How to start small business in difficult economy
Small businesses are currently experiencing low sales, cashflow problems, employment freezes and sometimes redundancies. Starting a small business is hard work in any environment, but it's even more challenging in a tough economy.
This is due to the high cost of living, high interest rates and even the ability to get financing.
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However, they are opportunities available, especially by choosing the right type of business and running it in the right way to be able to thrive when economic conditions are tough.
It is important to note that some businesses are more likely to succeed in a tough economic situation than others. The following steps will assist you in starting your small business.
Understanding the economic environment
In order to start a business in a high inflation environment, it is essential to understand the economic climate. This will include researching the current inflation rate, analyzing the trends in the market, and understanding the impact of government policies on the economy. Starting a business during high inflation can lead to higher cost of materials and labour, which will affect your revenue.
Furthermore, if the economy is in recession, it can be difficult to attract customers and generate revenue.
Developing a comprehensive business plan
It is important to develop a comprehensive business plan after appreciating the current economic environment and the risk involved. Your business plan should include undertaking market research, conducting a competitor’s analysis and considering the financial implications of starting a business in a high inflation environment. Some of the financial factors include budgeting for higher cost of labour and materials, including your sources of financing.
Identify your business niche
Your business niche is a market segment where certain products and services are in demand. Niche markets can cater to geographic locations, cultures, occasions or activities. It is important to note that services are increasingly specialised.
Starting a niche business is one of the ways many entrepreneurs I know have been able to penetrate into the markets. Your niche will further focus on a tiny area in a large market with unique requirements and identities.
Is your offering able to address a unique niche right now to help people get through the current crisis? I will advise you to identify the issues faced by friends, co-workers, etc. and envision the potential solutions to problems that aren’t being answered by what’s currently out there.
Concentrate on your core competence
Your core competence refers to your set of skills and abilities that make you stand out, and gaining such a sustainable competitive advantage is crucial to the long-term sustenance of the business. I have noticed most early startups have the misconception that diversification simply means adding an additional product or service to their offering. I will advise business owners at the early stages to avoid diversification and rather focus on demand-driven products and services and build a strong brand for their business.
Starting any business entails having an understanding and dealing with very critical issues which include legal, staffing, financing, sales and marketing. Starting small will enable you to manage, especially your expectations and give you the opportunity to plan as well as develop a business plan. It is important to consider opening a small office in a less expensive location or staying virtual, especially during this period.
Adopt technology
The best way for small businesses to reach a broader audience is by adopting social media platforms to their advantage and developing a social media strategy and a social media plan. (Facebook, Instagram, LinkedIn etc.) Technology is currently supporting many small businesses in numerous ways to save money and increase their profit.
Small businesses are able to create awareness around their brands and drive sales using social media tools which are affordable.
They can further expand their market by selling online through multiple channels, using email marketing instead of print and more expensive advertising, optimising their websites and creating online customer loyalty programmes through sales, discounts, referral bonuses and coupons.
The writer is a lecturer, University of Professional Studies, Accra
Email: [email protected]