Entrepreneur.com
Written by Brad Sugars of Entrepreneur.com
With debate continuing to rage over whether the economy is on the verge or even in the grip of a recession, many entrepreneurs in start-up mode may be getting a crippling case of cold feet. Even seasoned business owners tend to panic when they hear the "R" word. But the truth is this: New companies can prosper in hard times.
For one thing, small companies are more agile and can move quickly to cut costs or switch strategies. For another, they frequently can hire experienced employees laid off by bigger firms who would not be available in an upmarket. They can often step in to supply outsourcing services embraced by larger businesses during economic downturns. Opportunity still knocks for those who know how to take advantage of it.
I have seen this phenomenon first-hand. I started my business coaching business in Australia in the early '90s when that country was staggering under the fallout of the U.S. savings and loan collapse. I expanded to Asia in 1997 just two weeks before Hong Kong's Hang Seng stock index plummeted 23% over a four-day period. Clearly, given the size of my company today, I was not adversely affected over the long term.
That said, anyone launching a business in today's economy must take the right steps to weather the storm. Here are some recommendations:
Focus on selling necessity-based products or services. Even in a downmarket, consumers and businesses need staples like computer services, and food and trash collection. Ironically, luxury items like boats and designer shoes can succeed if you can hang on long enough for the business to catch fire. The trick is to avoid the middle market, whether it's a mid-priced restaurant or a picture framing service in a modest neighborhood. If people can opt for a less expensive alternative or delay a purchase while times are tough, that's not the business in which to to be.
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