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Starting a Company During Economic Recession: Seize The Moment
The past few years you were wandering around with an idea, conceptualising and thinking about implementing it. You have been reading and researching how to transform it into a valuable business, comparing incubators, checking what other founders have done and evaluating educational programs. Just when you were about to get your hands on and validate it, the Coronavirus changed everything.
The pandemic disturbing the whole financial market and strongly affecting businesses and startups, decreased your initial excitement and motivation. Noticing investors are also seeing the potential risks and most of the investment rounds are postponed, you are also planning to hold up or even give up on starting your own business.
But don’t back down just yet.
With that being said every cloud has a silver lining.
Wondering where the sunshine will break through? Well entrepreneurs, that’s your task, but keep in mind a few things:
Prepare yourself for uncertainty and learn to use it as your opportunity. Always question your assumptions and test them. Starting your business will be a bumpy road, but the more insights you gather the less the uncertainty becomes. Consequently, flexibility is a must.
With such a big impact, the market will be strongly influenced, expanding some sectors but also diminishing others. TechLeap reported that in September only 20% of the current Dutch startups will have funding and cash flow. And while it may be hard to get funding during an economic downturn, as investors are risk-averse, your chances increase with a valuable idea and less competition. The only way to find what your customers value is understanding them now and in the future.
#Changing consumer demands
When building up your customer segments think about the changes an economic downturn creates. How is it going to influence your customers? What would they have to give up? What will they miss the most? Does your offer ease the pain, substitutes the product, or offers it at a cheaper price? You are on the way!
With risk-averse investors, the likelihood of being funded for selling the “painkiller” is high. The reason for that is your product/service will not only bring value, but will actually become a need, as it solves a problem in the life of your customer.
You have already found the solution, but don’t fix your mind yet. Talk to your customer and get to know them. Repeatedly. This is the way to not only understand the pains and needs, but to also validate and experiment solutions. To do that you can use Sean Ellis’ test, which is simplified product/market fit validation, which can even be executed online.
#WOW Customer Experience.
Your solution has just been validated. You think, now that I don’t have that much competition, the market is craving for my product. Be careful! Customers are way more picky in economic downturn as they spend less and are likely to search for something valuable. Designing the most suitable customer experience can not only help you engage and build relationships with your customers, but also give you some free marketing by word of mouth.
Combining a painkiller with a strong relationship will already make your customer happy. If it was not recession. Now you need to offer something cheap.
Finding a way to offer a cheap product/service or solution that saves money in a recession is what everyone is looking for. When working out your Business Model to fit the recession, look into your cost structure. Usually cutting down costs is a challenge, yet the downturn is on your side. Human resources and facilities will be far more affordable during a crisis and you should definitely have lower fixed costs which can result in a cheaper product.
Building your team may sound difficult, but with a higher unemployment rate you will find skilled staff at a low-cost. Challenges are also a great way to strengthen your team and when success comes the satisfaction will be even better.
Recessions will generally lower the price of properties, as well as office spaces. This an opportunity to find cheaper facilities where you get to work. However, as the current measures limit your office time, think about your virtual options. This makes your facilities even cheaper. Do remember team building is a bit difficult if you’re not used to working from home. Consider options to increase engagement rate and keep the connection steady.
Choosing the right timing to launch will be decisive for your success. With that being said, dig deep and find out how the crisis is expected to affect us, how long it will last and consider how you developed your value proposition. Does it apply to the current situation? Or will it bring value after the crisis? This is important as launching a product designed to solve problems related to COVID-19, when the epidemic is over, will make it useless and vice versa.
If you feel that it is time to start your company, don’t hesitate to act. Assess the uncertainty by anticipating the customer expectations, the opportunities that emerge with the market shift and the economic downturn. Create several scenarios and a plan for each. Build your revenue model. This will help you adapt quickly.
Finally, we would like to remind you that starting a company during recession will create a positive impact on the economy. Be the economic influx the world needs!
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