Why start a business when economic times are tough?

Published on May 14, 2012 Why start a business when economic times are tough?

It might seem counter-intuitive, but one of the best times to start an online business is when the economy is tight. Why? One of the main reasons is that when the global economy is tight and consumers are tightening their belts, businesses start shed spending and letting a lot of their less productive ideas go. They also defer spending or the start dates of upcoming projects (that could give them an advantage in the market), waiting for their cash flows to improve. They might even start laying off staff. That opens a window of opportunity for a well organised start-up.

Starting the right business in these times can give you more stability from the potential of job losses by your present employer and a sense of your own destiny, but also give you a huge window of competitive advantage as many of your potential competitors in the industry may be deterred from starting up or competing hard on things they don’t perceive to be immediate cash makers.  A strong business and brand built during tough economic times can become a lucrative superstar for you as times improve.

Since economies always go in cycles, if you are smart about the way you start your business, the money you put to work wisely can turn you into one of Australia’s online success stories.

What are the benefits of an online business in tough economic times?

• Competitors will be competing hard, but only on proven business activities. Rarely do big competitors compete as hard as they might have done on new projects, new markets or innovations when times are tough. They’re giving you free reign to beat them so why not go for it?
• You will have more stability for your company
• Think of things like your monthly payments on your website as cheap rent. If you’re smart you can easily make the money back that you spend on your website before it’s launched. As long as you plan in advance.
• There are plenty of deals to be had if you ask or can negotiate. Not every business will offer discounts or deals, but you’re more likely to get a great deal on luxury items or things that aren’t necessities as those businesses strive to protect their revenue streams.

What about attitudes of family and friends?

A stumbling block to starting a new business is the opinions of friends and family, who might tell you that you need to save when times are tough, and spend only what you have. They discourage you to take risks, to invest any of your funds suggesting you should “get a real job”.

It might be hard but this is the wrong attitude to have in this kind of economy. Instead of asking yourself why are you doing what you are, you should be thinking about how you can take advantage of the environment. Think of it like the economy having a 20% Autumn sale – the costs of starting up can be less, the competition can take less to fend off, and you may be able to negotiate better deals for your business as other businesses are looking to grow revenues. The sun still shines when it’s covered in clouds – it’s all about how you think about it and how you take advantage of the opportunities that you have.

How to go about it? How do you market your business when people aren’t buying?

Firstly, it’s important to understand that people are buying. They are just buying different products and services or approaching their purchases in a different way. They’re more conscious of whether the things they are buying are the right things for them, purchased at the right time. You’ve got to do more work to convince them of that and can’t afford to just “build it and they will come”.

Some marketing ideas for your online shop in a tough economy include:

• Know your customer – profile your customers, think about what they like and who they are, where they go and what they buy
• Use social networking – tools like Twitter or Facebook are invaluable and should be utilised. Build your networks during tough times and build loyalty to your brand while the economy is tough. It will be harder for competitors to go up against your established brand when times get better.
• Be different and creative – do something that your competitors don’t to build a reputation
• Focus on reviews and other endorsements like testimonials. Consider using comparison shopping sites if that’s where your customers are shopping
• Ease customer concerns – about the security of your website, the background of your business and your privacy policies. Check all of your policy pages and make sure all pages in your site are complete.
• Use email marketing and newsletters to build an audience and rapport with your customers. You need to demonstrate your credibility and build trust and authority if you wish to drive additional sales in the long run.
• Track your progress as you try things. Engage in search engine marketing rather than advertising as natural results in search engines are cheaper click throughs than paid ones.

Your attitude, your drive and your approach can stand you in good stead. Along with good planning (being realistic about the environment), setting tough but achievable goals and monitoring what you are doing as you go will stand you in good stead for building a solid brand and taking your business into the stratosphere as economic times improve.