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Tips for Starting a Business in an Uncertain Economy

Key Points

Learn what industries were affected during the pandemic along with tips for testing the waters for your new business venture.

Starting a small business is hard work in any environment, but it’s even more challenging in a tough economy. Small business owners must hone their business plans. If you create a thorough business plan for starting and growing your company you can stay focused on your goal when things inevitably get tough.

If you are thinking of becoming an entrepreneur, consider the following tips for successfully building your business in a challenging economy.

Tips for Starting a Business in an Uncertain Economy

1) Be Real with People.

Don’t gloss over the realities people are facing. Offer support.

2) Prepare to adapt.

Prepare for business to be slow, but also be open and willing to adapt. You may have to broaden your horizons or niche down.

3) Track your expenses.

Keep track of your finances. You need to know where every dollar goes. Cash flow is crucial in times of uncertainty.

4) Get clear on your audience and their problems.

Know the problems they face and how you can solve them. Don’t start a business if there is no need for your product or service. 

5) Build an audience first.

Network and build an audience before launching. You can build an audience for free through a blog and on social media. Make sure to collect feedback — it will tell you whether or not you’re heading in the right direction.

6) Get moving.

Crises inevitably end. If you start moving now, you’ll be the one standing while others take time to get back up and running. Start small and grow over time.

7) Do your research.

Nearly 50% of small businesses fail within the first five years. That number jumps to almost two-thirds by 10 years. There are plenty of reasons why a business fails, but CB Insights found that 35% of startups fail because there’s no market need.  The way around this is to research your target audience before starting a business. Look into economic trends, consumer behavior, audience demographics, and competition.

The Truth About Uncertainty

Economic Uncertainty Headline

While uncertain times surely make it harder to build a business, the truth is that there truly is no certain or perfect time to do so. If you’re considering starting a new venture, evaluate your life, relationships, and bank account and decide if they’re sturdy enough to ride the waves of entrepreneurship. 

Be prepared for the ups and downs of business-building. Add safety nets before starting your business (whether that’s having X months’ living expenses saved, a healthy pipeline of leads, etc.), and know that there’s always risk involved.

Data from several sources continues to support those looking to start a new business. The Census Bureau reported that more than 4.4 million new companies were created in the U.S. during 2020 — a record-setting high. This is a 24% increase from 2019 and 51% higher than the average from 2010-2019. 

The influx of entrepreneurial activity during 2020 didn’t just set records in the US. It was also the largest increase of any country in the Organization for Economic Cooperation and Development or the G20 with available data.

Before taking the leap, consider which industries have been most affected by the pandemic and which may be the most profitable. Retail, food service, and logistics have seen major losses. However, finance, construction, and eCommerce barely slowed down. 

Your chosen industry plays a part, as well as the amount of additional funding you can get from the government and private stipends. But it’s clear that the economy is getting back on its feet, and more people than ever before are setting up their own businesses.

When Is The Best Time to Start a Business

Ask any entrepreneur when is the best time to start a business and they’ll probably tell you “there is no perfect time.” Every business takes dedication, strong leadership, a great product or service, and a little luck.

Research from the Kauffman Foundation found that 30% of new entrepreneurs in 2020 were unemployed when they started their companies. Some entrepreneurs had ideas brewing for a while and took advantage of downtime during lockdown to create their own companies. 

See what the experts are saying.

The Bottom Line

There are unique benefits associated with starting a business in any economy. If you do your homework, think strategically, and take advantage of every opportunity to minimize costs while maximizing the value to your customers, you can build a foundation for long-lasting business success.

 

By Leslie Radford
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What the Experts Say About Starting a Business in Uncertain Times

Key Points

Get inspiration and advice from experts about starting a business in a tough economy

 

Starting a new business is one of the most unpredictable, tumultuous adventures you can embark on — but it also has the potential to be one of the most gratifying, lucrative ones as well.

Let’s explore whether starting a business in these uncertain times is worth it in 2022.

What Industry Leaders Have to Say

HubSpot spoke with a handful of entrepreneurs about their personal experiences with launching businesses back in 2020. Their feedback is detailed below.

Brendan Hufford, founder of SEO for the Rest of Us

Hufford founded SEO for the Rest of Us as a community dedicated to helping people stop learning (and start doing) SEO.

“If these times have taught us anything, it’s that our world is farther out of our hands than we may have ever imagined. Multiple income streams can provide security and a level of freedom that, in a way, make things more certain,” shared Hufford.

Hufford learned that, while starting his new business was stressful, he was also able to bring a bit of certainty and peace to people looking to learn SEO. “It’s been a privilege to help others grow their business during the pandemic,” he shared.

Should everyone start a business during uncertain times? Hufford says no. “You shouldn’t start a business if you’re gambling on more than yourself,” he said. “Adding that level of stress to your relationship with your significant other or children isn’t something I’d ever advise doing.”

Melissa Pedigo, CPA, founder of A CPA Writes

Pedigo is a CPA who writes tax, accounting, and finance content exclusively for CPAs, tax accountants, and financial advisors — she’s also dubbed herself Chief Nerd Officer and tax-writing wizard.

“If you already know what you want to do and are sure there’s a market for your product or service, then starting a business in uncertain times is no different than starting one in certain times,” said Pedigo.

However, she warns that if you’re not certain of the demand for your idea, you should wait until a more stable time when consequences may be less impactful.

Moreover, with a solid support system (like a spouse, friends, or business partners), you’re better suited to start a business during uncertain times. “Having a supportive spouse, both financially and emotionally, is underappreciated and under-recognized in providing the security to make big decisions like starting a business,” Pedigo shared.

Doug Davidoff, founder and CEO of Imagine Business Development

Davidoff and his team enable companies to orchestrate all elements of their sales, marketing, and customer success efforts to generate more impact.

“Asking if one should start a business in uncertain times infers that there’s an option to start them at certain times,” Davidoff countered. “In my experience, there is no such thing as certainty, especially when it comes to starting and running a business.”

In fact, Davidoff believes that uncertain or difficult times are, in fact, the best times to start a business — for three reasons:

Tough times (like recessions) have a greater impact on larger companies. If you’re a new company, there are still plenty of opportunities available for you.

Companies and people alike are more likely to be actively considering a change in turbulent times than they are in smooth times.

Good decision-making pays off far more in difficult, uncertain markets than in good, solid ones. Companies don’t become great when times are good — they become great when times are difficult.

“Businesses should be started in uncertain times because if they weren’t, they would never be started,” Davidoff stated. “I do believe there are exceptions for who should start a business in uncertain times, but it would be the same answer if times weren’t uncertain — starting a business is not right for everyone.”

Dr. D’vorah Graeser, CEO and Founder of KISSPlatform

Graeser founded KISSPlatform as an agile competitive intelligence toolkit to help you innovate and validate your ideas to bring them to market faster.

When asked about starting a business during uncertain times, Graeser said, “Times of crisis offer unique opportunities to take control of your future. [During crisis], only the companies that ventured to do something new were available when things calmed down.”

According to Graeser, crisis provides a novel scenario in which we can succeed while other companies fail. To reach that success, she encourages new entrepreneurs to make decisions quickly and take chances. “Limitations and constraints make us think better and faster,” she shared.

She agrees that while starting a business in uncertain times isn’t for everyone, it can be a smart move. “[Starting a business] will test you … but I’ve worked with many companies that look back to uncertain moments and are thankful for taking bold actions, making plans for the future, and investing in their businesses.”

What’s Your Plan?

In business, success rarely comes from winging it. Instead, you need a well-devised strategic business plan. This outlines how you’re going to execute your ideas and maintain your business over time.

A strong business plan utilizes research on your competitors and target audience. It considers competitors’ offerings, pricing models, options, KPIs, delivery, timelines, customer feedback, marketing channels, and areas for growth. The goal is to understand where your industry is at, where it’s heading, and how you can set up your business to succeed in the space.

Check back next month when we discuss tips for starting a business in an uncertain economy.

By Leslie Radford
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