10 Start-Up Success Tips for a Recession
Written by Priscilla Y. Huff
You Can Grow a Business When the Economy Goes Bad
Depending on which financial news source and experts you follow, we are either in a temporary economic slow-down or headed for a serious recession as evidenced by a reduction in our country’s domestic production (GPD), rising food and fuel prices, higher unemployment rates, and a troubled housing market. As an entrepreneur, you may question if this is a good time to start a home business, expand an existing one, or wait for better times?
There is no definitive answer, but slow economies impact all ventures, positively and negatively. Savvy entrepreneurs know how to start, maintain, and even thrive in economic slowdowns or recessions. Here are ten of their success tips to help you launch a profitable home-based business or increase the earnings of your present one:
1. Use Your Business Plan to Economize
Consult with financial experts to assist you in writing a start-up business plan or to review your current one for ways to lower your fixed costs and other expenses, or design new tactics to increase your business’ cash flow. Include affordable financing sources and low-cost marketing methods in your business plan you can use to expand or get your business underway. As a current business owner, avoid reacting too hastily to recession news with drastic cutbacks that may hurt your business’ products and customer service and enable your competitors to encroach on your present customer base.
Spend less on supplies and equipment by shopping at used furniture stores or waiting for sales, buying in bulk, or leasing. Explore online auctions and nonprofit sites such as CraigsList.org and Freecycle.org for discounts on software and other technology or for free business-related equipment. Consider bartering goods and services with other entrepreneurs in your network or through barter exchanges. Ask suppliers if they give discounts and how you might qualify.
If starting out, consider operating part-time and re-investing your profits back into your business, or use them to pay down personal or business debts, to save for future expenditures or to apply towards a business loan. Starting a business on the side can also help you from getting into a credit crunch and provide time to perfect your products and services and find your best paying customers.
2. Evaluate Alternative Business Financing Sources
Without substantial collateral or sizable investments of entrepreneurs’ own money, small businesses pose a greater financial risk for established lending institutions, and are less-likely to receive traditional bank loans. Many entrepreneurs turn to creative ways of financing and expanding their ventures:
n Investigating if they qualify for U. S. Small Business Administration (SBA) financing www.govloans.gov/govloans_en.portal including special loan programs for veterans or rural businesses.
n Working part-time jobs, often with the added benefit of gaining on-the-job experience if they work in industries related to their businesses.
n Searching the Internet to find peer-to-peer (P2P) loan programs that match borrowers with individual lenders, who usually lend money at lower interest rates.
n Selling valuables or collectables through online auction or classified sites.
n Borrowing from friends and/or family members (have written agreements).
3. Diversify
Work to develop multiple income streams in the event a client folds or cuts-back on subcontracting. Review your business’ offerings for possible sideline or spin-off products or services you can market to your current customers or to potential new ones. For example, one woman who owned a promotional products business added business coaching for new entrepreneurs in her trade.
To increase your revenues, hold seminars and sell recorded versions afterwards. When customers or clients cannot afford to hire you for long-term projects, offer “how-to” workshops or consulting. They will appreciate your willingness to help them, and are more likely to re-hire you again when times are better.
Explore passive income sources, where you do the work once and sell it repeatedly like book sale royalties or developing and selling business-related products. If your company has been successful, consider expanding it into a business opportunity for entrepreneurs to purchase and operate in other parts of the country.
4. Re-Examine Your Current Target Market
Re-examine the market research you conducted for your business plan to see if the demographics of your target customers have changed or are predicted to change in the recession so you can adapt your business’ offerings to satisfy their latest needs. Use as many feedback sources as you can afford to do such as questionnaires, online surveys, test-marketing, or by directly contacting potential customers with e-mails, postal (direct) mail, or telephone calls.
Then analyze or hire a marketing expert to assist you in assessing the results of your collected data. Look for specific buying trends and how your customers are adjusting their lives and spending in this economic downturn. Develop a unique selling position for your business that emphasizes its benefits like better service, faster delivery, or one-of-a-kind products so customers will buy from you first.
A slower economy may also provide time for you to re-design your business offerings to a previously overlooked group of customers that your initial market research did not reveal. If you need a better understanding of market research and analysis, visit the sites of The Senior Corps of Retired Executives, www.score.org, or the Small Business Administration (SBA), www.sba.gov/services/training/onlinecourses/index.html, for their free online business courses.
5) Show Customer Appreciation
The business axiom that it costs you less to retain a new customer than to market for a new one is especially true in a slow economy. Offer discounts, giveaways, referral reward programs and additional special deals to your faithful customers to show your gratitude for their patronage. Studies reveal that superb customer service is the highest contributing success factor for a company over its competitors.
Review your customer service procedures to ensure each step is client-centered and look for areas that you can improve upon like providing a wider variety of selections or customizing orders. Follow-up all sales for your customers’ feedback and to guarantee they are satisfied. Even if money is tight, economize other ways so you can retain employees with whom your clients have developed a good rapport. Customers like being treated as friends.
Demonstrate your empathy about tight-money times by offering extended business hours, flexible payment options, or discounts for bulk orders and early payments. If you keep your clients happy in down times, they will return and spend more when the economy improves.
6) Market More Often, Not Less
New business owners can expect to spend seventy-five percent of their time marketing while successful entrepreneurs make marketing a daily activity. In recessions, many entrepreneurs mistakenly scale back their promotional efforts when experts say they should do the opposite instead and intensify their marketing activities.
Contact past customers or clients and ask how your products or services can help them at this time. If they do not have a present need for your business’ offerings, remind them you are always available. Ask if you may contact them again in the near future, and for referrals to other companies who might be interested in using your business. Staying in periodic touch with your customers increases the likelihood they will remember you when they are ready to hire again.
Assess your present marketing methods for their cost-analysis and effectiveness in bringing in new business. Challenge yourself to try new marketing tactics such as direct mail or cold-calling.
Make every advertising dollar count and consider doing joint advertising with other entrepreneurs. Take advantage of free or low-cost publicity opportunities and write press releases to announce new business developments, upcoming talks, or your participation in community events. It will increase the public awareness of your business and may lead to feature articles or television spots.
Business owners, who step up their marketing in recessions, have improved survival rates and increased profits. It is up to you to actively find those customers with ongoing promotions and smart advertising. Visit the Ewing Marion Kauffman Foundation’s section, “Sales and Marketing,” for helpful marketing articles and templates (http://eventuring.kauffman.org/).
7) Fulfill Needs in Sectors Affected by the Recession
Monitor business news reports how the recession is affecting specific companies, trends, and buying patterns to recognize potential opportunities for your business. Companies may need consultants for expert advice or to hire contractors to do tasks of former employees. Consumers may want specialists to: help them manage finances; do home remodeling or repairs to save energy; or find new careers.
Recessions often spawn the invention of unusual (and sometimes fun) products or services that reflect current trends and the mood of the country. Entertaining bumper stickers, posters, colorful window painting ads, music, books, fashion items, and other items depicting aspects of everyday life or current economic and political events can help people smile or momentarily forget their troubles. Depending on the image you wish your business to project, put on your “thinking” hat to see what sideline products you can create that your customers can relate to and enjoy.
(SEE also the sidebar in the article, “Selecting the Right Business for Tough Economic Times” in the Home Business® Magazine (HBM) April, 2008 issue.)
8) Upgrade Technology for Continued Growth
Successful business owners use the latest technology to increase their business’ volume and communicate with customers around the world. They broadcast podcasts from just about anywhere; host tele-classes; and/or sell products like e-books directly from their web sites.
Purchase affordable software to simplify your operations and save money in managing your accounting, customer relations, marketing plans, web site promotions and taxes. Consult with computer and/or marketing experts; attend industry trade shows; read technology reviews in trade publications and magazines such as PC World Magazine (www.pcworld.com/) and Smart Computing (www.smartcomputing.com); or follow recommendations by entrepreneurs in your network, to select the best home office and mobile technology suited for your business’ needs.
9) Never Stop Networking
Small business owners who succeed in downturn periods are excellent at making contacts and building business relationships both on- and off-line. Join industry and entrepreneurial organizations to meet new people and search for additional opportunities to inform others about your venture. Network for specific purposes such as gaining knowledge or leads to a special group of potential customers.
Strive to have a mix of individuals from various industries and backgrounds with whom you can regularly communicate in person, over the phone, or virtually via the Internet. People in networks will also often work together on joint projects or share expenses. True networking is supplying connections within your links with prospective leads and information. The more you help others, the more inclined they will be to refer potential customers to you.
10) Focus on Sales
If the main reason that businesses fail is due to low sales, then conversely, high sales will equal success. Do not let recession fears immobilize and prevent you from energizing your sales efforts. Using your customers’ feedback, isolate what ads or promotions convinced them to buy from you and repeat these on a regular basis. Do not be tempted to cut prices on your high-value items. Instead offer customers a choice of lower-priced packages to which they can upgrade later if they choose.
People will buy from you if (1) they trust you and (2) your business fulfills their needs or provides the solutions to their problems. Trust is built by providing quality products and backing those with excellent customer service. Concentrate on selling the value and advantages your products and services offer.
Sales can make or break your business. Hire experienced sales representatives or enroll in workshops or industry seminars if you need to boost your sales skills. Visit the Edward Lowe Foundation’s “Entrepreneurs' Resource Center” (www.edwardlowe.org); for sales tips, plus read the HBM (Jan/Feb 07 issue) article, “Super-Size Your Sales.”
Whether the present economic downturn worsens into a full-scale recession or is just temporary, you have the advantage as an existing home-based business owner or new entrepreneur to adapt your business strategies more quickly to the changing markets than larger competitors. You can either sit back and watch your venture falter; or you can use these success tips and others to not only survive, but to persist until you build a thriving enterprise that will weather almost any future economic storm. HBM