There’s no “perfect” time to build a business. But it might feel especially tough if you’re thinking of building a business when the economy itself has slowed down.
Maybe you decided it's finally time to work for yourself, or your passion-fueled side hustle picked up enough to support you beyond what you had imagined. Maybe you've realized that being self-employed will give you the flexibility for much-needed time with your family and friends.
Whatever your motivation for creating a business, if you're doing it during an economic downturn or recession, it's hard not to be discouraged. Morale can be low.
But not everyone is discouraged.
If you’re nervous about starting a business during tough times, consider this: Plenty of successful businesses got their start during hard economic times and are still powering through today.
So we asked those small business owners: What are some of the tactics you've used to be so resilient? What strategies would you recommend to anyone who is building a business during tough times?
Here’s what they told us!
It's understandable that finances are one of the first things you may think about when it comes to creating a business. The adage, "You have to spend money to make money," may come to mind. And while that may be one strategy, you will likely want to be smart and realistic with your finances.
Consider asking yourself:
"What will be absolutely necessary to properly complete work for my customer?"
"What would be a great addition to my tool set that may make things a bit easier?"
In order to do your job or run the business, you may not want to overspend on things that are “nice-to-have” right now, just because they add an extra flair. Instead, maybe focus on the must-haves to start.
Once you're making enough money to cover the tools you're using, then you can begin to consider which "nice-to-have" items may be worth buying.
Making lists may seem futile, but listing your needs may help increase your profit in the long run.
Some of these items may be what you would need to complete your first project from start to finish, and others may be those "nice-to-haves":
What else will fit into the "And more!" category of your list?
For me, the financial planning was always the most overwhelming. That's why it's so important to have a solid business plan. But there's no reason to be overwhelmed about creating a business plan — we have a FREE template you can download here and tailor to your business needs.
How much money you'll make is typically dependent on how much you charge your customers. Consider having different tiers of pricing options: What can you do a project for at the base level, and what prices would allow you to either break even or gain revenue once you walk away from the project?
Vincent V., landscaping services, who created his business during tough times, suggested calculating what you'll have to work with, to determine how to approach things financially: “You need to figure out how much materials you'll need to do your work. You need to scout out great sources, and figure out what you'll need to do to make a profit. After you've done that, you'll be able to decide how much you want to charge. Then it's all about getting started, being ready to take customers, and giving prices.”
You can do this by taking a few steps to get yourself set up for success. Compare the pricing structures of other companies in your industry, either in the area, or with similar audiences who you think might be competitors. Do these companies even have their prices listed? Not all will, but if that's the case, you can always offer to grab a coffee (in person or virtually) to understand what they may be charging for a specific service or product.
Of course, some of these calculations won't be exact and you'll need to estimate, but you can go through the steps. In order to find a few options that may work for your business, play around with the possibility of offering different structured pricing, such as:
There are a lot of ways business owners get creative while building their businesses. Some decide to sell personal property (such as extra property or items of value) to earn money they could use to invest in their business.
When we talked to our community of small business owners, a big trend in financing was asking for help. For some, this may mean going to the state or federal government to apply for a loan. For others, it may mean borrowing money from a family member or close friend, or simply asking for their support should they ever be in need of the services your new business will provide.
Keep in mind that the help you ask for doesn't necessarily have to come with a dollar sign attached to it. “I'd tell them to find a mentor — someone who's been doing what they want to do for a while, and let that person help them," says Caroline K., a photographer.
Then again, we understand that a relationship with a mentor can't always be forced into existence. We recommend keeping a running list of the topics you'd like advice on. "Keep a list of questions," says Christine B., who is vice president of a liquor store.
Regardless of what may be waiting for them in the future, or maybe because of it, many small business owners opted to help themselves by securing their new venture with business insurance. It was an option to protect themselves and their finances, should any legal action be taken against their company.
We mention the importance of involving your friends and family members in your decision to start a business, which may seem like a no-brainer, but we're serious when we say that how you nurture your network is crucial to your growth and success.
Leveraging the people that you know and cross paths with (either as a customer, vendor, or even a competitor) can help you keep an edge on your business knowledge.
If you notice that a customer doesn't seem entirely satisfied with your product or service, don't get discouraged. Instead, ask them what else you could have done to make their experience better.
Similarly, if you look on a vendor's website and see that they're including information about a service you also offer, you could consider talking about that more publicly on your website and social media accounts if you don’t already.
There are a lot of places you can look for new customers, especially now that you have the digital world at your fingertips. Sure, you can use social media to connect with folks in your community, but you also can use word of mouth.
When you talk to someone who is in need of your product or services, make sure you leave your information with them and offer to consult with anyone they know who also may need your services.
Once you make a sale and gain a customer, they become one more member of your existing network. You can work to build your relationship with them not only to increase your rate of customer retention, but because you never know who they'll tell about your work. Ed B., sales and marketing consultant says "I always stayed in contact with former customers after my first sale."
Over time, the loyalty and retention of current customers can result in ongoing revenue and referred business.
Even if the people in your network don't become customers or only have a one-time need to engage with your business, there is still a lot you can learn from them regarding how to move forward with your business.
You can talk to people to find out what prices they're willing to pay, when they're most likely to need your services, or whether or not they'd consider engaging with you for an additional service.
Remember, your network doesn't include just friends, family, and potential customers, but also more-seasoned business owners in the area, or even competitors. Jason S., a construction project manager, suggests, "Maybe talk to other small business owners and see what pitfalls they went through so you could avoid them.”
When economic times are tough, one instinct may be to hurry up to get things in place and your business running as soon as possible. But there's something to be said about "Slow and steady wins the race."
When there's a recession or economic downturn, there isn't a race to be run against others — the goal is merely to finish, and keep your head above water. It's icing on the cake if you happen to come out in front. That being said, it may be best to go slow we recommend going slowly when it comes to implementing new practices in your business.
Lei Lani L., who works in the engineering industry, reflects on her time starting her business, saying, "I was going to say I would take over the company earlier, but I think I needed that time to understand how the engineering world worked, so I could implement a good long-term strategy for the business as a whole."
In the end, if you take your time getting started, you're less likely to make mistakes later on, and which may help to be more likely to build a business with a strong foundation.
Don't get us wrong. We understand that starting a business at any time comes with ample risk, not to mention taking on the task during the current hard times.
There are reasons why so many small business owners in our community didn't give up, despite the bad times: they love what they do, they're good at it, and they enjoy working with their customers.
Richard G., IT consultant, advises, “Keep your expectations in check. At the same time, optimism is important. One cannot be unrealistic about opportunities, but risk-taking is part of growth. So, I'd say, ‘Accept small risks. Don't be risk-averse, but prepare for both good and bad to happen.’ What this means (to me) is to risk what you can afford without exclusively risking your or your family's future.”
Years from now, we hope that your doors will remain open and you can look back on hardships with the perspective that you're glad you got creative, asked for help, and leveraged your network. In the end, the risk can be worth it.
I’ve told stories since I learned to talk and written since I could hold a pen. As a small business owner myself - I'm a freelance writer and yoga teacher - I love contributing to the entrepreneurship community in different ways (including writing for Simply Business!). When I’m not drafting articles for SB, I can be found on my yoga mat, perusing an indie bookstore, and writing (with my cat nearby of course).