Starting a Business in a Down Economy

An economic downturn undoubtedly provides some challenges to businesses of all sizes. But it would be a mistake to let negative headlines prevent you from following your dream of starting your own company. In fact, many experts suggest that launching your new business during a down economy can actually be a savvy move. Investing in small business software will help you get off the ground.

Why start up in a down economy?

Consumers are choosier. In a time of plenty, people may be less likely to bother looking around for better deals. In contrast, an economic downturn inspires shoppers to think hard about their choices. This tendency can present a golden opportunity for the small business owner who knows how to market their product to budget-minded consumers.

Challenges make your business stronger. A small firm that has learned the ropes during a down economy sets itself apart and business should thrive when the situation picks up. Chances are you will have learned some valuable lessons that will continue to provide benefits in the future.

Underemployment leads to entrepreneurship. What better time to start your own business then when job cuts are looming across the country? In an economic downturn, creative individuals tend to be motivated to strike out on their own. In addition, they can often find like-minded and talented individuals to work for them.

Success stories abound. At first, it may seem intimidating to think about starting up in a recession, but experts cite a number of successful businesses that were launched during difficult economic times. Examples include Hewlett-Packard, which started up in the Great Depression, and Microsoft - launched during a recession in 1975.

Tip 1: Choose a low-cost idea

Money is always a concern when starting a business, but the impulse to be thrifty may be more acute during a downturn. When you are creating your business plan, remember that some companies cost more to get off the ground than others.

Consider ways you can reduce the start-up costs associated with your business, such as renting equipment instead of buying or searching out second-hand furniture. You may also want to think about working out of your home instead of renting a separate property. You should also consider investing in small business software to keep track of revenue and expenses.

The good news is that suppliers may be more willing to make discounts or strike a deal in a challenging economy. Also, commercial real estate may be going for less than it would in other situations. Don't be afraid to negotiate for lower prices.

Tip 2: Don't skimp on marketing

Marketing may be one area that is tempting to scale down when you are thinking about ways to be frugal. But research has shown that during a challenging economic period, small businesses are better off increasing their spending on marketing, rather than cutting back. This can be particularly crucial for a firm that is just getting off the ground.

As stated earlier, in a down economy people are likely to be more selective about where they spend their money, so this can provide the perfect opportunity to target your marketing efforts aggressively and pointedly at your customer base. Give them a good reason to choose your firm - a perfect selling point during a recession would be value.

Tip 3: Put customers first

Because consumers are choosier in a downturn, it is essential to focus on providing them with the best possible experience to increase the chances they will become repeat customers. In this climate, stand-out customer service may mean the difference between someone choosing your company or a competitor.

Make sure your customers know you care about nurturing their business and will cater to their needs. You can conduct market research to find out what aspects of a product are most important to your base and aim to meet their requirements. Flexibility is key - if you don't have what someone needs, don't hesitate to offer an alternative suggestion.

You may also consider creating a loyalty scheme that will encourage customers to return to your business - and recommend it to friends and colleagues as well.

Tip 4: Seek out other entrepreneurs

In this or any other economy, remember you are not alone. There is a wealth of advice out there for business owners in your position - it is up to you to seek it out.

Look out for online discussion groups and websites where entrepreneurs gather to chat about their challenges and offer solutions. Similarly, you may want to seek out your local Chamber of Commerce, a state or local business incubator or industry groups that can help support you as you launch your dream.