Start a Business Without Going Broke
Starting a business is difficult enough when the economy is strong but when you decide to start a business amid a 9.7 percent unemployment rate--while foreclosures are at an all-time high and bankruptcies are reaching epic proportions--the odds for success seem hopeless.
For startups willing to defy the odds, there are many advantages to starting a small business during a recession, and it can even be done without burring yourself in debt. Experts will tell you that the absolute best time to start a business is during a recession, and several well-known, highly successful businesses were launched during weakened economies.
Why did these companies succeed against the odds? They succeeded because the founders recognized a need in the market and filled it. Identifying that market need is the key to success for any business--regardless of what the economic climate is when those market needs are fulfilled.
Hewlett Packard was started in a garage during the Great Depression with startup costs of just $538. It was the first technology company to exceed $100 billion in revenue and is currently operating in almost every country worldwide. Burger King got its start during the recession of 1954; the Whopper was added to the menu during the recession of 1957. Microsoft was started during the 1975 recession. Bill Gates dealt with primitive computer languages until the creation of MS-DOS, which IBM Corp purchased, starting the company's climb to fortune.
Tips for Starting a Business In a Recession
The high risk of failure during recession requires that the start up costs are kept as low as possible. Businesses that start and survive during a recession are in the best position to take advantage of the inevitable economic upturn. Businesses that postpone launch until the economy shows signs of strengthening are that much further behind, and give a head start to competitors who took the risk of starting during a recession. Keep starting costs low by:
- Keeping your day job. If you're lucky enough to still have a job, try starting your business in your off-hours. You'll have the steady income from your existing job to pay your living expenses and can focus on making your new business profitable without the risk.
- Not buying, leasing or renting office space. Most businesses can be started right from your home. Don't waste money on an office space or retail storefront before absolutely necessary. Use your kitchen table, home office, basement or garage as office space. Some businesses will never need to venture outside the home.
- Not hiring employees. If you need help from other people, use contract workers and issue 1099s instead of hiring employees.
- Not wasting money on advertising. There are countless ways to advertise your business, product or service without spending money. If you--the maker of your product or provider of your service--can't sell yourself, no one else can, either.
Recession Proof Industries
Whenever possible, you should look at starting businesses in industries that are considered "recession proof". These are the industries where consumers will still pay for the products or services offered even when money is tight. Recession proof industries tend to be:
- Health care, including psychology and substance abuse
- Computers and IT--especially fixing other peoples computers. People aren't buying new equipment; they're fixing what they have to save money.
- Security / criminal justice / police
- Education--adults go back to school when they lose their jobs; more high school graduates will go to college because they can't find jobs out of high school
- International business--just because the economy is bad in the US doesn't mean it is everywhere else
Finding Your Niche
When starting a new business, whether you create a product or provide a service, you need something that distinguishes you from everything else that's already available. Your long-term success is defined by your ability to be both unique and better than your competition, by adhering to these principles you'll fill a void in the marketplace.
One of the best ways to find your niche is to create a business that offers something you needed but couldn't find. If you couldn't find something you needed, chances are good others have the same need. If you have a business venture that fills a void in the marketplace and can be launched at a low costs, you're in good shape--regardless of the economic climate.