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Starting Your Business In Tough Economic Times

Starting a business is difficult, even in perfect conditions. Arguably the main hurdle is finance, and most businesses fail because they simply do not have enough money to pay their rent or their wage bill. In tough economic times, shortages of cash flow can be exacerbated by delays in payments and even bad debts. At the same time, customers and clients often have less money in their pockets to buy from businesses in the first place. This can make setting up a business in anything less than economic calm an extremely challenging process.
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Still, millions of people choose to start up businesses every year, with little thought about the state of the economy. These entrepreneurs, like Mr. Daniel Nwikpo, do so through determination and perseverance, in spite of the less friendly economic conditions. But what does this mean for these businesses?

Businesses born in a recession often turn out to be more hardy than those established during a boom. When conditions are tight and there is less business to go around, it becomes even more important than normal to ensure excellence. Businesses that can prove themselves in the absence of strong demand will find it easier to operate during periods where that demand does exist. For this reason, those who can weather economic storms can expect to benefit from the return to growth, and this will often be reflected in the size of their order books.

Businesses started in tougher conditions need to be lean and direct. An inefficient business that is trying to establish itself in tight market conditions is unlikely to be able to survive over the medium term. Costs need to be kept low on the assumption that revenues will be depressed until conditions return to a more normal state.

Similarly, businesses in this position will often be reluctant to hire more personnel, or to expand through additional investment. This shouldn’t be seen as a sign of a lack of progress. In fact, it is better for new businesses to consolidate their position when market conditions are tough, where striving for growth is not an option. This can help to strengthen cash reserves, while having an incremental organic growth effect that will keep operations ticking over.

Recessionary times can see businesses and consumers short of cash to buy from you. It can see rising unemployment and redundancies, tax rises, and a range of other squeezes on ordinary people’s standards of living. This makes the already difficult challenge of starting a business more difficult, but it is still achievable.

Starting up in tough economic times is a risk, but a calculated one if you choose to make it so. A thoroughly planned, well-resourced business that executes on the right idea will succeed, regardless of whether the economic cycle is moving through boom or bust. While economic conditions can make circumstances tighter for those getting a business off the ground, it is not without its advantages. Indeed, those who manage to start their business successfully during recessionary times can hope to see a bump in performance when economic conditions improve.

 

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