Tough economic conditions may not seem like the right time to launch or grow a business, but downturns can actually be beneficial for startups able to exploit gaps in the market and address changing customer needs. Read our guide to how to run a business during periods of economic change.
The news is currently dominated by negative headlines about the economy but history is full of examples of successful businesses that started during recessions. Among them are global giants like Microsoft, Walt Disney, Airbnb and Uber, while UK companies JD Sports, Wilko, Sage and Pets at Home also launched during difficult times for the economy.
Despite these many successes, a period of economic turmoil is not the ideal time to launch a business and it's understandable for entrepreneurs to feel scared about starting or growing their own venture. But remember that there is no perfect time to start and if you wait, it may never happen.
Startups have an advantage over bigger companies when it comes to flexibility and innovation to exploit economic downturns and if you put steps in place to tackle the challenges of tough times, your business can benefit.Here are some tips for how to do it.
Meet Customers' Needs
Small businesses can move quicker, innovate, and respond to challenges much faster than many established companies. Large firms are often more cautious and slower to act which means they face more risks from a fall in customer spending. Startups have fewer overheads and aren't held by bureaucratic processes so can be flexible and adapt to changing customer needs and behaviours.
Speak to your customers about what they're looking for and adjust your products or services appropriately. You could offer special reductions or payment plans to help customers spread their costs or add extra features or services to keep them spending.Getting new customers is more expensive than keeping existing ones so focus heavily on your customer service to keep them loyal. Respond quickly to any problems and go above and beyond when it comes to serving their needs.
Being small can be an advantage to generating sales. Many people are keen to support independent local businesses even during tough economic times. Emphasise that you're a small business in your marketing, use hashtags like #ShopSmall and #SupportSmallBusinesses in social media posts and target people in your local area with free delivery and other offers.
You can also take advantage of initiatives like Small Business Saturday, Just a Card and Handmade Hour which encourage the public to support small companies.
Seek out finance
Your business may need funding to see you through a downturn or to fund growth. While traditional bank loans might be hard to access, there are plenty of other options. They include grants, startup Loans and crowdfunding.Read our full guide to small business funding here.
Attract and retain staff
Many people are sadly made redundant during economic downturns, but this can mean that small businesses have access to skilled and experienced jobseekers they wouldn't normally be able to attract.
While your salaries may be lower than bigger companies, showcase the benefits of working for a startup such as a strong company culture, flexible working and the ability to play a key role in the growth of a business.Take care of your existing employees too by giving them space to express concerns and looking after their mental health.
Cut costs
An economic downturn is a time to review your costs.Review any business subscriptions and decide if they are worth keeping. If they are, contact the supplier and ask for a better deal. If you automatically renew services like broadband, insurance and mobile phone contracts, you are probably paying more than you will if you negotiate a cheaper price each year.
Other businesses will be facing high costs so if you have strong relationships, get in touch and suggest collaboration by sharing equipment or doing deals. A marketing agency, for example, could provide free social media advice in return for free printing from a printer. Speak to your accountant or visit the government website for details of tax reliefs your business is entitled to. If you're self-employed, you can reduce your tax bill by deducting allowable expenses.
Using freelancers can be a flexible and cheaper way to bring expertise into your business than payrolled employees. To find them, speak to fellow business owners for recommendations, make connections on LinkedIn and use platforms like Upwork and Freelancer.
If you already have an office with additional space, consider if downsizing may be a way to reduce costs. Using a flexible workspace like Plus X Innovation, which covers energy prices and business rates, is a way to cut your expenses. Plus X Innovation has office space with space for 2 to 20 desks, as well as larger offices with space for 70 to 150 employees. You can also use spaces such as Plus X Innovation to bring your team together for inspirational away days to keep the innovation and new ideas flowing.
Modern technology and the benefits of hybrid working mean some businesses may choose flexible coworking options to lower costs without losing out on collaborative working. Take advantage of solutions like Plus X Innovation's UNLIMITED membership, which provides access to hot desking and communal break-out areas when you and your employees need them.
Look for Support
Learning from fellow business owners, particularly those who have started and grown businesses during economic downturns, can help you get through the tough times and spark new ideas. Join business groups and find events on sites like Eventbrite and Meetup to track down fellow founders. If the perfect business networking event doesn't exist in your area, start it.
Signing up for accelerators and innovation programmes is another way to get support. They give access to business experts for free or at low cost, and some provide grant funding and connections to potential partners and manufacturers. Plus X Innovation runs a number of programmes for businesses, where you can sign up to register your interest and be the first to know about any new programmes.
You can also find inspiration from successful entrepreneurs in podcasts. There are thousands to choose from but here are lists of UK business and entrepreneur podcasts.
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