The economic crisis is having a marked effect on the disposable income people keep in their pockets, so with less money around, starting a brand new business may seem unnecessarily risky.
There is, however, a strong school of thought that a recession is a good time to start a business. The British entrepreneur and inventor James Dyson once commented: “So I think the winners in recession are the people who produce new technology that does things better, which people really want.”
Buying habits change
Times of recession can shake up that state of complacency that is easy to adopt when everything is going well. Money is tighter, which means that you have to become laser focussed on what you are producing, the money you are spending, and down the line in doing the same for your clients, who are also going to be watching every penny.
When times are good, people are less conscious of the steady trickle of money that escapes from their pockets as those pockets are readily refilled. Once those pockets start to feel lighter and emptier, you want to hang on to what’s in them for a bit longer. So it’s the ‘unnecessaries’ that start to get cut – the gym memberships, the wine clubs, the meals out. This doesn’t mean though that people stop spending – rather it is their spending habits that change.
Looking for greater value for money
The positive angle to this is that by being more conscious of their spending, individuals may be looking around for better value alternatives. They are in that ‘position of change’, which raises a different set of buying signals that you can tap into. To this end, starting a new business in a recession needs to take into account the value for money and ultimate gains that someone is going to get from your product if they are to make a purchase.
Take advantage of the changes in attitude
So if you are keen to launch that new beverage product, for example, that you have long dreamt about, then you need to think about what motivates people to buy during a recession, and then build on that. Think about your soft drink packaging – you don’t want it to appear cheap, but it needs to reflect value for money while still giving an individual that sense of tangibility that their money is being spent on something that reaches them emotionally – and quenches their thirst!
Negotiate better supply terms
Negotiating in a recession will actually give you greater leverage to get better terms from suppliers. Many existing suppliers will be conscious that they need to adopt greater flexibility into their supply terms, which means that you might be able to get a lower minimum quantity order and more favourable credit terms.
Starting on a shoestring
As you are starting form a standing start, you will not be burdened by the baggage that established businesses will have gathered along the way. This puts you in an ideal position of being much lighter on your feet, able to operate faster and lighter without the burdens your competitors might be carrying.
It also allows you to come in with something really new and exciting that can deliver the same, but at a much lower price point. Being open and honest about your newness to the marketplace is an important element to marketing yourself as a new start in a recession. That lean nimbleness is a characteristic that will resonate with your potential clients, who will want to align themselves with that lean-ness, cutting the fat and wastage that might have been hanging around for too long.