Top 8 Reasons to Start a Business in a Recession
Recessions, like the current market volatility caused by COVID-19, are challenging times. Uncertainty, job losses, and reduced cash flows can put businesses in dire straits. However, starting a business during a recession doesn’t have to be all bad.
Current businesses are pivoting their models, revising budgets, and forecasting to conserve cash and improve their chances of survival. They are finding ways to thrive. For aspiring entrepreneurs, now may be the opportune time to start a business.
By using a one-page planning system, starting a business during a downturn can help you capitalize on a weakened economy and avoid many challenges faced by existing businesses. To get started, here are eight things to keep in mind for a successful business launch during a recession.
1. Identify new problems
Difficult economic times give rise to new problems. Understand how consumers currently deal with these challenges and identify gaps in existing solutions. Position your business as the superior alternative that provides immediate, reliable, and affordable results. For example, consider offering remote, delivery, or as-a-service variations of products or services.
2. Provide cheaper and better solutions
As a new business with minimal overhead, you have the opportunity to offer cost-effective solutions and win over customers. In a recession, businesses and consumers seek ways to cut costs. If you can save them money while delivering better service or faster turn-around time, you can establish long-term customer relationships.
3. Less competition
A recession creates a vulnerable market for new entrants. Established companies are struggling to survive, making it easier for you to enter the market. Work from home and leverage your lean position to weather the economic storm. Learn from current incumbents’ mistakes to position your business as a better solution.
4. Access to inexpensive supplies
In a recession, companies often sell products, assets, and equipment at lower prices. This can help you minimize overhead costs, from office rent to starting purchases like laptops and printers. Look for vendors, business partners, and suppliers offering discounted rates and negotiate long-term payment deals.
5. Better credit options
While businesses explore relief options, banks and credit card companies may lower interest rates to encourage spending. This benefits new businesses by offering loans with less penalty and higher credit limits. Ensure you have a solid business plan and financial documentation to apply for credit. Consider using business planning tools like LivePlan.
6. Access to investment funds
During a financial crisis, investors often seek promising startups and small businesses. Secure funding by preparing a thorough executive summary and demonstrating your business’s resilience in an economic downturn. Highlight how you cut costs and deliver better service. Present financial plans for post-crisis stability.
7. Limited competition
In a crisis, there is less competition entering the market, giving you a valuable advantage. Focus on taking on established competitors rather than worrying about new entrants. Prepare your business to handle increased competition as the market recovers.
8. Set up for long-term success
Building a business during tough times helps you develop lean planning methods and adapt strategies based on performance and market behavior. By establishing your brand as trustworthy and stable in uncertain times, you position your business for long-term success.
Starting a business during a recession offers many benefits, but it still requires careful planning, testing, and financial foresight. Prioritize a lean plan that can be adjusted as needed. Take advantage of available resources, like business plan samples and templates, to help you get started. Now is the time to leverage economic difficulties and develop a recession-proof business.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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