Recently senior adviser to the Prime Minister, Lord Young said that the slumping economy might actually be good for small and start-up businesses to boost profits and increase market share. But is he right? We think so.
With the unemployment rate remaining unchanged at 7.7% over the last few months, Lord Young's comments took a few people by surprise and many critics even thought of them as ill-timed and appalling. Regardless of what people and critics might say, we think businesses shouldn't worry too much about macro economic factors such as the recession and here’s why:
Reason 1: Odds of success remain the same
What is a recession? According to the dictionary, “It is a period of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in Gross Domestic Product (GDP). In plain English, if the economy shrinks by 1% everyone spends £99 instead of £100. However, everyone tries to achieve or realize the value or worth of £100 while spending £99. In such a situation if your product or service delivers better value for money, it will be in demand and your business will grow.
In our opinion, the national economy does not really affect the success of a start-up or a small business because you will have failed start-ups and small businesses even in booming economies the same way you will have successful start-ups and small businesses in recessionary times. All should ensure they take business start-up advice as part of their planning.
Statistically, an entrepreneur’s chances of success are the same whether he or she starts a company during a boom or during a bust - so long as you are able to find a gap and niche in a market.
Reason 2: Finding money
You might put off the idea of launching a business because of worries that the banks have cut back on their lending. According to the British Bankers' Association, “the first quarter of this year saw a rise in finance applications approved for smaller and medium businesses. More than 100,000 loans and overdrafts were approved, providing over £6 billion for businesses.” We understand that it will be hard but if you have a really good business plan and have really researched your business idea, you’ll still be able to get finance. Good local accountants will be able to guide you to financial advice for small businesses.
Reason 3: Limitations makes you more innovative
A recession and limited access to finance really forces you to focus on what is important to your business and can teach you to become more innovative as a result. You might not have the big advertising and marketing budgets that your competitors do, so finding other routes where you can be faster and leaner in your operations has become easier.
Reason 4: Failure - a necessity on the road to success?
Recessions in the past have generally witnessed a spurt in business start-ups - mostly sole traders and small businesses. This is because during an economic downturn many (if not most) people start up out of necessity. They may have been made redundant with skills in areas that other large companies are not recruiting for. Whatever the reason, these start-ups are created around personal skills and expertise which gives them a greater chance of success.
World-renowned firms such as GE, Hewlett-Packard, Microsoft and Disney all started during a recession. So if you think the subdued economy is holding you back, think again, and stop making excuses. Take that small business, and make it big. Accountants for small businesses can help you get to where you want to be.