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How to Successfully Launch a New Business During Tough Economic Times

Updated Mar 06, 2023

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  • Determine whether your business idea can provide a solution or service to people affected by the recession.
  • Plan for your business to grow slowly and steadily, not exponentially or rapidly.
  • Take advantage of recession-specific credit and loan opportunities.
  • This article is for owners of new businesses and startups who are looking for advice on how to stand out during tough economic times.

Regardless of whether you call the current market slump a recession, you can’t deny that entrepreneurs who are looking to start new businesses face some serious challenges. However, it is still possible to launch a new business successfully during tough economic times. In fact, it might even be smart, provided you have the right plan and keep some key strategies in mind. Let’s look at five tips for starting a business during a recession.

How to start a business during a recession

Launching a business at any time is full of inherent risks, and these risks are more pronounced during a recession. However, there are steps you can take to improve your business’s chances of survival, even if the economic landscape is troubled. Here are five tips to give your new venture a fighting chance, even during a recession.

1. Look for new opportunities.

One of the best ways to start a new business successfully during a recession is to look for new opportunities and exploit them. Recessions are opportunities for growth and advancement for wise entrepreneurs. Many recessions fuel demands for specific services or businesses —  including bookkeeping, tax preparation, freight and logistics solutions, and accounting — making them great opportunities for professional services and B2B businesses in particular.

Specifically, try to identify areas of the economy where the recession has hit most strongly. Then, determine whether your business idea can provide a solution or service to people affected by the recession. If you find a new opportunity before anyone else, your business will grow rapidly even while the rest of the economy is still recovering.


Need some inspiration for your business? Check out our list of great business ideas to help you get started — you might just find your next entrepreneurial venture.

2. Focus on personalized and grassroots marketing.

Traditional marketing can be expensive and time-consuming, and you may not have enough capital to manage it. Instead, focus on grassroots or personalized marketing as much as possible.

During a recession, many clients and customers will be looking for personalized, cost-effective services. By reaching out personally, getting to know your first customers and offering competitive pricing, you’ll bolster your brand’s initial reputation and set it up for long-term success.

More importantly, grassroots marketing — which targets a specific demographic of your target audience and is powered primarily by word of mouth — is not very expensive. It doesn’t help you grow your customer base as quickly as expensive ads do, but it’s a good way to get your business off the ground without a lot of overhead costs.

3. Grow slowly and steadily.

Growth is another consideration when you’re launching a business during a recession. You might have dreams or ambitions of scaling your business to the max, and that’s a good thing. But remember that recessions are marked by slow economic growth. Overextending yourself can leave you with serious cash flow problems, especially if you still have to strengthen your revenue.

With that in mind, plan for your business to grow slowly and steadily, not exponentially or rapidly. If you make a surprising amount of profit in your first year, funnel that money back into your business without going overboard on hiring additional staff, opening new locations or introducing tons of new products. It’s easy to overextend your business finances if you achieve unexpected success during a recession.

Key TakeawayKey takeaway

Lack of cash flow is a major small business killer. Consider these cash flow strategies to ensure your business has access to enough liquid capital to stay afloat, even in tough economic circumstances.

4. Stay agile and adaptive.

A major advantage that small businesses and startups have over established competitors is their ability to change direction and strategy at a moment’s notice. You should try to stay agile and adaptive as you grow your business. Because your business is still small, you’ll have the time and opportunity to pivot and offer slightly different services or products as you discover insights about your target audience and market.

For example, if your target customer base appears to be different than you initially thought, adjust your marketing accordingly. If one aspect of your product is more popular than another, double down on the unexpectedly popular element and focus on that. Don’t lock yourself into a specific business identity or plan too early in the game.

5. Take advantage of credit and lending opportunities. 

Lastly, don’t forget to take advantage of recession-specific credit and loan opportunities. During a recession, the government usually offers incentives or special loan programs for small business owners. One good example is the SBA Economic Injury Disaster Loan, which can help businesses that have faced challenges due to recent economic struggles. 

If you’re having trouble getting enough funding for your business, look into these programs and take advantage of them as much as possible. Those programs come around only occasionally, so use the goodwill and government funding to get your business off the ground. Funnel that money into a business bank account that comes with features such as enhanced security, autopay functionality and advanced reporting functions to stay on top of your finances.

Did You Know?Did you know

Roughly 80 percent of small businesses have no employees; approximately 27.1 million companies are run by a single owner, according to the U.S. Small Business Administration’s Office of Advocacy. That should tell you that you need only yourself, a plan and ambition to succeed when launching a new business, even in a recession.

Common financial risks of starting a new business

Even though starting a new business during a recession can be profitable, you also need to be aware of significant financial risks and potential issues. Before you launch your business, take these steps to navigate your business during its earliest and most important days:

  • Forecast your finances. It can be difficult to forecast your financial needs, expenses and profits, even months or years into the future. For instance, if your business model involves building an app, the initial price of $45,000 can quickly become much more expensive due to unforeseen costs. Because of this, you’ll have to be inherently conservative with your business spending and expansion plans (provided that your business succeeds long enough to reach that stage).
  • Determine your target audience. If you start a business during a recession, you’ll need to be very careful to target the right market so you can count on consistent income and profit during the earliest, most fragile months of your business’s existence. Many people spend less money during a recession, so you’ll need to target people perfectly to market effectively.
  • Articulate your value proposition. Your marketing and advertising need to be on point and highly persuasive for you to make a profit. Because people are less willing to part with their money in a recession, there has to be a good reason for them to break that habit for your brand. You need to double down on your unique selling proposition if you hope to succeed in your industry. Considering that nearly 70 percent of consumers with a monthly rent or mortgage payment have to make sacrifices in their spending to pay for housing, you can’t expect your initial profits to be astronomically high.

Labor is the No. 1 cost for most businesses, accounting for approximately 70 percent of all business spending and between 25 percent and 35 percent of gross sales, according to Paycor. That’s followed by inventory, the second-biggest cost for most small businesses.

Potential benefits of launching a business during a recession

A recession is marked by an economic downturn and consistently lower consumer spending. That’s a death knell for all new business ideas, right? Not necessarily. Starting a business during a recession has unique benefits and potential advantages, especially if you leverage them properly. Consider these examples:

  • Filling market gaps: Recessions break some businesses, leaving market gaps that may create opportunities for clever entrepreneurs. If you have a great idea, a recession could be the ideal time to bring that idea to market. As your competitors go out of business or stop expanding, some business savvy and a solid business plan will help you weather the economic storm and emerge stronger on the other side.
  • Beating competitors’ prices: During a recession, businesses and consumers alike are looking to save money, and new startups are nimbler than established businesses are. If you can launch your business cost-effectively and run a lean operation, you may be able to undercut your competitors to acquire new customers and gain market share quickly.
  • Acquiring good equipment and personnel at lower prices: Companies sell off a lot of equipment and other assets at low costs amid a recession. If you’re just starting your new business, you can take advantage of these cheap supplies and use them to jump-start your own operation. Similarly, if you need talent, you may be able to take advantage by recruiting skilled employees who were recently laid off by your competitors.

Planning your business meticulously and keeping an eye out for these opportunities can help you successfully launch even when the broader economy isn’t doing so well.

Did You Know?Did you know

Over 28 percent of all business is conducted online, according to market research firm IBISWorld. This data indicates that starting an online business, even during a recession, could be a wise idea, as more people than ever spend their money in the digital domain.

With a good plan, you can launch a successful business anytime

Starting a new business during a recession is challenging, but it can also be smart if you plan accordingly and act wisely. You can be successful if you have a solid plan, good business sense, and the wisdom to grow slowly and steadily. If you keep the above tips and strategies in mind, your entrepreneurial endeavor will be much more likely to thrive as the market recovers. 

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Whether it's a food truck or a fashion line, a coffee shop or a consulting firm, Business News Daily's goal is to help entrepreneurs build the business of their dreams and to assist anyone working in a small business make smart decisions about products, services and ideas. Our reporting style is simple: We seek insights and advice from experts and then stick to the basics by bringing you concise, actionable information business owners can use to make the daily decisions required to start and grow their businesses.
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