One of the biggest news items in the UK currently is the growing cost of living crisis. Across the country, people are facing rising costs across the board. Everything is increasing in price, from mortgage payments to food items, and people are feeling the squeeze.
But the cost of living crisis isn’t only affecting the general public. It’s also affecting hundreds of businesses across the country as they deal with rising overheads, rental costs and energy bills. Alongside the cost of living crisis, it was recently announced that the UK is heading into the longest recession in 100 years.
And many people are taking this opportunity with a 21% year-on-year increase in company formations. So if you’re thinking about starting your own business soon, we’re here to help. We’ve put together five essential tips for launching your company in a recession. Let’s get started.
1. Do Your Research
Research is essential whenever you start a new business, but it’s especially crucial during tough economic times. The most important thing to do when starting a business is to take your time. Rushing at this stage will lead to mistakes down the line that could be costly.
If you’ve already got a business idea ready, you should research the following:
- Your competition
- Industry trends
- Gaps in the market
- Growth potential
If you’re still looking for a business idea, you should look into the following:
- Growing industries
- Consumer concerns
- Potential gaps in different markets
- Solutions for common problems
By doing your market research early, you can ensure that you have a solid business idea before doing anything else. Once you’ve got your idea, you can start putting together a business plan that outlines how you’ll build a successful company.
2. Find Your Target Market
With your research complete, you can start to dig into the industry you’re entering. Whichever industry you enter, you’re likely to have stiff competition — unless you’ve got a unique business idea.
Regardless of the number of competitors you have, you’ll need to identify who your customers will be. It’s a good idea to try and identify a niche market rather than targeting a broad spectrum of consumers.
To identify your target market, you should:
- Examine your offering — What do your services or products provide a solution to? Who do they appeal to?
- Analyse your competitors — What services or products do your competitors offer? What problems do they solve? Can you improve on their offering?
- Create customer profiles — Put together a range of profiles for your potential customers, including demographic details like age, gender, education level, etc.
By finding your target market, you can ensure that everything you offer appeals to your ideal customer. This can help you to make your branding appealing and hone your marketing strategy. Just remember not to make your target market too niche.
3. Keep Your Overheads Low
One of your most significant advantages over established businesses is that you have more control over your overheads and outgoing expenses. Your established competitors will have ongoing contracts for:
- Employees
- Suppliers
- Office and warehouse premises
As a new business, you’ll be able to keep your overheads low. For example, rather than renting a large office space, you could choose a more flexible space that allows you to change your office depending on your needs. Alternatively, you could embrace remote or hybrid work to cut costs.
By keeping your overheads low, you’ll be able to beat your competitors on price and build your customer base. While your competition focuses on ways to cut back and save money, you’ll be making it.
4. Build a Strong Team
Speaking of your competitors cutting costs, many of them will consider making redundancies during tough times. One of the key signifiers of a recession is a sustained rise in unemployment.
As a new business, this means that a pool of talented and experienced people will be available to hire. It’s important to note that you should grow your team in line with your business and be sensible when hiring new employees.
Most new businesses have a relatively tight cash flow, so you may be unable to offer candidates competitive salaries in line with established companies. However, you can incentivise your job offer with perks, such as:
- Remote or hybrid working
- Health and wellness subsidies
- Flexible hours
- Family benefits
- Generous or unlimited holiday (within reason)
- Good company culture
Often, applicants will be willing to accept a lower salary for job security, perks and a better company culture.
5. Use Technology to Your Advantage
Just as established businesses have long-standing financial commitments, it’s also highly likely that they use outdated technology and processes. As a new business, you have the opportunity to find better technological solutions for your business that are more efficient and cost-effective.
These solutions will differ depending on your industry, so research any solutions before committing to any. If you can, speak to professionals in your industry to see if there are any common pitfalls with technology or any exciting new technologies you could use.
Start Your Recession-Proof Business
So there you have it, your five tips for starting your own business in a cost-of-living crisis and recession. By now, you should have a good idea of your business idea, target market and methods in place to ensure your success.
At this point, you still need to:
- Put your business plan together
- Formulate a marketing plan
- Create a website and social media channels
- Register your business with Companies House
Once you’ve done all that, you’ll be ready to start your business and make it a success. Good luck!
