Starting Up In A Recession

I was recently asked by an old colleague who is thinking of starting her own business whether she should start a business in a downturn or not...

At first I thought about giving the "standard" response about historical examples of businesses that started in recessions such as Microsoft, but then I thought better of rolling out that cliche.

Starting a business always carries a degree of risk and depending upon the type of business being started, the general macro economic factors can have a massive impact, just ask Woolworth creditors and shareholders...

But I have a slightly more pragmatic viewpoint... Unless you have funny shaped crystal balls, you'll never know if it's going to be a recession or a boom time, and frankly don't try to guess it either.

What is far more important than timing is whether or not customers actually need only your product or service, in boom AND bust times.If the answer to that is yes, then go ahead and start in a recession as you will probably succeed.

So spend the time understanding what customers need and whether or not you can meet their needs better than anybody else rather than spendign time worrying about recessions or boom times.

There's only 3 things you can sell to a business

I have been working on a number of b2b projects recently and what I have discovered is that everything they do with their clients boils down to either one of three things or a combination of three things.

Before I disclose the three things, some wider thoughts...

Businesses like people have needs. And they only buy products or services that meet those needs. But unlike people, businesses are massively motivated by the power of money, either spending it or creating it - that is their raisin d'être. To enable them to make money, they have a number of drivers, which in turn each have a number of supporting elements.

But no matter what sector, nor the size of the business, the need for buying a product or service comes down to one or a combination of these three things which fits with their core supporting elements

1. Sell more
2. Save more
3. Solve more

So quiz yourself the net time pitching to a company to ensure you are able to demonstrate to one or a combination of the three things....

Will this sell more of their products? Will it make them more money? Will they increase their frequency of purchase or their spend per purchase?

Will it save them money? Even if they have to spend more money to get this product or service will it make them more efficient over the long term on the basis of an Internal Rate of Return?

Does it solve a problem better than they can solve it themselves? Does this problem stop them or slow their business down?

And if you don't have an emphatic "Yes" to any of those questions, don't waste their time...