Setting Up Your Small Business

Starting a modest business is demanding work in any environment, but it's even more challenging in a difficult economy. This is largely because when credit markets are limited, it can be challenging to get financing. That's why small business proprietors must refine their business strategies.

In other words, if you want a share of the financing pie, you need to work your financial projections diligently and know your bottom line down to the fraction. It is essential to know explicitly how much money you need to invest into the business, how much you need to charge to meet your operational costs, and what to do to generate a profit.

If you are considering of becoming an entrepreneur, consider the following suggestions for successfully developing your business in a challenging economy.

Can You Be Successful?

A recession can be a very challenging period for both individuals and businesses. People lose their livelihoods and cut back on expenditure, and cash reserves start to diminish. Credit markets become stricter, and banks begin to increase their lending restrictions. This presumably makes you question whether it even makes sense to contemplate launching a new enterprise and, if you think it does, how do you do it?

Part of your success depends on the kind of business you intend to start, so choose a structure that can flourish when times are difficult. Before we look at some of the steps you’ll need to take to get your business off the ground, consider that you can find success—even at moderate levels—during turbulent economic times. Here are a few reasons why:

• You may discover a lot less competition during this time. That’s because most people tend to start a business when the economy is flourishing. If you’re determined and focused, you may even be able to do it without having to share your profits with third parties.

• Customers you gain during this period are more likely to stay with you when the economy transforms for the best. This is especially true if you’re able to offer them more affordable options than your competitors.

• Established businesses tend to curtail or discontinue innovation during a downturn. You can use this time to come up with new ideas that may be absent in the market, giving you a stronger position when you open your real or virtual doors.

• You may find things are much cheaper, namely items that contribute to your overhead costs. Think of items such as your rent, furniture, and materials—all of which you may be able to get at a discount. Of course, in an economic downturn, like the one caused by the Covid-19 pandemic, locating items or even locations to rent out are not necessarily affordable. The pandemic-related supply-chain issues, an inflated real estate market, closure rules, and social distancing requirements made it very difficult for small business owners, particularly those in the hospitality industry.

1. Find Financing

Before applying for a loan, ask trusted friends or professional advisors to review your business plan to ensure you're not disregarding anything critical or making inaccurate assumptions. Often credit unions offer lower interest rates and fees than commercial banks, so don't confine your search for financing down to only large banks.

You may consider inquiring the following sources:

• Friends who own their own enterprise

• A loan officer at the bank where you do business

• Your local credit union where rates for business accounts may be friendlier than a commercial bank

• An accountant, but first get an estimate for evaluating your plan, so you aren't surprised by a high invoice

• Check out the Small Business Administration's SCORE program of free monthly mentoring sessions with retired professionals, intended specifically for individuals commencing a business.

In addition to acquiring financing for your new enterprise, come up with a financial contingency plan for your business and personal finances if you fail to make your initial revenue projections. It is a good idea to build up your financial reserves to have enough to survive off for six to 12 months. Make sure you budget meticulously, so you can continue making your most crucial payments: rent/mortgage, insurance premiums, utility expenses, and food. Finally, examine your gut—and your bank balance—to make sure you're set to start your new venture.

2. Do Smart Marketing

Starting a new business when the economy is taking a decline takes creativity and ingenuity. Marketing is vital to staying ahead of the game and your competitors. Take your business plan and flesh out the marketing components: What specifically are you planning to sell? Who are your prospective customers? How will you price your products or services? What is your plan for promoting your business?

You stand a greater chance of succeeding by thinking niche. Slice and dice your original consumer base to come up with smaller segments so you can market more strategically. For example, if you offer a professional service tailored to women, can you narrow it down to target women within a specific age range, career category, or geographic location?

Alternatively, consider about methods to alter your products or services to broaden your business appeal and customer base. For example, if you opened a make-your-own-dinner company, could you also offer dinner delivery or premade/prepackaged entrees for consumers who want grab-and-go?

Remember to maintain a careful tab on the competition. Do ongoing competitive analyses. Watch what other providers are doing and study the marketing techniques they’re using to develop their enterprises. Are they altering the product? Lowering the price? Using creative promotional tactics? You’ll need to know where your competitors are to differentiate yourself and gain market share.

3. Start Small With a Plan to Expand

Manage your expectations and expenses by commencing as “mom-and-pop” as feasible, then plan to expand when your business takes off. Review your business plan and reconsider what you need to start. For example, could you open in a lesser and less expensive location? Or could you remain virtual by eschewing a physical office altogether?

After identifying the finest, most affordable space for your business, consider about your personnel needs. Before employing full-time employees, consider about filling positions with independent contractors, temporary workers, or part-time staff.

If you’re establishing a business in an area that has seen local businesses collapse, you may be able to pick up some outstanding talent for less compensation than in a favorable market.

Be realistic about which employee benefits you can offer and shop competitively for the best prices. It may be preferable for your employees to provide fewer benefits upfront and add them as your profits increase rather than taking benefits away if you can't afford to maintain them.

4. Use Technology to Your Advantage

First, nearly all small businesses need to use social media marketing on Facebook, Instagram, LinkedIn, and other social media sites to reach a broad audience in cyberspace. In addition, learning how to use search engine optimization to reach potential customers via Google is a wise notion.

Digital marketing on social media creates a flurry of awareness around your brand, generates sales, and can be an affordable way to market your new business.

Technology can provide you with numerous ways to save money and increase profits. Using technology will bring consumers to your brick-and-mortar or digital door.

• Expand your market by retailing online through multiple channels.

• Do email marketing instead of more expensive electronic or print advertising.

• Use websites to get ideas from fellow entrepreneurs and successful business leaders, such as Entrepreneur.com.

• Optimize your website for search engines to maintain your site showing up at the top of your customers’ searches.

• Produce affordable marketing vehicles, such as recordings or webinars, through your website.

• Create an online consumer loyalty program offering advanced notice of sales, discounts, referral incentives, and coupons.

5. Network, Network, Network

Get to know other individuals in your community who can refer customers and help develop your business. Don’t know where to start? Find a local business networking group or contact your chamber of commerce. Consider joining a professional association—either a local one where you can meet people in person or an online group—to draw into others’ ideas.

Read Also: Top Empowerment Techniques for Business Growth

6. Lower the Costs

A somber economy can disguise some excellent methods to save money. Creative ideas to lower your startup costs include:

• Using the economic situation as leverage when negotiating rents, equipment leasing agreements, etc. Lessors, developers, and vendors need businesses to pay their rent and fulfill their contracts. You may be able to get a lower price if you can demonstrate the ability to deliver on time and in full at a reduced rate.

• Buying supplies from businesses that are closing or need to reduce inventory, particularly for big-ticket items such as electronics, office furniture, etc.

• Bartering with other business proprietors by searching for business alliance possibilities and suggesting offsetting costs by trading products or services.

• Doing your legal research before shelling out large money to a lawyer through online sources such as Findlaw.com, which provides free resources and low-cost services.

• Online comparison searching for the best bargain on a business credit card, looking for rewards, record-keeping tools, and other special services, as well as reasonable rates and low fees.

• Find a bank account that fulfills your small business requirements, including access to brick-and-mortar and online services as well as attractive interest rates and rewards.

How Can I Start a Business With No Money?

The first step in beginning a business with no money is determining what you can do right now without additional expenditures. Can you sell to friends and family, can you market yourself on a free social media account, or can you sell your products on sites like Etsy? From there, save up a few months of expenses before going all-in. In addition, seek out to friends and family for starter funds. You can also turn to crowdfunding sites to raise initial capital. Once you get the initial business fundamentals underway, you can apply for small business loans or grants; the Small Business Administration (SBA) is a wonderful resource for this.