Starting a New Business in a Recession
Image via WikipediaIs this the time to start a new business?
Having been a banker for over 35 years, I can tell you that some of the best companies were started during a recession because they addressed a need during an economic downturn that continued to be successful even as the economy rebounded. One such type company is the employee placement companies. When companies have to downsize and cannot keep on skilled individuals on a full time basis or pay them benefits, then employment agencies are an ideal answer to meeting the needs of completing a job without their having to have a full time employee. When the job is done, the temporary employee is returned to the agency until needed again.
When I would lend money to businesses, one of the areas I would review is the company’s ability to withstand a recession. What was especially effective was a company’s ability to expand and contract according to impending business. Another would be if they were in a commodity market where they sold a high priced product that was discretionary and therefore would have difficult times during an economic crisis.
If you are starting a new business like Lola Kakes did with EffortlessHR, have you considered it’s relevance in a recessionary market Is your product affordable, does it fill an important niche such as being an alternative to a higher priced product or service out there. In the case of EffortlessHR, timing works because it is an affordable product, internet based, starting at as little as $24.95 a month.
Why does this work Because it helps small business owners to replace what some business owners are spending hundreds of dollars for in HR processing and employment management and retention. That makes sense.
A very good example of an existing company taking advantage of the difficulties of one of the kind of companies that has a high priced product, is McDonalds coming out with a premium coffee that is half the price of Starbucks. Brilliant timing! Many are saying, I’ll have McDonalds during the week and treat myself on the weekend to Starbucks so I can put gas in my tank.
What is your idea?
Considering how much you’re spending for gas and food right now, would you spend money on what you’re proposing to sell?
Would it work now and when we have an upward turn?
It is especially compelling if you were in corporate America and was laid off and said to yourself, this is the time to go out on my own. While that is true and the majority of businesses being started today are small businesses, be sure you have the right ingredients for success in this economic environment.
Also see our friend Chris Brogan’s article on how being a small business is a weapon and Seth Godin’s great article on why small businesses should not whine.
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I was just talking to someone yesterday who said this is the best time to start a business because you have to be more strategic. You have to think of creative ways to reach your market. If you start from the bottom, the only way is up. We also talked about a site to help people write their business plan. http://www.guidedbusinessplans.com. I guess it’s another way to bootstrap.
You’re right about the fact that starting a business during a recession absolutely requires that the new business owner know exactly who their audience is and target market. At the same time, it is critical that there be an element of how you can help prospective clients during a tough economy. Just like the “green” theme whereby if a company does business ecologically smart, that should be touted, so should “economy smart” be a focus. Thanks for your comments.
cheers. Nice articles on your webpage. This can be used as a ready reckoner anytime.
I also follow a blog on Importance of Human Resources:
http://managehrnetwork.blogspot.com/
Rgds,
Ankur
http://managehrnetwork.blogspot.com/