It’s no secret that small businesses affect the economy. In fact, the Business Development Bank of Canada (BDC) released statistics on it.
According to the BDC, small- and medium-sized businesses alone contribute 54 per cent of Canada’s gross domestic product. They also account for 98 per cent of the country’s businesses, employing more than 8.4 million Canadians.
But, when the roles are reversed, what effect does the economy have on small businesses? Many people looking to launch their startups may feel worried doing so when the economy is down.
However, economic slowdowns don’t mean you have to press pause on your business plans. In fact, pursuing your small business in this economy has its upsides.
Here’s why you shouldn’t let tough economic times discourage you from fulfilling your goals.
Lower startup costs
Despite assumptions, starting your business when the economy is down is often cheaper than doing so in a healthy market. Economic challenges of any kind are bound to impact most businesses.
But this can be beneficial for those just starting out. An economic slowdown allows you to take advantage of cheaper prices from suppliers and manufacturers, according to the BDC. You may also find that overhead costs are lower. This allows aspiring business owners to cover the costs of rent, advertisement and materials at a lower price.
Saving money is important for a few reasons. For example, your business may not work out. If so, your overall loss won’t be as big as it would’ve been if you started during an economic boom.
Also, spending little in the early stages of your business leads to fewer concerns around profitability. Since you spent less, you won’t need to make as much money to support both you and your business.
People are more likely to start their businesses when the economy is doing well. This gives you the upper hand. With fewer looking to pursue startups, there’s no need to worry about new businesses leveraging the same position as you. Instead, you can focus your efforts on standing out against the established competition.
However, pre-existing businesses will be struggling far more than those just starting out. Those businesses face budget cuts, layoffs and possible shutdowns. Meanwhile, there’s plenty of room for new business owners to steal the spotlight. Layoffs allow you to recruit experienced employees, and customers of businesses that closed down will be searching for a replacement.
As long as you’re dedicated and have a competitive edge or niche, you’re at an advantage.
The market will improve
The economy will bounce back. Times of economic hardship don’t last forever. When things improve, you’ll reap the benefits. Although you may face challenges or limitations when starting out, like stricter budgets or lower profits, they will eventually pass. Once they do, you will begin to see an increase in sales and overall revenue. Things will even out over time. When they do, the cost-efficiency of starting while the economy is down will pay off.
The customers you gain during this time are more likely to stick around. In fact, you can prove to your current clients that you are dependable and resilient when faced with sudden change. Doing so will make them more likely to stay loyal once the economy improves.
While your competitors are struggling, you can attract potential clients. In times like these, people are looking to save money however they can. If your business can offer prospective clients more affordable options than your competitors, they’re more likely to stick around long-term.
So, before putting away your business plans, remember it’s possible to find success during challenging economic times.
Melanie is the contributing editor for Business Hub. She has a background in journalism and feels very passionate about storytelling. When she isn’t working, you’ll find her listening to music (a little too loudly), rewatching the same movies she’s seen too many times or reading a really good book.