Business and prospective entrepreneurs can benefit from these eight points on how to start a business in a recession.
The Government of Trinidad and Tobago, like so many in the Caribbean are grappling with economies that are in crisis. Their plans for the most part are good but in the face of falling revenues and dwindling foreign exchange needed to purchase basic goods and services, there is very little that can be done re additional capital expenditure and much of the annual budgets is spent on recurrent expenditure. Notwithstanding, they continue to plan and Trinidad and Tobago’s National Development Strategy 2016-2030 (Vision 2030) “Many Hearts, Many Voices, One Vision” is one such plan.
What do you do in this economic environment as someone who want to go on a path of creating new businesses. It is important to know that many companies, even start ups, strive during a recession as people do not stop spending, they just look for and exploit better deals. In How brands thrived during the Great Depression, Dave Chase noted that both anecdotal and empirical evidence support the case that advertising was the main factor in the growth or downfall of companies during the Great Depression.
Janet Fowler in an article entitled 9 businesses that thrive in recession highlighted a group of industries where recession may actually lead to an increase in business, perhaps even an opportunity to thrive or grow the businesses extensively. Even though the industries listed here are understandable, these are not necessarily the only type of businesses that thrive during a recession.
Do not say that there are too many companies doing what I want to do and do nothing. The Caribbean business landscape is littered with companies that were mega companies and now are no more and others came on the scene and replaced them and are doing well. In one of our streets in Trinidad and Tobago, Aranguez, there are many businesses on both sides of the streets selling vegetables. All the vegetables look fresh and all the businesses survive. A big burger business can open business and a man will push a cart in its vicinity and sell burgers and get sales. You may ask why. He is offering the burger lovers a cheaper alternative and if it is a good burger, he can have a thriving business. You make or break your business. Plan well and study the competition. Remember when you are selling products/services that others sell, you distinguish yourself by customer service and decor. The key to staying in business is attracting and keeping your customers.
Eight tips on how to start a business in a recession
1 Alec lynch in In ten reasons to start a business during a downturn pointed to what the new startup has going for him/her. You have to examine this list and develop a strategy for your business that is informed by these factors.
2 Do not blindly go about implementing your business idea. In his YouTube video on how to start a business with no money Trent Drysmid gave the following business advice – the best way to succeed in business is to be in business. He discusses his green dot theory. What this means is that as you go after one business idea, you may recognize that you are better positioned for another idea that you did not previously know of but became aware of it as you interacted with businesses/clients and paid attention to your competition, etc. The journey of being in business will help you to uncover good business opportunities, resolve business problems and make useful contacts. In the Caribbean you should pay attention to developing the right contacts.
3 Plans can be wrong because of the wrong business idea. Do not spend a very long time in planning hoping for the perfect plan. Start getting feedback and reaction of customers to your product/services. You will never have the perfect plan at the start. Talk to persons, network, get ideas from interaction with others, etc. This going to your customers is not new. Big businesses have free giveaways to get feedback on new products. Define your target market get feedback from them. In this area you do not need to be sensitive. It is best that your feelings are hurt rather than you loose a lot of money.
4 Be flexible – Be prepared to change your business model, product, services based on needs of your clients. Remember that you can have a blend of packages, some of which make you profits and some that help you to cover costs but serve as a means of obtaining further business. Let the clients know that you are given them a discount so they do not believe you are trying to exploit them when you increase your prices.
5 Clinically define your market. One of my favorite examples is a business to make a bread that fat persons eat and loss weight. I often ask my students to define the market and they say fat persons. I say no – at a start, it is fat persons who want to loose weight (some fat persons do not want to loose weight). In addition, you have to further narrow it down as the world of fat persons who want to loose weight is not your market unless you are marketing to the world- this is hardly likely.
6 Start where you are. I do not advise you to go out and rent a business place, spend a lot on internal work etc. before testing your product/service. If you want to sell bakery products, you can offer your friends etc. bakery products on a weekend and start selling. Get feedback on prices, quality, etc. Get the best type of advertising, customer referrals. Expand it to persons in the neighbourhood. Today, many businesses can be operated from home until you outgrow that location. Business meetings etc can be done in many of our companies that rent space. This will provide you with reception and other facilities. Think virtual. Remember that business is about satisfying needs, reducing customer’s pain and you need to know that your product, services satisfy the needs of your customers and they are willing to pay for it. The blog post by IBMC on Validating a business model is important to read. Another useful video is 5 small businesses you can start from home.
7 What you have to do is continuous planning. Years ago we did five year and ten year strategic plans, now we do roll over plans as the direction, environment may change so drastically that we have to adjust our plans. Be prepared as you interact with clients to do the adjustment, but start by working our the details of your plan and your value proposition. A value proposition is “A business or marketing statement that a company uses to summarize why a consumer should buy a product or use a service. This statement convinces a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.” investopedia. Do not just jump into the waters and hope for success. It is now that you have to keep your eye on the environment for opportunities and threats and develop appropriate responses.
8 Network. Join business groups so you can get information on trends, what is happening in your business area, etc. With limited funds available, thus choose the business groups to join. Visit your community center etc to find out what is happening at the community level. In Trinidad and Tobago much money is being spent in poor rural communities and there may be opportunities for training, business, etc. Read, Read, Read. Many business and government website offer valuable information on business, trends, what is available especially to small entrepreneurs, etc. Visit the government business support agencies to get information on funding, technical support and other support services available,.
As you are thinking of starting, it is useful to listen to the following videos- the top 7 things not to do when starting a business
10 steps to starting a new business– this is a long video but it is well worth looking at.
For those persons who are in business and who may be struggling to make ends meet, they may get help by reading the following of my blog posts:
- 10 tips for small business growth in 2017
- how businesses can survive and grow in a recession
- Strategies to experience business growth in this global environment
We welcome your feedback. What is your experience.