession.
How to Start and Build a Business in a Tough Economy
Choose the right business
Not all businesses can withstand tough economic conditions. Some businesses thrive in a recession While others struggle to keep their doors open. If you haven’t started a business yet, you should take the time to figure out if your business idea makes sense in a tough economy.
But what if you have already started your business? How do you grow your business during a recession? There are several strategies companies use to survive recessions. One of them is to act like a recession-proof business.
Basically, it means understanding your customers’ struggles and doing your best to offer them what they need. This could be offering deep discounts or offering alternative products that are more affordable. If you’re wondering what types of businesses do well in a recession, check out our article 13 Recession-Proof Businesses That Thrive in a Down Economy.
Plan well and get into a good financial position
During economic expansion, there is no shortage of capital available for new and established businesses. Banks and investors are always looking for a business to help fund in hopes of a huge return.
But the money wells dried up during the recession. This doesn’t mean you can’t invest or get approved for a business loan. This means that it can be more difficult to do.
A really good business plan, a proof of concept and good personal credit history will go a long way in finding financing for your business. Before seeking money from an institution, an investor, or even family and friends, make sure you can handle the funds responsibly.
Run as far as possible
When an economy is slow, it usually means the money supply is tight. This means that finding finance to run your business is going to be challenging. That’s why it’s always better to use less money to run your startup. Paul Graham, popular startup essay writer and founder of Y Combinator, hit the nail on the head during the 2008 economic crisis when he wrote: “Why start a startup in a bad economy?” In the essay, Graham reinforces the idea that to survive in any economic climate; Run cheap. Here is an excerpt from his essay.
Remember that just because your sales are down or financing is more difficult, it doesn’t mean you should close your business. The economy expands and contracts so if you can hang in there during contractions, you’ll be in a better position to take advantage of expansions.
Use alternative methods to market your business
It takes ingenuity and creativity to build a business when the economy is bad. Therefore, you must think of new ways to stay ahead of your game and your competitors.
In a tough economy or recession, businesses that innovate and adapt usually do better throughout and after the crisis is over. In your business, it is important to be creative when marketing your business. Offline marketing and using a combination of social media and YouTube is the best and most economical way to reach customers.
Think of fun ways or campaigns to promote your product to your target customers. Go to Youtube, Twitter, TikTok, Instagram and start a campaign, or better yet, run on one that’s already running.
Once you’ve got some online momentum, you need to go offline to stay visible. Go to local business meetups, give talks and talks, and be an active part of your community to make sure people are aware of who you are and what your business does. The important thing is to ensure that you are visible and active so that your brand gets exposure to your target audience.
Manage your expectations
As I’ve said before, when the economy contracts, money is tight. That’s why it’s important to manage your expectations and work to properly utilize your capital to manage business expenses. Eliminate wasteful steps, unnecessary protocols, or procedures that add no value or waste time. Your employees can use those extra hours to focus on your company’s core mission.
Your financial projections and key performance indicators need to be adjusted for economic conditions. This doesn’t mean you have to give up the idea of growth in exchange for survival. However, this means that you redefine what growth looks like for your company.
For example, you may have a goal of expanding your team from 25 to 50. But does your team need to be full-time employees or can you use sites like Upwork and Fiverr to get the work done? Remember that before you can thrive you must first learn how to live. It is important that you learn How Successful Companies Survive Recessions And practice the same principle.
Leverage free and low-cost technology, software, and tools
As a new business trying to find its way through a recession, it’s important to find the most economical way to do everything. When it comes to things like accounting, online marketing, customer management, etc., there are many free and low-cost options that you should consider using when you’re just starting out.
Wave App and ZipBooks are good examples of capable accounting software that are free to get started. As your business grows, you can choose to continue using them with upgraded features or move to a more hefty tariff.
Starting a business during a recession is not always ideal. But if you take the right steps and go into it with a game plan, you’ll increase your chances of success. Take the time to choose the right business for you and your financial situation. Then, grow that business by carefully investing in things and being innovative. Just because a recession cripples the economy doesn’t mean you can’t win. If you’re already in business and want to know how to weather the storm, check out our article How Strong Companies Survive the Recession: 7 Strategies You Need to Incorporate in Your Business Today
This article was first published on 6 February 2016 but has been updated and expanded.
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