The belief that the recession is the perfect time to start a business seems to be ringing true with entrepreneurs  in the UK.  Ninety eight thousand new businesses were launched in the first quarter of 2008 in England and Wales, despite the ongoing economic crisis. In London, 19,000 startups were created in January to March of last year, which was up by 1000 on 2007.

John Smith, Marketing Director for Small Businesses at Barclays observed: “Small business entrepreneurs are  still finding unique opportunities in the marketplace.  Clearly there is the belief that there is never a bad time to start a good business.”

Of all the new businesses that had been launched, the most popular industries were business and financial services, retail and construction.

Female entrepreneurs are not being disproportionately affected by the recession, a survey has found.

The Impact of the Recession on Women’s Enterprise – the report commissioned by the Women’s Enterprise Task Force, found that when analysed by sector women were losing their jobs at a slower rate than their male counterparts.

Female entrepreneurs were found to have more positive attitudes towards the recession, and did not want to be seen as victims in the current climate regardless of what happened to their organisations, as they feared this would undermine the hard work they had put in to grow their enterprises in the first place.

The results of the study also appeared to show that women were not dispropotionately having difficulty accessing  finances in comparison to their male counterparts.  This finding broadly ties in with research conducted by Delta Economics and Professor Sarah Carter on Access to Finance, which indicated that there was no clear evidence of differential pricing by banks for women business owners compared to men.

According to a survey conducted by SmallBusiness.co.uk, most small business owners are confident that the worst of the recession has already passed.  Over half of the respondents reported improvements in trade, or that business was starting to plateau.

110 business-owners participated in the poll, whereby just 48 percent reported a decline in trade. This follows The British Retail Consortium’s survey, which reported a 4.6 percent increase in sales in April compared to last year.

The proprietor of The Property Search group, Andy Percival, says that, although the market has yet to pick up, it is no longer nose-diving at the same rate.

Percival predicts that clear improvements in the market won’t come until spring next year. Nonetheless, he says that the general view held by industry-insiders is that the current trading climate is ‘not as scary’ as it was at the end of last year.

We’re clearly in a recession. Consumer and business spending is down; unemployment is up. The summer season is almost upon us, traditionally a slow time for independent professionals. It’s natural to wonder whether perhaps this is a bad time to be marketing your business.

Since I’ve been self-employed for almost two decades now, I’ve seen several economic cycles — and many holiday seasons — come and go. What I notice about these “down” periods is that people who frequently struggle to get clients typically think these are bad times to market. On the other hand, people who have been consistently successful at landing clients seem to believe that there is never a bad time to market. Personally, I’d vote to follow the lead of those who are succeeding.

Professionals who have built successful long-term businesses have learned that continuing to market pays off in both the best of times and the worst of times. But you may not be able to produce new results by marketing in the same old way. Here are six suggestions for how to keep your marketing up when the overall business climate is down.

1. Turn up the volume. When people are distracted by bad news, economic concerns, or holiday plans, you may need to communicate more often or more visibly. Where an email might have done the job before, now you may need to pick up the phone or send a postcard. Instead of just one follow-up call, you may need to make two or three. If your business is slowing down, make use of the extra time you have available to ramp up all your marketing efforts.

2. Become a necessity. When clients are cutting back on discretionary spending, they need to perceive your services as essential. Look for ways to “dollarize” the value of your services. How can you help your clients save money, cut expenses, or work more efficiently? Will your services help them gain more customers, increase their income, or experience less stress in tough times? Tell your prospects exactly why they need you, and why they shouldn’t wait to get started.

3. Make use of your existing network. It’s always easier to get your foot in the door when someone is holding it open. In a slow market, referrals and introductions can be the key to getting new business. Seek out opportunities to propose repeat business with former clients, too. Uncertain times encourage more reliance on trusted sources and known quantities, so warm approaches and existing contacts will pay off better than cold calls or mass mailings.

4. Explore partnerships. Working with a partner can create more opportunities for both of you. By sharing contacts, you each increase the size of your network. Together, you can multiply your marketing efforts and share expenses. A partner with a complementary business can allow you to offer a more complete solution than your competitors can. A photographer could team up with a graphic designer, for example. And you can help keep each other’s spirits up, too.

5. Meet people where they are. In a down economy and at holiday time, prospects are even more price sensitive than usual. Instead of slashing your rates to get their business, propose a get-acquainted offer. A professional organizer or image consultant could offer a reduced price half-day package for new clients. A management consultant or executive coach could propose a staff seminar instead of consulting/coaching work. Once clients see you in action, they’ll be more willing to spend.

6. Find the silver linings. When companies cut back on staff, opportunities are created. With fewer people on the payroll to handle essential tasks, downsized organizations present possibilities for project work, interim assignments, and outsourced functions. Economic changes beget other needs. People who are out of work need resume writers and career coaches. Folks concerned about their finances need investment advisors and financial planners.

Landing clients during a down period requires not just more marketing, but more strategic marketing. So instead of getting depressed by the news, get inspired by it. When you hear about coming layoffs, consider how your services could benefit those companies. When you read about negative consumer attitudes, use those words to better target your marketing copy. When prospects say, “not this year,” craft a proposal that ensures your place in their 2009 budget.

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About the Author: C.J. Hayden is the author of Get Clients Now!™ Thousands of business owners and independent professionals have used her simple sales and marketing system to double or triple their income. Get a free copy of “Five Secrets to Finding All the Clients You’ll Ever Need” at www.getclientsnow.com.
Photo credit:  This fab photo has been taken by jd

Feeling the crunch?  Here are 10 ways to beat the downward trend and keep your business on the right track.

1. Look at more at cost effective ways to market your business.

E-marketing is a very powerful and cost effective way to market your business. It enables you to send out newsletters, mailshots, special offers and loyalty schemes directly to your customers via their email address at no extra cost, you save on postage and/or printing costs too. It also encourages them back to your website to see what other services you offer. The only investment is the time needed to design your promotional e-mail material it is so simple!

2.Invest in an on-line business management tool to help you save time and money

Using a business management system that offers an ‘on-line diary feature’ to enable your customer’s access to book their appointments direct is a great way to reduce down the volume of calls and work generated for reception cover. Business tools to analyse the productivity of your staff against work load and business demand is invaluable to ensure that your business is running efficiently and recruitment of staff is being spent wisely.

3. Ensure that your business software is not costing you in the long run in hidden costs.

Check that you are not tied into lengthy maintenance & costly technical support contracts for your business software. There are a few companies now that offer business software on-line, saving you in set up fees, annual subscriptions, free maintenance and technical backup as well as data protection. You automatically get free upgrades to keep your software up to date and switching over could not be simpler. You just register and pay on line and you will be up a running within hours not days. You also have technical support via email or phone so help is at hand as and when you might need it.

4.Reduce your staff overheads with a virtual pa/receptionist.

Staff overheads are one of the first things that get cut in a recession. An excellent way to compensate staff cuts but not lose on quality of service is to look at the virtual pa/receptionist option. To ensure that you get adequate phone cover for your clinic without having to overstretch your existing resources, you can opt for a pay as you go virtual receptionist that will represent your company. She will answer calls, take messages, book appointments and send out marketing material for mail shots, create and send out invoices, update account spreadsheets etc. She is totally reliable and does not require holiday, sick or lunchtime cover, you simply use her as and when you need to – costing as little as £75 a month! A fraction of the cost of a full-time pa/receptionist.

5.Save on the cost of telephone calls

Look at reducing your phone bills every quarter by installing VoIP technology. VoIP allows you make your phone calls over the internet at the fraction of the cost of a normal phone call saving you hundreds of pounds on your annual business phone. It is really easy to set up and run don’t be put off by telecom technology.

6.Increase customer retention through improved customer care

Ask yourself not what your customer can do for you but rather what you can do for your customer. Customers are driven by both emotional and practical needs – make sure you are satisfying both of these. Look after them by offering customer loyalty cards – stop your clients using your competitors, and reward customers with referral schemes. Most important listen to what they have to say about your products and services as well as your staff, ask them to complete questionnaires – there opinion is vital to your success long term. They may even give you new ideas that you may not have considered.

8.Reduce your operating costs.

Look to see where you can save money on basic essentials i.e. stationery, raw materials etc source suppliers on-line and save money or go direct to the manufacturer and cut out the middle man. A little time spent on researching on the internet will reduce down your material and equipment costs. You can search via brand and model number and then go to price comparison sites to get the best deal.

9.Understand your customers needs better.

Keep up to date with your customers, a good customer database is an invaluable investment to your business. It allows you to share information amongst your team improving knowledge and communication as well as customer confidence in the way you implement it. A database can identify customers needs – their likes and dislikes and will provide vital clues in helping you to cross sell other products and services you offer to increase customer spend.

10. Re-assess your products and services.

Look at all the products and services that you offer in relation to how much you sell and how profitable they are. At times it is necessary to eliminate treatments that are simply costing too much to operate i.e look at materials and labour costs in relation to net profit. The products and services that are the high profit earners are the ones that you and your staff should be pushing make sure you all understand this. Or look at your existing products and services and ways to save money on materials and time but not compromising quality of service.

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About the Author: Claire Hibbert.  Claire is the Marketing Director for icomplete.com. Claire left a career in the video games industry to launch her own beauty salon in the late nineties. It was while managing her small business that she had the “eureka moment” that would lead to icomplete.com, and the concept of a fully integrated, complete business management solution.

Photo credit:  Photo from Flickr, taken by Bitzcelt

Economic downturns tend to be self fulfilling. We all help to drive market conditions, so if we all decide to ‘batten down the hatches’, and become more risk averse we all contribute to prolonging a downturn. However though it may sound counterintuitive, an economic downturn is as good a time as any to start a new business. This short article discusses how entrepreneurs can bootstrap their way to success, by describing what it means in practise and suggesting some benefits to bootstrapping.

While certain businesses will struggle to get off the ground in a recession (in particular ones that require significant investment), for others, the time is as good as any to take the plunge. For a start, there tends to be a wider pool of qualified candidates available to work as unemployment rates increase. Similarly some companies may reign in marketing spend so there is a greater opportunity to market at more competitive rates. Finally, there are also stronger disciplining forces at play when conditions are tougher as people keep a much closer eye on outgoings. In short, it is a perfect time to bootstrap a start-up.

What is bootstrapping?

The phenomenon of bootstrapping is simply starting a business without external funding such as venture capital (VC) funding. The aim is to maintain a strict discipline on cash flow by managing costs very closely and trying to get the company up and running as cheaply as possible. By ensuring as low a cash burn rate (rate at which a company uses up cash) as is feasible, you increase the chances of your business succeeding. Similarly, without any debt repayments or obligations to shareholders you can afford to be more flexible with your idea. Other commentators, such as Seth Godin, believe bootstrapping is as much a state of mind (1) as anything.

Of course, bootstrapping is not possible for all start-ups as it will depend on a number of factors ranging from the nature of the product or service, whether the business is capital intensive or not, and whether low-cost guerrilla-marketing techniques are suitable in the industry context, etc.

What does it mean in practise?

For me, bootstrapping means behaving very smartly at every cost point, given there is no external investment in the business. It means entrepreneurs consume business essentials only and are constantly looking for innovative means to substitute costs out of operations. It means resourcefulness, and plays to the fact that larger companies are less nimble than start-ups.

The phenomenon of bootstrapping can be viewed in stark contrast to the excesses of the ‘Dot-com’ boom. During this period, companies secured significant funds from financiers and some of these investments were squandered or invested in non-revenue-generating assets such as perks. This profligacy typified a classic case of the ‘Principal Agent problem’ (2), which occurs when the incentives of management and investors are not aligned and management (agents) spends money on items (perks) which are not aligned to generating a return for investors. These included water features in receptions, chill-out rooms replete with table football, offices in prime locations and generous expense accounts. With bootstrapping there is no scope for excess. The sole focus is getting the company running without incurring any non-essential costs.

What are the benefits of bootstrapping?

One immediate benefit of bootstrapping is that you are not reliant on outsiders for funding. As a result there is greater flexibility afforded you, the entrepreneur, as you put your ideas into practise.

Similarly, if the business fails to take off it is less painful to exit as the cash burn rate will have been low, so there are no significant losers. However, if the business takes off the rewards are not dispersed to third parties. Once there is proof of concept and evidence of demand, it is a lot easier to secure financing at more favourable rates.

Finally, with bootstrapping, incentives tend to be aligned so those that invest their time are rewarded accordingly, which typically leads to greater focus and reduced agency costs (see Principal Agent problem above).

Bootstrapping ideas

Bootstrapping includes outsourcing certain activities, so you pay on a usage basis rather than bearing the full cost. It also means negotiating hard with every supplier you deal with and eschewing capital expenditure in favour of renting or leasing. The following represents a list of some typical bootstrapping behaviour:

* Purchasing office equipment on eBay
* Using a virtual office assistant system rather than a full-time secretary
* Choosing efax solutions rather than buying a physical fax machine
* Using Open Office or Google Docs for word processing instead of Microsoft Office
* Promoting your offering through blogs, commenting on blogs and other relevant forums
* Hiring staff that are generalists and are happy undertaking a range of varied tasks
* Remunerating staff with stock options rather than high salaries

Additional examples can be found in Jason Calacanis’ excellent article called ‘How to Save Money running a Start-up’ and the article by Guy Kawasaki entitled ‘The Art of Bootstrapping’.

The Starbucks office

A major cost for any new business is rent. However, increasingly it is becoming more popular for people to start from their home or a small, flexible rental arrangement. As a result of these trends and the increased ubiquity of wireless, more and more companies are bootstrapping by using Starbucks as their meeting rooms.

Dangers of bootstrapping

While certain aspects of bootstrapping are clearly useful, it is important not to overstep the line. There needs to be some reasonable amount of cash available. Excessive thrift can be counterproductive and can send out the wrong signals to staff, customers and prospects alike. The objective is not to become compulsive in managing the costs or to expect a company to successfully develop on nothing. As always it is a question of balance. You do not want to lose credibility by being noticeably focused on bootstrapping, but you do want to manage your cash position to move the company forward.

Summary

Bootstrapping is an increasingly popular way to start a business, regardless of the economic conditions. Naturally it is more conducive to certain businesses, such as Internet based businesses, where initial costs can be managed until there is clear evidence of demand. Once the idea you are bootstrapping gains traction and revenue begins to increase, you may then need to switch out of bootstrapping mode. At this point it may be appropriate to seek external funding from the likes of VCs. However once you have proven the concept, the risk for investors reduces a little and hence you should capture more of the upside as you need to give away less equity. In short, the aim of bootstrapping is to keep a low cost base to ensure you can gain a foothold in some market and to generate a sufficient return so you can then assess how best to proceed.

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About the Author: Alan Gleeson is the Managing Director of Palo Alto Software, Ltd., creators of Business Plan Pro® 11.0. He holds an MBA from Oxford University and an MSc from University College, Cork, Ireland. For further information on business planning visit http://www.bplans.co.uk and http://www.paloalto.co.uk