How To Successfully Opening A Business In A Down Economy
When the economic impact of Covid-19 hit Europe 2020, some people who were considering starting their own business in 2020 put those plans on hold. The pandemic forced companies to close and unemployment rocketing while the global stock market slammed and significantly decreased discretionary spending.
The outlook has stood bleak, and people naturally thought opening a business in this environment would be a guaranteed failure. That may be the subject with some firms in characteristic industries, but it does not apply to all.
While some companies sorrow as the economy drops, those with more robust systems can endure and better position to increase market share. This occurred during the recession a decade ago, and we can already see the same thing happening again in 2021.
Client opened a 24/7 access fitness facility in 2008. It was not considered a great time to start a business, but as some competition went away, they felt like they had an opportunity to carve out a niche in the marketplace. The fitness center was an affordable facility featuring premium equipment with an open-access concept that was unique at the time.
Ironically, they were able to take advantage of some elements of the market state as they were establishing the business. The demand for commercial real estate was down, and they were able to get an excellent rental rate and reasonable lease terms via aggressive negotiations.
Less competition led to more affordable marketing and advertising opportunities and the power to attract new customers. They also found some outstanding employees and great managers from a larger pool of candidates due to higher unemployment numbers.
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The most crucial disadvantage of opening during that time was that people were hesitant to spend money and change their lifestyle.
People tend to be conservative with their capital during economic downturns and stick with what they know.
As a result, attracting clients and growing the membership base was slower than initially planned. Luckily, the benefits helped offset those challenges.
One of the most significant benefits to their business was its industry. When people did not have jobs, we saw that they spent more time working out. Even during times when people are spending less money, they still desire to exercise. We just needed to give them an economical and functional way.
When people become concerned about the economy and its impact on their business, they must look at things from a fact-based point of view rather than a perspective based on fear.
We remind them that the most important factors are the industries in which they work and the strength of their system.
We know that the demand for many franchised services remains unaffected, mainly during the pandemic. Many are essential services such as plumbing, air conditioning, or disaster remediation services.
For these businesses, it doesn’t matter what happens if the economy is booming or if it is 2009, 2020, or following the stock market crash of 1987. Demand for these types of businesses persists regardless of the economy.
They don’t expand during an up economy, but they don’t contract during a down economy. They are the middle ground, which can be a secure and desirable place for starting a business.
The infrastructural backbone of the franchise system is also essential to its success, especially during a rough economy. The franchises with higher success rates are the ones that have better marketing, operating systems, customer attraction, and customer retention standards.
If the business has everything a customer wants, then not only will they be attracted to the concept, but they will be more likely to remain a customer.
The better the operational systems and the more valuable the structural backbone, the more likely the business will compete successfully within a marketplace. Firms with solid foundations that provide a good product or service will attract and keep customers regardless of the economic climate.
Who could find one example of this in the real estate industry a decade ago?
From our perspective, it has been a crowded marketplace with many people with real estate licenses all trying to compete in the same space. The people who established good, solid businesses and minded their foundational regulations found themselves in a perfect position because of less competition. When the recession hit, those with weaker operating systems suffered and went away.
It is comprehensible for anyone to have a sense of fear and uncertainty in opening a company while the economy is down.
However, businesses can nevertheless be successful in any economy by selecting a franchise in the right industry, a unique operating system, and taking advantage of down-market timing.
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