Starting a new business is daunting, no matter when one chooses to do so. Starting a new business when the economy slows down may seem more overwhelming. Still, if you know where to look for opportunities, potential business owners may find that an economic downturn is an ideal time to start a business venture.
Be ready when opportunity knocks
One of the ways in which fledgling business owners can take advantage of economic changes is by being prepared for such times. Kyle Theil, the owner of The Visual Realm, a Tampa-based web design firm, encourages all business owners to be ready for the economy slowing down at all times. "Monitor your expenses and cut back where you can," Theil says. "It's important to keep an eye on your bottom line and ensure you're not taking on too much debt."
Theil also advises business owners to make connections with others. "Networking with other entrepreneurs can help you stay ahead of the curve and learn about new opportunities as they arise," he says.
Do your research
Recessions have happened many times before, so business owners have the opportunity to learn from the past. Natalia Morozova, a Managing Partner at Cohen, Tucker & Ades P.C., a New York City-based immigration law firm, suggests learning about your industry's economic downturn history. "Fledgling business owners should also understand the unique demands of their industry during this economic climate. Research what happened in your industry and the competition during previous recessions," she says. "Is your industry traditionally hit hard during an economic downturn, or are there key areas of development you could take advantage of to help your business survive?"
"Networking with other entrepreneurs can help you stay ahead of the curve and learn about new opportunities as they arise."
Additionally, Morozova suggests collaborating with others in your industry who have been through a recession. "Seek counsel from other business owners and entrepreneurs who made it through economic downturns in the past—they'll have the first-hand insight of how this could affect your business," she says.
Provide value to your customers
When the economy slows down, many people look for ways to save money individually and for their businesses. Providing value for your customers will help you maintain their business, according to Shaun Martin, owner of Denver Home Buyer in Denver, Colorado. "In a downturn, people are looking for ways to save money, and they're more likely to appreciate companies that offer products or services that help them do just that," Martin says.
Kyle Theil also advises business owners to add value to their services by helping customers save money. "Many companies are looking to cut costs and increase efficiency," Theil says. "As a result, there is an increased demand for consultants who can help organizations streamline their operations. If you have management consulting experience or expertise in process improvement, you may be able to find work helping companies navigate these difficult waters."
Create dedicated customers in your business
New businesses need to provide value first and foremost, but they also need to give their customers a reason to keep coming back. Steve Wilson, Founder of Bankdash, an online informational tool for choosing financial institutions, says, "Create raving fans out of your customers or clients."
"By consistently offering them goods or services that are better than their realistic expectations in terms of quality and value, customers cannot operate their enterprises without your assistance," Wilson says. "You can nurture your current customers by establishing genuine connections with them and assuring their contentment. It will boost your client's lifetime value, which is a reliable measure of your business's long-term survival and financial stability. They'll not only keep buying from you, but they'll also recommend your business to others."
Consider an investment
Turning an economic crisis into a business opportunity might also be possible if you have some capital to invest. Businesses that suffered in 2020's rapid economic changes may look for investors, or try to get out of the market entirely by selling the business.
If you do consider selling, buying a business, or an investment, you're well-advised to talk to a lawyer about whether the deal is fair.
Some may take advantage of other people's misfortune during a bad economy. In addition to being bad PR, price gouging is illegal in many states, according to the National Conference of State Legislatures.
Sudden economic downturns can frighten people who have sunk their hearts and fortunes into their businesses. But with some bravery and creativity—the same qualities that made you an entrepreneur—you can identify business opportunities even in tough times.
Finding gaps in the market to fill with your new business venture takes research, patience, and dedication on the part of a new business owner, but establishing a new business during a recession does not have to be a bad idea. Taking advantage of an opportunity during an economic downturn can prove highly profitable. By identifying needs and filling them for customers, businesses can weather the temporary constraints of a recession and emerge as strong and successful ventures as the economy eventually stabilizes.
Lorelai Laird contributed to this article.
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