10 Tips For Starting A New Business Amid A Recession Under Financial Strain?
The economy is under strain right now, but this is also, in a way an ideal time to start working on your business idea because the global society is going through a transformative phase. Whenever there is a transformation of the economy and society, there is an opportunity for growth.
How to Start a Business in Financial Strain?
Without any doubt, starting a business under financial strain is a difficult task to do but then, even when there is no financial strain starting a business is a tough task in itself. So there is a level playing ground here. If you look at most of the successful entrepreneurs you will find out that they weren’t super-rich when they started out, their endeavour began under a situation of strain. So with this in mind, let us now look at the ten ways to start a new business amid a recession.
1- Look for a Niche
It is essential to look for a niche for your business. As mentioned above, the society is going through a transformative phase, and business areas that were considered traditional are fast becoming obsolete. So where you decide to position your business will matter a lot on the success of your business.
Try not to position your business in an area that has no scope because it does not matter how good the idea is, if there is not going to be any market for your idea then you are bound to struggle, but if your idea has a market or if it is such that it can grasp the attention of the potential customer then it will be easier to develop your business.
At present, anything that has to do with digital sphere and fintech is “fire”. So if your idea is linked with these sectors, then you may already have a head start because of the present market interest in these areas.
2- Work on your Idea
Once you have found your idea that you are going to stick with, you will need to develop that idea. Now, this step is the same whether you are under financial strain or not. The importance of proper development of a business idea cannot be stressed enough, and if you are doing this in a period of financial strain, then it makes even more sense to work out your idea completely before you commit to it financially.
Working on your idea involves starting from scratch and building it up. You’ll need to figure out your product or your service, work on your pricing and basically write up a whole business plan, that should have not only the details of product and pricing but also market research data, analysis of competition, funding sources, aim, mission and objective etc
Making whether you are under financial stress or not and it becomes even more important when you are under financial stress because it will give you a clear line of sight about what you want to do with your business. The more detailed your business plan is, the easier it will be for you to obtain funding.
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3- Start Small
Being prudent never goes wrong, especially under the current situation when there is economic uncertainty. Consider this as an opportunity; this situation is tailor-made for entrepreneurs who like to go slow, making sure that they are in control.
There is no need to go big and fast, take your time to see what works out for your business, you can adopt the trial and error method at this stage to see how the market responds to your idea. Take your inspiration from Jeff Bezos if you have to, the richest man in the world started Amazon from his garage.
Under this financial crisis, you don’t really have to set up an office, that’s simply extra expenditure that you can avoid by setting up the base of operations in your home. The expenditure on office supplies etc will be minimal, thereby tying up very little of your money initially.
4- Market Smartly
Marketing is the key to gaining traction in the market; once you have developed your idea and set up a basic structure of your business, you will then need to get the word out of your business to attract your first customers. Under normal situations, a start-up would hire an advertising agency to handle its marketing campaign but listen, marketing for a small start-up is not rocket science.
The founders of Dropbox were strapped for cash at one point, even though they had the backing of some heavy financers in the market, so they simply decided to skip their marketing campaign and instead gave incentives to their existing users to bring in new users. So that whenever any new user was referred by an existing user, the existing user got extra storage space on Dropbox.
This is just an example to show the diverse ways in which start-ups can carry out their marketing campaigns. So try to develop out of the box thinking strategies, you can also use your marketing budget to promote your business on different social media platforms yourself but before you market your product make sure that you have properly identified your target audience for maximum efficiency.
5- Use Technology
Technology has become a necessity for conducting business now if you have a business and are not fully utilizing every bit of technology that is available to you, then you are simply inefficient. Technology can be used to automate almost every aspect of your business, especially for start-ups. You can use accounting software to automate your accounting function by syncing up your bank account with the software to automatically update your books. This can drastically cut down the accounting cost, and then you can outsource the accounting work to online freelancers.
The same goes for invoicing, sales tracking and project management. Every aspect of modern business can be automated, thereby reducing your workload and giving you more time to focus on the core activities of the business. So make sure that you are well aware of the technology that you can use to make your business more efficient.
6- Be Flexible
Flexibility is the most important trait that an entrepreneur needs to have, especially in uncertain times. As stated above, you will have to use the trial and error method to find out what works best for your business and it is entirely possible that your first and second strategy may not work; therefore you need to have flexibility.
7- Avoid Credit
Normally start-ups require credit or initial funding, but when times are uncertain, and an economic crisis is looming on the horizon, it is better to avoid credit as much as possible because at this stage you are not sure about your revenue stream so how can you be sure of paying back the credit? Banks or lenders will take advantage of your situation to give you credit at a high cost, so it is simply better to avoid getting credit till you are certain about your revenue stream and the ability to pay back the loan. It is better to be bootstrapped under current conditions then to rely on external credit.
You can ask your friends and family members to help you out, and in return, you can offer them equity but tying down your business with external creditors is a big no under current circumstances.
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8- Take Second and Third Advice
You may think like you have got your idea worked out quite well, you may be right, but unless you are an experienced entrepreneur who has set up successful businesses in the past, you will need to take second and third advice from someone more experienced.
Never hesitate to take your idea to a mentor you trust and discuss it with them. You will find out that there were aspects of your idea or business that you were not aware of or had overlooked.
9- Keep Expenditure To the Bare Minimum
Assuming that you are just starting your business and you do not have an established customer base yet, it would be ideal and preferred under current circumstances to keep your expenses to a minimum. Remember Bezos started Amazon from his garage, Zuckerberg created Facebook in his dorm room. Elon Musk lived, slept and worked in his office when he was writing the code for his first company. These are all successful business leaders, innovators and frankly movers and shakers of the world right now.
They knew that when you are beginning your business you need to forget everything else and work on your product or service, once you have finished your product then only can you afford to focus on other aspects. So keep the expenses to a minimum and take this opportunity to perfect your product. A good product or service will attract customers, even with bad marketing.
10- Lease The Business Equipment
If you are at that stage where you need to purchase office equipment, then it may be a better idea to simply lease some of the more expensive office equipment instead of buying it. Leasing would keep the cost low and will, therefore, be light on your budget. There is nothing wrong with purchasing the office equipment, but it will come with a high cost, and during the current financial stress, it may not be so wise to commit that amount of money. The money you save through leasing the equipment can be invested in other core areas of your business.
So, these are 10 tips that you can follow to start a new business during this financial crisis. Some people may discourage you from starting a business, especially during this time citing economic uncertainty as a reason. But remember, there is nothing wrong with starting a business during a financial crisis, as long as your idea is good, it will get market traction. Secondly, a financial crisis is in a way the ideal time to start a business because these are times of transformation and if your business can take roots and survive this crisis then it will experience a boom stage as soon as the financial crisis levels out in future.
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