The most powerful things you can contemplate about in launching a business is to decide what kind of business you are trying to create. A business can fall into various categories; micro, lifestyles, growth or revolutionary. However, even the best of these businesses may not be able to survive a pandemic hit on the economy like COVID-19, which has caused an inevitable economic recession. How then can a successful entrepreneur come up during this pandemic period?
Potential Clients Open to New Options
during an economic downturn, thus, a general slowdown in economic activity, many companies are seriously seeking to cut costs and looking for ways to save. They are therefore open to change and willing to consider options which offer them better value. A new start-up that offers an existing firm better value propositions than what they are currently getting is likely to have an easy time convincing them to switch. During an economic downturn, companies let go of their supplier loyalty to uncover innovative new ways to save costs and this gives new start-up businesses new sales opportunities.
Talent comes cheap
One of the largest expenses for many start-up businesses is the salary bill. During the boom times, salary expectations can sky rocket. During a downturn, employees and contractors have fewer options and they are willing to work on terms that are more favorable to the entrepreneur.
Many of today’s most successful web and social media companies were founded by savvy entrepreneurs in the past dot.com era burst when most IT people were looking for jobs and willing to work for very reasonable rates. In boom times, talent is expensive; in a downturn, talent can be accessed at far more favorable rates giving you the opportunity to get your business off the ground without overspending.
Excess capacity at suppliers
A recession is almost always preceded by a period of high demand. In times of high demand, suppliers build up capacity. When demand drops off, most suppliers have excess capacity. As a start-up company, in boom, you have very little sway with suppliers but in a recession when they have excess capacity, you have more negotiating power. You can negotiate favorable terms and other benefits to be able to start your business off on the lowest cost base possible. In boom times, many suppliers won’t even talk to insignificant start-ups, in a downturn, they are scrabbling for business and will work with you on your terms. To take advantage of the opportunities that arise during a downturn, you need courage. In addition to courage, flexibility, focus and the will to negotiate will stand you in good stead as you launch your start-up.
Don’t be too locked in- adapt
Downturns in an economy are times of uncertainty, therefore don’t put too big a bet on what the future may hold. Many of the businesses that came up during a recession or another had to adapt to situations as they presented themselves; they became adaptable. After getting into business in a downturn, the founders realized that new opportunities were emerging as events presented themselves.
The key lesson is that all downturns are followed by upturns and entrepreneurs who are already operating and are flexible enough to be able to respond to new opportunities will be the ones to benefit most from an upturn.
Set your business up so that you are moving positively in a general direction and be ready to pounce on new opportunities as they arise.
Focus on what counts
Many incumbent firms during an economic downturn will be distracted by non- value adding activities such as layoffs, restructuring and cost cutting. Firms engaged in such activities tend to forget about the customer. As an entrepreneur, it is critical for you to focus intensely on your customers. The two most important activities of a start-up are to make sales and generating cash and to do these things you have to please your customers. As you please customers, you build up new levels of customer loyalty. This creates a solid platform from which to build and grow your business in the future.
In a downturn period, a start-up entrepreneur should keep negotiating. Don’t just accept list prices or terms. Always seek to make your situation more favourable. In a downturn, companies are scrambling for work and can be desperate to make sales. They may be more flexible in negotiating contracts to keep you happy as a customer. As you start your business during a pandemic, be sure that you are ready to negotiate at every opportunity; don’t accept things too easily or quickly.
Most people will shy away from launching a business during a recession or a pandemic period but it is exactly that fear that opens the door of opportunities for you to establish the foundations of a new profitable, powerful enterprise. A recession is commonly defined as “two consecutive quarters in which a country’s gross domestic product shrinks.”
Even though the concept of a recession carries with it many negative connotations, they are also often hot beds for innovations and many or today’s most successful companies like Microsoft, Walt Disney, General Motors, Wikipedia; all formed during a recession period.
By Amelia Zanette Mugayo
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