Starting a Business in the UK During a Recession: What to Look Out For

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Starting a business during a recession is possible. People will still buy and other businesses still need services. However, this is not the easiest and you will need to take a number of steps to make sure that you succeed. Having a business plan is essential during a recession so you know the direction of the company, marketing options and financial opportunities to keep the business afloat. The best part of surviving through a recession is that you will be stronger when the economy recovers. According to the staff at Real Business Rescue, here are just a few helpful points to consider.

Pick an Area that is Sought After

Not all types of startups will survive a recession. It is important to find the markets that are thriving and are called for during this time. Remember that people have very little money to spend on luxuries so they want items that last and that they need. Choose ideas careful and research the market before you start taking the steps to open your business.

Some of the most common businesses to do well in a down economy are those selling food or affordable luxuries. Food is a necessity and offering it at a lower price than supermarkets will help gain the customers to make a profit. If you are not interested in food, consider luxuries at a lower price. People still want to be able to treat themselves to offer smaller, cheaper drinks or shorter and affordable holidays.

But the Banks Will Not Loan

You need to determine a way to finance your business. It takes six months, at least, to get a startup business off the ground so you need to have financing in place during that time. The problem with a recession is banks start to cut back on the amount of money that they loan. It can lead to having to finance out of your own pocket or look to friends and family members who are willing to risk the investment.

There are government grants available for small businesses, which are worth considering. Look into all of your financial options. If you do want a loan from a bank, you will need to make sure your business plan is clear and detailed. Include how you expect to make the money back and how it will be spent. The banks need to reduce the risk and starting a business during a recession does not help them with that.

Look for Affordable Marketing

Marketing is essential for any business. Without marketing, you will never help to get your name out there and create a brand. This can cost money so you need to look out for the more affordable and effective marketing techniques. Do not opt for TV advertisements as they will not always work and cost a fortune; try smaller, online tactics first.

However, you will also need to think about your target audience. This depends on the products that you sell or the services you offer. Most people search online for businesses, so you need to make sure you are there, but some will still use the phonebook or rely on the TV. Create a marketing budget based on your target audience and never go over it. Look back over your marketing regularly to make sure it is working or to try different areas.

Control Your Cash Flow

Your cash flow is just as important as your profit. While you may be thousands of pounds in profit at the end of the year, that does not matter if you failed to pay your bills due to the way money was going in and out of your account. You will need to make sure your clients or customers pay on time and that you have the money in the account by the time your bills are due.

This can be difficult in a down economy since others are worried about their cash flow. It is possible to take steps to work to your advantage, including factoring your invoices, setting up milestone payments or asking for everything up front. Whichever you choose to do, control your money to avoid bad debt; this is the first sign you are in trouble.

It is possible to start a business during a recession but you do need to be careful. There are benefits to starting while the economy is down, as long as you consider the factors above. While you want profit, controlling your cash flow and finding the best financing option for you are just as important. Take your time and you will be on your way to a successful business.

Alex writes many business related articles for Real Business Rescue. Over the past year she has written topics relating to business insolvency and company closure as well as well as a wide spread of information relating to corporate insolvency. Real Business Rescue are business insolvency experts who offer free advice and support to company directors who face financial distress.

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