Starting a business is a frantic and confusing job itself but in a tough economy things can get even more difficult, requiring upcoming entrepreneurs to triple their efforts. This is partly because the tough economy puts great pressure on the credit markets, thus making it somewhat of an impossible task to obtain startup financing. Even if you do, you have to work extra on your cash projections and know your bottom-line down to every single penny. Still want to take the risk? If so, then consider the following tips to successfully build your company in a tough economy:
Review Your Plan and Look for Financing
Before applying for a loan, it is imperative that you review your business plan a million times to ensure you aren’t making inaccurate assumptions or overlooking anything critical. You can even ask friends, a loan officer at the bank, or an accountant to review your plan. Regardless, once you do, it’s time you start looking for financing.
You can always secure a loan from a bank, but they usually charge hefty interest rates in a tough economy. Also, most big banks will not lend you a business loan unless your business has been up and running for 2 years. Therefore, it would be better to ask any of your friends or family members to forward you a short-term loan to get things going. You should also build your own personal cash reserves, so you have enough to keep your business running for at least six months. But, budget carefully!
Tweak Your Innovation
When an economy is slow, it typically means that the money supply is tight. That means that finding money to run your business is going to be challenging. That is why it is always better to use less money to run your startup. In his bestselling book “The Lean Startup How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” Eric Ries emphasizes the importance of lowering costs and expenses in order to create a more streamline business as well as one that won’t tank at the first sign of economic trouble.
Paul Graham, popular startup essay writer and founder of Y Combinator, hit the nail on the head during the 2008 economic crisis when he wrote “Why to Start a Startup in a Bad Economy”. In the essay, Graham reinforces the idea that in order to survive in any economic climate; run cheaply. Here is an excerpt of his essay.
“Fortunately the way to make a startup recession-proof is to do exactly what you should do anyway: run it as cheaply as possible. For years I’ve been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money. So the cheaper your company is to operate, the harder it is to kill. And fortunately it has gotten very cheap to run a startup. A recession will if anything make it cheaper still. “ -Paul Graham, Why to Start a Startup in a Bad Economy
Keep in mind that just because your sales decrease or that financing is more difficult, does not mean that you should shut down the business. Economies expand and contract so if you can hang in there during the contraction, you will be in better position to take advantage of the expansion.
Use Campaigns to Market Your Business
Building a business when the economy is down takes ingenuity and creativity. Therefore, it is imperative for you to think of new ways to get ahead of your game and your competitors. For example, do you remember the “ALS Ice Bucket Challenge”?
That was an incredibly clever and impressive marketing strategy that help raised awareness about a dangerous disease. Similarly, think of fun ways or campaigns to promote your product to your targeted customers. Get on Youtube, Twitter, and Instagram and begin a campaign or better yet, hop on one that is already in motion. The important thing is to make sure that you are visible and active so that your brand gets exposure to your target audience.
Manage Your Expectations
Of course, your business won’t just start generating profits overnight. It will take lots of patience and effort. Therefore, manage your expectations and work on properly utilizing your capital for handling business expenses. Eliminate waste steps, nonessential protocols or procedures that add no value or waste time. Your employees can use those extra hours focusing on your company’s core mission.
If things don’t work out and you start running out of capital, start cutting costs. Find a smaller and less expensive location and think about your staffing needs. For instance, you might not be able to afford a group of full-time employees, but you could hire temporary workers or part-time staff to cut down your expenses and keep your business running smoothly. If possible, use sites like Upwork, and Fiverr for anything that can be done remotely.
Leverage New Technologies, Software and Tools
Last, but not the least, when it comes to building a business in tough economy, you need to utilize whatever tools, technologies you have and make the best of it. Therefore, use your laptop and internet connection to build online channels, do email and social media marketing, and optimize your website to rank better in the search engine results.
You can also use technology to run the business also, not just to market it. There are free accounting and management software that a small business can use if there is a monthly subscription cost for their current software.
Here is a list of free software and tools to get you started.
1. Customer Relationship Management
FreeCRM.com-Helps manage the sales process from new prospect to established customer. May be a bit limited for a much larger business but it will get the good done for a small and growing company.
2. Documents and Spreadsheets
OppenOffice-Word documents, spreadsheet, and presentations. This is a free alternative to Microsoft Office but is compatible with every version of the software.
TurboCash-Gotta love opensource software. Similar to OpenOffice, it has everything a new business needs to do handle all of its accounting.
So, now that you are familiar with the tips mentioned above, building a company in a tough economy will be easier.
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