Recessions are a difficult time for most people – many lose their jobs, businesses dissolve and the cost of living rises. On the contrary, it’s not all doom and gloom. Many familiar businesses such as Burger King, Uber, AirBnB and even General Motors all have one thing in common – they began during an economic downturn.
This goes to show, there are huge opportunities during a recession. But why is this? Being able to successfully start a business during a recession is a strong indicator that your business has enough strength to grow during the most difficult of conditions. One of the reasons many businesses fail during a recession is through lack of innovation and the speed in which they adapt to a new market. As a smaller start-up business, you often won’t have the challenges which many established businesses have to overcome to remain afloat – staffing costs, training, internal politics and slow decision-making processes. This gives you the freedom to quickly adapt to changes in demand, your target audience and the product or service which you’re selling.
Choosing the right (not right now!) niche
It’s important to consider which industry you’re planning to set up a business in. With the drastic changes to the global economy as a result of the ongoing pandemic, demand for particular products and services has seen an exponential increase which may be artificial. Before investing time and money, consider whether the product or service will likely still have a high demand after the pandemic. A quick and easy way to do this is to use a tool called Google Trends. Simply enter the keyword of the product or service and set the period to report on over a few years. You’ll then be able to get an approximate idea as to whether the demand is likely to remain afterwards. If the demand is much lower in previous years, it’s not to say the business isn’t likely to remain profitable in the future though, as general consumer and market trends will have shifted dramatically.
When deciding on your business idea, be sure to consider the additional risks involved during the pandemic. If your business is heavily reliant on employing staff for example, always have a contingency plan in place if someone was to be unwell for an extended period. A positive is that the talent available during a recession is often much easier to find.
Position your value proposition correctly
Many start-up businesses are designed to succeed during a recession. However, if your business isn’t suited to a receding market, you may need to re-consider how you position your business. For example, if you have a service which improves productivity, it can be sold as a revenue-generating tool in a positive market. On the other hand, during a recession, this service could be re-branded as a cost saver instead – focusing on survival as the key USP (unique selling point).
Plan ahead and consider your marketing spend
In marketing during a recession, businesses will usually do one of two things – cut their budgets or double down. Marketing is simply defined as exposure to your audience and where many businesses both large and smaller are cutting budgets, this typically drives down the cost to reach your market. Marketing channels such as Google Pay Per Click and Facebook Ads may be cheaper to run in your industry during a recession as there is less competition.
At Devonshire Green Accountants, we work with a variety of small and large businesses. We offer a range of services from both our London and Kent offices. We have competitively priced solutions which can help you manage your accounts, forecast and process your tax liabilities efficiently. Speak to a member of our team today to find out which solution is best for you.