TALK of a possible recession has left many would-be entrepreneurs reeling with
uncertainty. Should they go ahead and start up their business regardless, or
should they simply abandon their dream and stick to the day job?
On the face of it, starting a business when a recession might be looming
sounds crazy. But don’t throw away those business plans just yet. Provided
you choose the right type of business and go about it in the right way, you
can still succeed. And if your business can thrive in a recession, think how
it will soar when the good times come again.
Jim Surguy, senior partner of Harvest Consulting, said the secret was to
remember that, during an economic downturn, consumers will think hard about
what products to buy.
“When times are hard people will search for value, so the response should be
to make smaller versions of the same things they always buy — drinks in
half-sized bottles, or seeds not plants, or holidays lasting five days
instead of seven days.”
Another option is to keep everything the same size but “value engineer”
products down to get a lower price — in other words, reduce the cost of the
elements that go towards making it.
“You can make the packaging cheaper, you can make the plastic thinner, you can
perhaps alter the ingredients, but keep it the same size and you can then
lower the price,” said Surguy.
One example of value engineering, he said, is Tesco selling unripe fruit that
will ripen at home. “That saves Tesco having to store the fruit and ripen it
themselves, which costs them money. They are just taking money out of the
system.”
Another avenue to explore when considering what products or services to offer
in a recession, is the concept of the affordable treat. “When times are hard
you have to satisfy people’s emotional needs beyond just value,” said Surguy.
“In the last recession in the early 1990s one of the things that was
successful was Häagen-Dazs ice cream. It was luxurious in its sector, but it
wasn’t hugely expensive and so was an affordable treat.”
Ultimately, said Surguy: “If you have a good proposition and you can finance
it — and you have the drive, energy and passion — then I would say do it.
Because if you can succeed in a recession then sure as hell you will be very
successful when the clouds lift and the good times come. You will have gone
through the fire and be all the stronger for it.”
Tony Kinch is one entrepreneur who is determined not to let the threat of
recession stand in his way. He plans to launch The Real Tea Club this June,
a business based on the model of a members-only club that will sell
high-quality, loose-leaf tea. Each month members will be sent a selection of
five teas from around the world.
Kinch, who will be managing director of the business, said: “We are quite
confident that even though we are hitting a recession there are still enough
people out there who would like to join this club.
