Starting A Business That Will Thrive During A Recession!


With the jobs outlook so bleak at the moment many people have commendably decided to try and make their own money by starting their own business. As commendable as this is, lets not pretend that in times of recession starting a successful business is easy! The whole reason the jobs market is so bad in the first place is that people have run out of money and have stopped spending!

Don’t be put off though! Many people are still able to make a good living and some businesses are even thriving in this tough environment.

What factors should you consider when trying to start a business during a recession? What type of business is likely to succeed in this tough economic environment?

Before you begin it is imperative for you to know the legal requirements in the state or sovereign states that you will be doing business in. For example, in the US the requirements needed to form a limited liability corporation in California may be different from the requirements needed to form a limited liability corporation within the island of Great Britain. Some states have tax laws that favor start-up businesses, while others have more stringent regulations that actually deter start-ups. Before deciding how to build your business, do your research and ensure that you know what you must do to be in compliance with state and local laws.

Lets consider 3 things people are looking for in times of recession and more importantly are happy to spend their money on!

The Lipstick Theory

There is a principle in economics that applies more than ever during times of recession. It’s called the lipstick theory.

The theory is that in times of financial hardship people cut back on purchases of large ticket items and go for cheaper items that have a feel good factor. The theory was based around the way a woman feels when she buys something small like a lipstick. A lipstick is a relatively cheap item and the feel good factor far outweighs the cost. It can replace the feeling missing when she can’t afford to buy that £100 dress she has just seen!

This can also be seen with recent bestsellers of toys. The top selling toys over the past few years have been smaller, lower cost items. This is because parents will not deprive their children the joy of getting a new toy but may no longer be able to afford the expensive ones. The principle is to think about selling low cost items with a feel good factor at a competitive price! Which leads me onto my next point.

Value For Money

This may seem like an obvious point but in times of recession people more than ever want value for money from a product or service! A business has to compete on one of two levels, price or service! Both of these factors involve value for money but in times of recession people will be looking for you to compete on price! That is not to say that you have to disregard service but if you can find a way to provide a service comparable to that of your competitor, at a better price, your business will likely have more chance of success.

Make do and mend!

Back when the economy was booming people didn’t think twice about throwing things away when they broke. Now though people will be more likely to try and preserve what they have and make it last as long as they can.

In the Uk we have a business called Timpsons. Timpsons amongst other things mend broken or worn out shoes and boots. When times are good people are quite happy to buy a new pair of shoes or boots when they wear out or break, not so in hard times! A friend of mine who works as an accountant for Timpsons informed me that their business is booming during this recession! This is primarily because in hard times people are much more likely to repair a pair of shoes or boots than buy new ones.

If you can start a business that preserves what people have for a lot less money than it would cost them to buy the item again, you may well be onto a winner!

So to conclude, if you want to sell a product, look to provide low cost items with a feel good factor and be sure to compete on price! If you want to provide a service look for ways to preserve what people have. If your potential service doesn’t involve mending, find a way to compete enough on price that customers will use you instead of their current service provider!

2 Responses to Starting A Business That Will Thrive During A Recession!

  1. I agree with all of your points but especially the business aspect when times are tough. The lipstick theory I’m sure many people can relate to whether male or female. I agree if you can come up with a great idea where people can have you fix something for cheaper than buying it new they will come to you. Of course word of mouth and a good reputation help as well. Now if only I can think of something!

Leave a Reply

Your email address will not be published. Required fields are marked *