The pandemic has tested every industry, and unfortunately, most of them failed to ride out. In such circumstances, starting a business may not seem a good idea to you. There is no denying that recession can be the most challenging period for people, including entrepreneurs.
People lose their jobs, demand drops down, savings begin to dwindle, and the lending market puts several restrictions on. You may wonder if that makes sense to start a business, and if you do so, will you make it to the top? If you look at the scenario from a different angle, you will find it yet a favourable time to start a business.
You will find less competition because most of the people start businesses during the flourishing economy. You may be able to sell things at lower prices because of low overheads, and this will pay you off when the economy bounces back.
People will naturally prefer you to your competitors selling the same things at slightly higher prices. However, it still requires a lot of things to consider to start a business during the recession. You will have to bear the following points in mind to keep running your start-up during the sluggish economy.
Examine cash reserves
Since you are starting your business during the recession, it will take some more time than you expected to generate sales. You will have to ensure that you have enough cash to hit the ground running until you generate profits. No matter how passionate you are about your business, be patient.
If you have been able to generate profits, take stock of cash flows to find out if it is enough to cover bills for coming months. A good rule of thumb says that you should have cash at least to meet 12-month expenses.
If it is not the case, it should raise the alarm bells. Do not forget to look over your ability to repay the loan if you have taken on. If you need to borrow money in the middle, make sure that you have enough money to repay your debt even if you are not generating profits.
During the recession, lenders generally prefer to approve secured loans. You may face difficulty getting approval for business loans without security, and if you put collateral, you will likely lose it. Therefore, you should try to borrow an amount as minimum as possible. If you need to fund your business expenses, you should take out Christmas loans in the UK.
Be ruthless to whittle down cost
When the economy is flourishing, cost reduction can be a choice, but it becomes a necessity during the recession. Even though your product has some demand and you have already been successful in generating revenues, you will have to cut back on the cost.
Cut down all the unnecessary cost. Apart from stationery and printing cost, you should trim down employee perks, incentives, increments, and the like. Your product may struggle to maintain the demand the same as before the pandemic, and you will have to figure out other ways to cut back on the cost.
For instance, you will need to shift to a remote employee policy. This will save you a lot of money on rent, electricity bills, and building maintenance fees. Do not forget to include the cost you incur in the form of giveaways, discounts and special offers to your customers. Some of your customers will walk away from you and threaten you to leave you, but some will stick to you to enjoy your services.
Think about a new strategy
Since the economy is being slow this time, your business will naturally go slow. Even well-established companies are not able to generate profits as they were before the outbreak of the pandemic. However, it does not mean that you will sit back.
Just because everybody is facing this depressing phase does not mean that you will not make a move to ameliorate. “Do not worry, things will pick up” attitude is not good at all for your start-up. You have never seen the future, so you cannot envisage an accurate picture of future likelihood. Did you ever imagine that the pandemic would come up and hit the global economy?
A rule of thumb says that you should not delay in making crucial decisions. Find out what you can do to engage your customers and have cash coming in. Here comes the role of your team. Communicate with your employees and check what they all can do to align with new goals of the company. Encourage them to brainstorm new ideas to increase sales. Tell them what unique ideas you have and how they should pursue them.
Most of the investors fight shy of investing a single penny on a business during the recession, but there is nothing wrong to give it a try before it is too late. You need some money to survive, and a loan is no longer an option, investors can help you ride out.
However, they will invest money in your business only when you prove them your business is highly likely to succeed. It will be still hard to convince them. You can expect mixed reactions.
However, when you emphasise how supporting your business can let them be richer. Make them believe that your idea is excellent, and it is worthwhile, but lack of money is holding you back from achieving your goal.
Starting a new business during the recession can be advantageous to some extent provided you have some useful strategy to attract your target audience. No matter how good the product you are offering to your customers, it may take some time to catch the pace.
You will have to be patient and manage your stress as much as possible. A good rule of thumb says that you should have planned adequately about your finances, cost-cutting methods, marketing and networking. All your effort will pay you off when the economy bounces back.