Given the unstable nature of the current employment market, it should come as no surprise that there has been a significant increase in the number of independent, VAT registered businesses. This is a response to the consistent lack of financially rewarding job opportunities that are available within the market, which is in stark contrast to the possibilities created by independent business ownership.
Even the global recession was not enough to dampen the surge in small business development, as this in fact inspired an entire generation of ‘accidental entrepreneurs.’ An estimated total of 236,000 VAT registered businesses were established during 2009 in the UK, which was significantly higher than the 205,700 that were started during 2007.
How to Ensure your Business is Recession Proof
While the ongoing economic instability may have encouraged many to create their own financial independence, however, it also poses a significant threat to small businesses and start-up ventures. This can prove to be a delicate balancing act for entrepreneurs, and one that can significantly disrupt their chances of establishing a successful enterprise. With this in mind, it is important to ensure that your business is well protected from the consequences of recession and prolonged periods of prosperity: –
Minimize Costs as a Matter of Urgency: While most aspiring small business owners understand the need to cut start up costs, the way that they go about achieving this is of pivotal importance. While many simply address individual costs to see where money can be saved, it is far better to adopt a frugal philosophy that dictates everything that you do as an entrepreneur. As an example, do not be afraid to start modestly and scale your business gradually, ensuring that it is developed in accordance with bottom line profit rather than financial estimates and projections.
Target Operational Costs Rather than Those Associated with Marketing: When consumers face personal debt issues, their first instinct is often to slash expenditure and eliminate all big ticket purchases. While this has at least some merit, however, it can have a detrimental impact on their lifestyle and cause them to resent frugality and fiscal prudence. As a business owner you must also be careful when it comes to spending, and look to make everyday operational savings that can accumulate steadily without compromising the integrity of your start-up venture. This also allows you to spend a reasonable amount on marketing, which in turn ensures that you can reach out to customers even during austere times.
Diversify your Business and its Revenue Streams: When a small business is dependent on a sole source or stream of income, it becomes extremely vulnerable to the threat of recession. It is therefore important to address this issue when you establish your business model, by looking to diversify revenue streams and create multiple sources of income. If you are looking to create an online retail outlet, for example, it may prove worthwhile to partner with more established brands and sell affiliate products through your website. This enables you to accrue income based on an agreed rate of commission, without having to invest any extra capital into product enhancement or excess marketing.
The Bottom Line
If you have a marketable skill or innovative business idea then establishing your own venture can be extremely appealing during periods of austerity. Despite this, recession also poses a significant risk to small businesses and independent ventures, as there is often a corresponding fall in consumer confidence and spending. It is therefore crucial that your develop a viable and well founded business model, which is capable of supporting long term growth and profitability.
Author Bio: This post was written by Lewis on behalf of Carfinance247. An independent car financing firm, it has evolved steadily overtime to emerge as a market leader.