5 Important Tips for Starting a Business in a Weak Economy
By Gal Greene
The coronavirus outbreak is causing such havoc to our economy that some experts believe that it will soon lead to a major recession. If you are thinking of starting a business, or in the process of starting one, an economic slowdown could make this far more difficult, by reducing your access to financing and by making sales harder. This, in turn, can adversely affect your entire business plan.
In this article, we will describe 5 tips for adapting your new business to a poor economy.
1. Get Creative with the Financing
A poor economy could eliminate access to the traditional forms of financing that you were counting on to fund your business, or it could reduce the amount of money available to you. Fortunately, there are many alternative means to fund your business. These include:
- family and friends
- business credit cards
- micro loans
- venture capitalists, angel investors and partners
- government grants
2. Think Smaller
Because of the weak economy, you may have to downwardly adjust the income assumptions that you made for your first year in business and maintain a greater reserve of cash (for both business and personal use) than what you had previously planned.
You should as well look for ways to lower expenses. Consider a smaller location, or no location at all. Also, think about hiring less full-time employees, or even replacing them with contractors. You further may have to trim the benefits that you planned on giving your employees.
Finally, you may want to limit the focus of your business to a specific niche, too. This can lower your marketing expenses as well as a variety of other costs, and it can give you a competitive edge.
Always remember that you can expand your operations later once the economy improves and your business is on a better footing.
3. Use the Internet to Its Fullest Extent
By moving your business online as much as possible, you can further lower expenses while expanding the markets that you serve. This means doing more than just putting up a website. It means selling your products and services online and through as many sales channels as possible, and it means marketing your business online, making ample use of tools such as email, podcasts and webinars.
You should also optimize your website for search engines so that it will rank higher in web searches, which will make it easier for customers to find you. You should start a blog, too, providing useful content that will bring customers to your site.
4. Network with Others
Networking can be an important tool for expanding your business. It can lead to not only more sales but also to business opportunities that you may have not anticipated.
You can network with others both online and in-person. For the former, look for online groups and forums in your line of business, and for the latter, find meetups in your area related to your business and local business networking groups.
Finally, consider joining a professional organization in your industry.
5. Negotiate as Much as You Can
It is important to understand that your business is not the only one that is operating in bad times. This gives you the opportunity to negotiate the prices of many things that you would not be able to negotiate otherwise. These things can include rent, equipment, raw materials, supplies and even salaries. You may also be able to buy products cheap in closeouts and bankruptcies.
Depending on your type of business, you may further be able to barter products and services with other businesses.
You do not have to let an economic slowdown ruin your dreams of starting a business. You just need to adjust your plans to the new economic reality.