by Laura Gibbs
Around the world, the words 'Recession’ and ‘unemployment’ are being whispered. Governments are afraid that their reactions to the Covid19 pandemic will have damaged their economies, while individuals are clinging tightly to their jobs, hoping they will be spared redundancy amidst the latest round of layoffs. But right now, amidst a recession and global economic uncertainty, is also the best possible time to start a business.
The list of companies founded during the start of global recessions is long. Airbnb, Valuetainment, WhatsApp and Groupon were created during the 2007-08 housing crash. Disney incorporated in 1929, at the start of America’s Great Depression. The Hyatt hotel chain started buying motels and hotels just as other businesses were selling them off in 1958. Microsoft was launched just after US GDP had taken one of its worst peacetime declines.
When investigating whether this might be a great time to start a business, I enlisted the help of a friend of mine, who also happens to be a serial entrepreneur. Wilbert Wynnberg, based in Singapore, has founded 3 companies to date (FTBT Academy, AuthorRise Media and Think Act Prosper) and openly offered me advice. He said that while different start-ups use different strategies and succeed for different reasons, there are 5 main factors any entrepreneurs should really pay attention to if they want to start their company strong and scale it fast.
There are lots of reasonings behind the out of the ashes success, ranging from ‘if your business can make it through a recession, it is destined to be successful’, to ‘new problems and opportunities are created during recessions’, but whatever the reasoning, now is as good a time as ever to launch your business idea. Here are the 5 steps Wynnberg shared with me how anyone can take an idea from mind, to market, to profit, generating at least 6 figures in sales within a year of launching;
1. Have a business plan
"The first step is to have a solid business idea that’s able to solve a problem or offer a service that's needed. People pay to solve their problems. The bigger problem you help solve, the more you will get paid in return. The only catch is that it needs to solve a genuine problem that people have, so research this carefully. If you can identify something that is genuinely beneficial to a set of individuals, are able to find a way to monetise it while delivering value, and can create a plan of the steps needed to become profitable, then you have the foundation of your business." suggested Wynnberg.
Think through the idea as much as possible. What possible objections, roadblocks or problems might arise, how will you market/reach the customers, how much are they willing to pay, how much money will you realistically need to start and create the business, and how quickly can you make profit. Plan backwards from where you want to be in a year to identify key steps to take.
2. Find your investors
"You will be surprised how many people are willing to invest in start-ups. Thanks to the growth of private investing, government grants, incubators and venture capital, it has never been easier to raise money for good ideas. Add in a recession, when interest rates are slashed, and those with money are looking for potential new investments with promise."
Be clear about your business objectives from the start, have a clear plan for profitability, identify the best and worst case scenarios and include potential scalability for the future. Addressing potential downfalls is just as important to investors as future potential.
Those who invest in start-ups understand there are many ways to create disruptive businesses and are more open to risk than traditional lenders. They are looking for well researched plans and creative ideas, and are willing to take a risk on businesses that have potential. Your friends and family might also be interested in helping you with start up costs, as they know your potential more than outsiders do. Just be upfront with them about what to expect. That way, whoever backs you will be on the same page.
3. Start Grinding
You need to believe in the potential of your business, and you need to drop everything and work hard for it. So often we look at successful people but we don’t see the sustained effort across years to make that business successful. Elon Musk tweeted that 80-100 hour work weeks are needed to change the world, and Jeff Bezos started with 12 hour work days 7 days a week.
"You have to work day in and day out to grow your business. You can hire others to work for you, but they will only work as hard as the owner, never more. Your business success ultimately falls on you, and if you are not willing to put in the hours to make it a success, no one else will do it for you. Over time, once you start to see what works, double down on that, and cut your losses on what doesn’t work/pay off," said Wynnberg.
4. Reinvest profits
"As soon as companies start making money, there is the decision on what to do with it. Those who think short term will start to pay themselves, taking a higher salary to reward themselves for their hard work and start to live the ‘entrepreneur lifestyle’ on Instagram. However this is the wrong way to use profits. By reinvesting what you earn, you can potentially grow the business to be even more profitable in the future."
Instead of paying yourself a higher salary, imagine how your business could grow if you paid that salary to another employee. Or on product development. Or on marketing to acquire new customers. Amazon didn’t start becoming profitable until 9 years after it was founded - all of its revenue was going back into the business. And it took Tesla 10 years to have a profitable quarter. Think about the value of ownership rather than a salary and focus on making your business stronger and bigger.
5. Build a movement/community
No matter how much you spend on advertising, word of mouth recommendations are always more effective. The Gallup advisory company has led countless research studies on customer satisfaction and has proved time and again that businesses that deliver value, communicate well with their customers and turn their customers into raving fans are more profitable in the long run. Apple is perhaps the best example of building customer loyalty, with their marketing focused always on improving customer experience, rather than acquiring new users.
Ask for customer feedback throughout the development of your business and you might find some great ideas to delight customers or find more problems. Focusing your efforts on your first customers will help improve your business but also build loyalty, as the customers feel engaged with your development. And once they become fans then reward them when they refer friends, and grow together!
"It took me 7 months to take my first company from $0 to $100,000 in revenue. It took my second company just 4 months to hit the same amount and my third company just 1 month. Best of all, I didn't even have to raise money for my second or third business because I had enough capital to start it myself. While all three businesses are different in nature (education, consulting and events), the principles are the same. Any sustainable business requires you to have a strong plan, manage a team who is willing to grind (including yourself), a leader who is willing to reinvest the profits and a vision built on community/movement," said Wynnberg.
Creating a business isn’t difficult, it just takes a good idea and a well thought out plan. However, before you start, you need to be fully committed to making your business work, sacrificing your time and profit in the short term to create something bigger and better in the long term. Are you ready to give up your weekends now for the potential to have a 6 figure business in 12 months?