If you’re reading this article, you’re probably thinking about starting a new business. This may be something you have always dreamed of doing, or it may be that recent events have shown that being employed isn’t as safe and secure as you once thought.
However, as much as starting a new business is something you would love to do, you may be worried about the timing.
You may be asking yourself, “Is now a good time to start a business or should I wait until the economy picks up?”
There’s no doubt that we’re living in exceptional times. We’re in lockdown due to the Corona Virus COVID-19 and it’s highly likely that a recession will follow. Many experts are predicting it will take years for our economy to recover.
So, does this increase the risk of starting a business now?
In my opinion, no.
There are many reasons why now could be the best time for you to start a new business. But, this clearly depends on the type of business you’re thinking of starting. If you’re dreaming of opening a restaurant, where you need customers through the door, then perhaps this isn’t a good time. However, there are many other types of business that can thrive at times like this.
In this article I’m going to give you five points to consider, if you are thinking of starting a new business now. If you have any questions about any of them, please feel free to get in touch.
1. What do people want right now?
You may already have a clear idea about what your business is going to do.
If not, think about:
- what product or service you could provide to fulfil a need;
- how you could solve a problem your customers are facing; or
- how you could offer an alternative to something they are missing.
Recessions and difficult times create problems and if you can provide a cost-effective solution to a problem, this could form the basis of a business.
But, remember to think long term.
Whilst you are starting your business in difficult times, these times will pass. Therefore, your product or service must still be relevant after the lockdown has been lifted and the economy improves.
2. Business planning is essential
Often, when I talk to clients about writing a business plan, they think the only reason to do this is to help them raise the start-up capital they need to launch their business.
However, I look at business plans differently.
Rather than just writing one business plan, I prefer to see plans evolve. I use them as a way to map out and model different options and to identify and reduce risks.
To help do this, I encourage my clients to prepare a cash flow forecast as part of their business plan. (If you have never prepared a cash flow forecast before, you may find this article useful: “How to prepare a cash flow forecast”).
When you prepare a cash flow forecast as part of your business plan, you can see in black and white how your decisions will affect the future profitability of your business.
For example, in your business plan you will include all of your likely expenses. If you simply list them out, you will see a total figure and think that is how much money you need to start your business.
However, when you put these figures into a cash flow forecast, you will see that they do not all need to be incurred at the same time. Also, when you see the impact that certain expenses have on your business, you may decide they are not needed straight away, or at all!
3. “You don’t need more resources, you need to be more resourceful”
I don’t know who first said this, but it’s true, especially in difficult times.
I like to think that we have three key resources – our time, energy and money. All three need to be managed efficiently to ensure that we make the absolute most of them.
At the moment, you may have more time available than normal. You may not be working in your usual job so have time to research and plan your new business. However, be careful of Parkinson’s law, which says “Work expands to fill the time available.”
If you don’t manage your time efficiently, you may end up wasting the time you do have.
On the other hand, you may have less time available if you are working from home and also juggling your children’s home schooling at the same time.
You may also be finding the isolation draining and as a result your energy levels are depleted. I could probably fill a book on managing your energy levels but basically, you need to ensure you are getting plenty of exercise, nutrition and sleep. If you’re struggling with your energy levels, you need to fix this as a priority.
The final resource, money, may well be in short supply. You may have less savings to invest into your business, the banks may be reluctant to lend and customers may have less money to spend.
So, as every good accountant will tell you, you need to maximise income and minimise expenses. However, you need to do more than that. You need to generate income as soon as possible and delay incurring expenses for as long as possible.
Your business plan and cash flow forecast will help you with this, but by managing your time and energy, you may be able to make up for a shortfall in capital by launching your business sooner than expected.
For example, under normal circumstances you may have estimated it will take you six-months to launch your business. But now, could you do it in three months, or perhaps even quicker?
4. Make the most of the advantages you do have
At this time, you will have advantages. You just need to find them and make the most of them.
For example, there may well be bargains to be had. If your suppliers are facing a downturn in their trade, you may be able to negotiate discounts or more favourable payment terms. However, don’t take advantage of them. You will still need these suppliers when the economy picks up, so think about building long term relationships with them.
Likewise, if people are being made redundant, there may be a greater pool of talent available to recruit to your business.
Look at what your competitors are doing during these times. Where are they struggling? Are they being slow to adapt to a new way of working? What can you learn from this?
If you’re starting your business now, you won’t have the “this is how it’s always been done” attitude to contend with. You can start fresh, with a clean sheet of paper, and make solid progress whilst they are trying to work out what to do.
5. Take advice
Finally, please take advice. There are two types of people you should speak to – those with expertise, and those with experience. If you can find people with both, then even better!
Talking to experts will be essential to fill in gaps in your own knowledge, but not all experts will have had the opportunity to apply their knowledge in all situations. Their advice might seem right in theory, but will it work in practice?
Business (and life) follows cycles. Recessions come and go. We’ve seen them before and we will see them again. When you talk to people with long term business experience, they will know first-hand what worked for them and what didn’t during tough times.
This will be valuable information to help you navigate this recession, anticipate what is likely to follow and enable you to build a business that is able to thrive now, not just in the good times.
So, what are you going to do?
Are you ready to start your business now?
If you are and you need someone with expertise and experience to talk to, please feel free to call me. I’ve been a solicitor for 20 years and have been running my own legal practice for 14 years. I’ve therefore seen my clients through good times and bad. I’ve also done it myself and will be happy to pass on any experience I can.