There's never been a better time to be an entrepreneur. According to Statista, in 2019 there were 310 entrepreneurs in the United States for every 100,000 adults. That's a jump from the beginning of the millennium, when there were only 270 entrepreneurs for the same number of adults.
New business infrastructure, financial sources, and marketing tools have made entrepreneurship a feasible path for many Americans. Unfortunately, however, it's not always going to be smooth sailing. Encountering challenges is par for the course for many small business owners, and in periods of recession starting a business can feel like an insurmountable challenge.
However, just because the process might be a bit more difficult doesn't mean that it can't be done. Establishing a business during an economic downturn can be tough, but it is doable. So here's a brief guide for starting a business during uncertain times, and what you can do to make sure you make it through that first year.
Finding Your Value
One of the core concepts to starting any sort of business is to figure out what sets you apart from the competition. It's especially important during a recession, when people are less likely to spend on frivolities.
Entrepreneur leadership network writer Per Bylund states that prospective business owners should be looking at their products not just as products alone, but as something that can benefit consumers. A great example of this is the streaming giant Spotify. To some, it may seem like a standard music streaming service, but it actually has tons of features that offer its users benefits like discovering new tracks that can help serve as a temporary retrieve from real life, learning new skills by way of podcasts, and even cultivating better sleep through carefully-curated playlists.
If these customers can see themselves benefitting from your product or service, then you've already won half the battle.
Build a Strong Foundation
The next thing you need to do is to build a strong foundation. Key to this is your business model. How will the structure you envision for your business react in times of stress? Will your business be able to adapt, and quickly? While it might be tempting to go for the sole proprietorship or partnership route, you need to think about safety nets.
LLCs are an example of a business model that can provide all these things. Unlike a sole proprietorship, you have more liability protection with an LLC. Business and personal assets are separate, meaning you're more protected from claims, debts, and lawsuits. The good news is that the process behind creating an LLC is not that complicated. While it varies depending on where you are, a ZenBusiness guide to forming an LLC highlights the main steps that are more or less the same across different states.
Think About Feasibility
The next thing you'll need to do is to think about feasibility. Can you fund your idea? Do you have a plan B for when things go south? One of the toughest hurdles for entrepreneurs is funding, and that can be especially precarious during economic downturns.
Forbes has gathered together a list of expert advice that will help small business owners recession-proof their businesses. Among the tips include taking note of cash flow— how much is coming in, and how much is coming out — as well as building multiple revenue streams, investing in client relationships, and much more. While this can take a lot of work, it’s worth the effort, especially since recessions and downturns can happen multiple times in the lifespan of a business.
Establish Credibility
Finally, you'll need to establish credibility for your new business as soon as possible. Credibility means that you're more likely to pull in new customers on referrals, as well as retain the customers you already have.
In a previous post on The Niche Movement, we talked about how credibility can be established through customer testimonials. Word-of-mouth advertising is a boon for small business owners, and is especially important during a time when you might not have the extra funds for marketing. Showing that you're trustworthy, reliable, and worth the money can go a long way in helping your business get through tough times.
Starting a business in the middle of a pandemic may not seem ideal at the moment, but so long as you have a great product built with the user in mind, then you'll have no problem succeeding. Just bear in mind that you'll have to work extra hard in building a great foundation, making yourself stand out from your competitors, and establishing credibility with your customers.
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