Starting a business during a recession seems such a silly thing to do. You may have no other choice if you are sitting at home with your redundancy cheque. Or your entrepreneurial spirit may have been stirred up. Disney started during the recessional period of 1923-24, HP started during the Great Depression and Microsoft during the 1975 recession – so it can be done. Here are a few pointers for you.
Think Positive: Don’t let the doom and gloom get you down. Think that you are on an adventure that is going to make your world much better.
Work Hard: Getting a business started is hard work in the best of times and a recessionary period is not the best of times so be prepared to work hard – very hard.
Good solid Business Plan: Be very detailed in your planning and almost pessimistic on your forecasts. Ensure that you are able to become profitable within a year or two at the most. Design a lean company that can be easily up scaled when the better times come.
Research your market well: Make your market research very detailed and ensure that any data you use is tailored to these more difficult times. Confirm that you know exactly what people need (as opposed to want) and how you can meet these needs.
Understand your risks: They will be different and more prevalent. Ensure you have good contingencies to meet and overcome them.
Need as little cash as possible: Start your business small and test the waters. If possible, try not to need funding as this will be difficult to obtain and is one less problem and stress for you.
Lease or borrow, not buy: Keep your costs and your risks down by keeping your start up costs down. Don’t buy anything unless you have to. Borrow from friends and your home if you can. Use a home office rather than rent an office if possible. Many large corporations started in sheds or on kitchen tables – including all those mentioned above. It is becoming more and more acceptable to use a home office now.
Good strong branding: Ensure that your brand meets the needs of those in a recession. You will note that many supermarkets have changed their branding by bringing out low cost/good value ranges.
Very high perceived value: In recessionary times people are looking for bargains. Design your products and services so that they have a high perceived value at a low cost. Make your customers want and need your offerings. In your marketing sell the benefits and lifestyle that they will accrue by using them. Look at how more experienced companies have changed their marketing.
Route to market: Look at different ways of bringing your products to market e.g. use direct sell, mail order, kiosks, party planning etc. instead or opening a retail outlet.
Scale your products to a recession budget: Review what you are offering and make changes so that the product and the price are suitable for a reduced budget and a reduced wish to purchase. This may mean offering tasters of larger items and then building an upward product funnel for the better times. If you are providing services consider a few seminars and then up sell your bigger services. If you are offering large items then consider either breaking them down, or if this is not possible, leasing instead of selling or even just offering repairs or maintenance.
Scale your prices to a recession budget: Similarly your prices should reflect the market ability to pay. This might mean offering better terms, but definitely means getting the best wholesale price you can or the lowest manufacturing prices. If you are consulting, offer on-site seminars rather than use a hotel. Scale down your business costs so that you can cut your prices as much as possible.
Provide good quality products and understanding services to keep them coming back: Build loyalty to your company and profits so that people will stay with you rather than jump to your competitors. In a recession people are very price sensitive but they still want good products and service.
Pay commission rather than salaries: Keep your costs down by paying as much as possible in commission. Help your staff make sales by providing quality products, good marketing, great adverts and appropriate training then incentivise them to sell. Do it yourself as much as possible.
In a recession, it takes a lot of hard work to get a business started, but if you are prepared to study hard, design a robust business model and work smart you should have a lean, robust, business ready to make a great deal of profit when the recession ends. Good luck.