Economic downturns are always hard times for businesses and people in general. They are usually accompanied by companies closing their doors, people losing their jobs, direct hits on cash flow, etc.
Further, the uncertainty created leads to low expenditures and a lower appetite for risk-taking.
However, such times can also provide a great opportunity to start and grow a business. To quote Michael Loeb, founder and CEO of Loeb.nyc, “Moments like these are like forest fires. The blaze will cripple some businesses, but they will also provide the heat to release new seeds into the soil. Many amazing companies have been born from the ashes of economic downturns and market crashes.”
If you are an entrepreneur and you don’t want to “waste a good crisis,” here are three essential tips for starting a business during the Covid-19 economic uncertainty.
Tips for starting a business in an economic downturn
1. Aim to find answers to new problems
Economic difficulties lead to new problems, and new problems give birth to new opportunities. Industry-defining companies take advantage of these opportunities to create a solution that addresses these unique problems. A good example is Airbnb. The company sought to provide short-term living quarters for those who were priced out of hotels during the 2008 recession. In 2009, they received lots of funding and experienced explosive growth.
To take advantage of the crisis, position your business, product, or service to address new challenges in society or the business world effectively. If you had an original idea, try to see how you can adapt it to the current needs.
2. Take advantage of launching during a recession
The unfavorable business climate has made a lot of businesses vulnerable since their established ways of doing business have been disrupted. This has resulted in employees being laid off, businesses selling assets, lower interests, and cheaper credit.
You can however take advantage of this in various ways. The talent pool is currently brimming after millions of layoffs, and so you can easily and cheaply get the right staff. You can also buy cheaper goods and raw materials and take advantage of the lower interest rates to give your business a boost.
3. Position your business for the long term
At the moment, most companies are adjusting their budgets to meet their current needs and reduce costs. However, since you are starting with the present conditions, you can start your business with a solid base to build a lean, mean, efficiency machine – whether you’ve bootstrapped or not. You can easily identify the necessary expenses, and you can have a clearer view of the future and the risks you can expect.
Apart from the business processes, you also need to position your company to be resilient to the ever-growing cyber security challenges. Remote working has presented businesses with serious security challenges, and according to IBM, it has increased the average cost of a data breach by $137,000. To stay safe, create a cyber security plan and secure company data by using a VPN for encrypted communications. For start, you can opt for a reliable free VPN and then upgrade as you scale.
Don’t let a recession stop you
Theoretically, a period of economic disruption is not the best time to start a business. However, it also provides a unique opportunity by shaking up incumbents and providing a point of entry. If you have an idea that people can spend on, put everything together and launch your business. You can then adjust your strategy and business processes based on performance, the market, and consumer behavior.
