(adsbygoogle = window.adsbygoogle || []).push({});

How to Start a Business in a Recession

How to start a business during a recession

Starting a business is a frantic and confusing job. But in a tough economy, things can get even more difficult, requiring upcoming entrepreneurs to triple their efforts. This is partly because a tough economy puts pressure on the credit markets and potential customers are more careful how and where they spend their money. Recessions and economic slow downs can also have multiple negative affects on small businesses.

As a business owner, you will need to be crafty, smart, and careful about the steps you take to launch and grow your business. There are many disadvantages to starting a business during a recession. Building a business in a tough economy or a recession is not impossible, but it can be difficult. Recessions are notorious for closing the doors of new and established businesses alike. In this article, we will give you steps on how you can start and grow your business in a tough economy or recession.

How to Start and Build a Business in a Recession


1. Pick the Right Business

Not all businesses can withstand harsh economic conditions. Some businesses thrive in a recession while others struggle to keep their doors open. If you haven’t yet started a business, you should take time to find out if your business idea makes sense in a tough economy.

But what if you’ve already started your business? How do you grow your business during a recession? There are several strategies companies use to survive a recession. One of them is to behave like a recession-proof business.

Essentially, this means understanding the struggles of your customers and to do your best to offer them what they need. This could be offering deep discounts or offering alternative products that are more cost-effective. If you’re wondering which types of businesses do better in a recession, check out our article 13 Recession-Proof Businesses That Thrive in a Down Economy.

2. Plan Well and Get into a Good Financial Position

During economic expansion, there is never a lack of capital available to new and established businesses. Banks and investors are always looking for a business to help fund with the hopes of making a sizable return.

But during a recession, the well of money available dries up. This doesn’t mean that you will not be able to land investment or get approved for a business loan. It just means that it may be tougher to do so.

A really good business plan, a proof of concept, and good personal credit history will go a long way in finding money for your business. Before looking for finance from an institution, an investor, or even from family and friends, be sure that you can demonstrate that you can manage the fund responsibly.

3. Run as Lean as Possible

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. 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 to survive in any economic climate; run cheaply. Here is an excerpt of his essay.

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 a better position to take advantage of the expansion.

4. Use Alternative Methods to Market Your Business

Building a business when the economy is down, takes ingenuity and creativity. Even as a new business, you must find ways to increase sales despite being in a recession. Therefore, you must think of new ways to get ahead of the game and your competitors. 

In a tough economy or a recession, businesses that innovate and adapt typically do better throughout and after the crisis is over. In your business, it is important to be creative when marketing your business. The best and most economic way is to use a combination of offline marketing and social media and Youtube to reach customers.

Think of fun ways or campaigns to promote your product to your targeted customers. Get on Youtube, Twitter, TikTok, Instagram and begin a campaign, or better yet, hop on one that is already in motion.  

Once you’ve got some online momentum, you also need to go offline to stay visible. Visit local business Meetups, give lectures and talks, and be an active part of your community to make sure people are aware of who you are and what your business does. The important thing is to make sure that you are visible and active so that your brand gets exposure to your target audience.

5. Manage Your Expectations

As I mentioned before, when the economy contracts, money is tight. That is why it is important to 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.

Your financial projections and key performance indicators need to be adjusted for the economic circumstance at hand. This doesn’t mean that you abandon the idea of growth in exchange for survival. However, this does mean that you redefine what growth looks like for your company.

For example, you may have goals to expand your team from 25 to 50. But does your team need to be full-time employees or could you utilize sites like Upwork and Fiverr to get the work done? Remember that you must first learn how to survive before you can thrive. It is important that you learn how successful companies survive recessions and practice the same principles.


6. Leverage Free and Low-Cost Technologies, Software, and Tools

As a new business that is trying to find its way in a recession, it is important to find the most economic way to do just about everything. When it comes to things like accounting, online marketing, customer management, etc, there are many free and low-cost options that you should consider using while you are just getting started.

Wave App and ZipBooks are good examples of capable accounting software that are free to start. As your business grows you can choose to continue to use them with upgraded features or move on to something more heavy-duty.


7. Pick the Right Products

 Just like there are certain businesses that perform better during a recession, there are also several products that sell better in a recession. When starting a business in a recession, you must remember that some of the products you want to sell, no matter how great, may not sell well because of the economic climate. While innovation is important in any business, offering tried-and-true products will help your business stay afloat until the economy improves.


Starting a business during a recession is not always ideal. But if you take the right steps and go into it with a game plan, you will increase the odds of success. Take time to choose the right business for you and the economic situation. Then, grow that business through carefully investing in the things and being innovative. Just because a recession is crippling the economy doesn’t mean that you cannot come out a winner. In fact, there have been some very successful companies that have started during a recession.

If you are already in business and want to know how to survive the storm, check out our article How Strong Companies Survive Recession: 7 Strategies You Must Incorporate in Your Business Today.

This article was first published on February 6 2016 but has been updated and expanded.

Lance McHenry on Twitter
Lance McHenry
Staff News Writer: Lance McHenry is a writer, tea snob, entrepreneur, lover of #tech and #startups. His idea of triathlon is developing an idea, creating a prototype, and validating. He has been involved in the growth of several startups and now shares his ideas on business and tech. Follow him on Twitter @Lanceexpress

Like this article? Get updates by email and get our eBook for FREE

Subscribe and Get Updates!


Invalid email address
Give it a try. You can unsubscribe at any time.

Article Tags:
· · · · ·
Article Categories:
Finance · Find Your Way · Grow Your Business · Youtube

Staff News Writer: Lance McHenry is a writer, tea snob, entrepreneur, lover of #tech and #startups. His idea of triathlon is developing an idea, creating a prototype, and validating. He has been involved in the growth of several startups and now shares his ideas on business and tech. Follow him on Twitter @Lanceexpress

Recent Posts

Related Posts

Popular Posts