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5 tips for a successful business in a recession

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As the US Federal Reserve raises rates again to contain inflation, many economists watch with concern as the global economy begins to slide into a downturn, with some arguing that we are already in a recession. Due to this downturn, many potential entrepreneurs are considering whether to start their business or wait for the recession to pass.

The world was similar when I started my business in 2009. There was a lot of panic, fear and uncertainty about what the future would bring. However, I continued with my business and by the time I sold my agency nine years later, I had hit the record 70 startups. I faced many of the same challenges entrepreneurs face today and saw how the startups I represented were able to succeed despite the recession. Based on this experience, here are five tips that will help your business thrive during a recession.

Related: 6 Proven Business Marketing Strategies for Growing During a Recession

1. Provide an evolving business model

One of the most challenging things about starting a business during a recession is competing with the legacy players in your industry. Customers during a recession are more risk averse and less likely to try the ‘new kid on the block’. Therefore, you need to understand the mindset of your potential customers and come up with a business strategy that is flexible enough to accommodate them.

As a newcomer to an industry, you are in a better position to identify the structural pain points and shape your strategy around these points to help customers realize you are the best fit for them. Being flexible in how you operate can cause an industry paradigm shift that will help you weather the downturn in the market.

2. Undercut Your Competitor’s Prices

The most important thing people think about during an economic downturn is money and how to spend less of it. It is essential to understand that most potential customers care about their bottom line. To take advantage of this mindset, you need to make yourself cheaper than the competitors in your industry.

While being cheaper means less profit in the short term, you can prove yourself to your customers and improve your reputation. Over time, you can build a strong and sustainable customer base. This means that you will have to be extremely careful with the profits you make at first. Make sure you don’t spend more than you have and make every penny paid count.

Related: 5 Ways to Support Business Growth During a Recession

3. Create value by innovating

If your business is to survive, it must add real value to your industry. As in 2009, fear and panic are starting to set in and many industries will “cut the fat” of low-value companies. Low value doesn’t mean they have low valuations, but it means they don’t bring anything new or innovative to their industry, and their industry won’t be affected by their demise.

They are companies that consumers realize are not essential to their needs, and they are likely to be among the first to leave if the economy fails. If you can start a business with real content, innovation, and value in your industry, you’re much more likely to succeed in a recession.

4. Position yourself strategically

In this uncertain time everyone is having a hard time. Businesses will fall, budgets will shrink and the short-term outlook can seem terrifying. However, as an londonbusinessblog.com, you should view this time as a “levelling the playing field” as companies in various sectors begin to decline or reduce their market share. Try to be optimistic and see the glass as half full as this is an excellent opportunity to find the perfect niche in your industry to grow your business.

Entrepreneurs should look for cracks in their industries. Which companies are likely to fall and why? Where are there openings in the market? And how can you place your company in that opening? This is an exciting time of industry reshuffle, and if you play your cards right, you can come out of the recession with a winning hand.

Related: 9 Smart Ways to Make Your Business Recession Proof (Fast)

5. Never give up

While starting a business requires perseverance at any time, you need perseverance during an economic downturn as the challenges and rejections you will face will only increase. Combine your perseverance with guts and the ability to adapt to constantly changing market conditions and you will be able to soar higher than you ever thought possible.

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