Having settled on a title, now I had to fill in the details, so I started doing some research. Fortunately we've got a lot of experience with this, since I've personally started four businesses now and two of those were started during previous recessions. I also researched outside sources, including business publications and news articles. And I found some very interesting information - the consensus among all the experts I researched was that a recession is a GREAT time to start a business, but you have to be careful. You need to think about your business, and focus on what it will take to be successful. But if you do build a successful business during a recession, you'll be well poised for even greater success when the economy recovers. And you'll be in good company: Microsoft, HP, Google, Disney, and McDonald's are just a few of the well known companies who were started during a recession.
Why is a recession good for business? Generally speaking there are 8 benefits that any business owner will see in a recession:
- Wages are lower
- Top talent is readily available
- Office space & Retail space is cheaper
- Used equipment & furniture is cheap and plentiful
- Advertising venues are more willing to negotiate prices
- Poorly managed competitors may fail
- Building a strong foundation now can lead to explosive growth when the economy improves
- Forced frugality and tight focus are common in long-term successful companies
But to be successful, we identified 9 principles for business success during a recession:
- Must have a Strong Business Plan
It's that old adage, if you fail to plan, you plan to fail. A strong business plan will guide your actions as you get your new business off the ground, by focusing on who your customers will be, how you will reach them, and how you will make money serving them.
- Must use Strong Financial Management (i.e. Waste Nothing)
Success in a recession is all about efficiency. Every dollar you spend needs to do it's part to improve your business - there's no room for waste.
- Must Use Smart Marketing
This builds on the financial management principle. Not all marketing is created equal - you want to identify and implement the marketing methods and messages which will give you the most bang for your buck with your target customers.
- Must Use Personnel Effectively
The reason why layoffs are so endemic in a recession is because businesses start taking a hard look at which positions truly help them reach their business goals. As a new entrepreneur it's critical that you hire the right people, compensate them fairly, and manage them well.
- Must Focus on What Sells
This sounds obvious, but it's often forgotten. What sells well during a recession? Every industry has opportunities, but there are five general categories that do better than others when the economy is on the rocks:
a. "Essentials" (groceries, office supplies, internet connections, pc repair)
b. "Discounts" (dollar stores, thrift stores, pawn shops)
c. "Small Indulgences" (spas, candy, hair salons, massage parlors)
d. "Nesting Accessories" (home entertainment technology, some appliances)
e. "Productivity Boosts" (some training, some software & consulting, websites/SEO)
(And it's worth noting that Computer Troubleshooters fits in 3 of the 5 categories!)
- Must Invest In Technology & Tools
Being competitive in a recession means being more efficient and effective than your competition, and that often means better tech & tools.
- Must Network
The best marketing in a recession is one-on-one, doing business with people you know.
- Must Treat Customers Like Royalty
Self explanatory - customer service always goes up in a recession.
- Must Stay Inspired
This one surprised me, but several authors mentioned it in some form, and it makes sense. It's easy to let the daily barrage of bad news get you down, and that's especially true during the challenges of a first-year business. You need a way to stay upbeat and focused on your long-term goals. Mentors, inspirational literature, entrepreneur groups, or franchises can really help you stay positive and stay successful.