The cost of living crisis in the UK has dominated the news cycle for the last 18 months. Every day we see stories about rising energy and food prices and people struggling to make ends meet. The crisis has multiple causes, including the war in Ukraine, Covid-19, Brexit and supply chain issues.
So naturally, you might not think that now is the right time to start your own business.
But tough economic conditions can present entrepreneurs with unique opportunities. There are plenty of huge companies that started during a crisis. In the UK, Wilko, PC World and Sipsmiths all started in recessions. Globally, half of all Fortune 500 companies were started during a crisis.
So whether you’re considering starting a business as your primary income or as a side hustle, it’s definitely possible to succeed. But the art of creating a successful business during an economic crisis is getting everything, or almost everything, right at the start.
But how do you get things off to the right start?
To this end, we contacted business formations expert Rajesh Velayuthasamy from Mint Formations. We spoke to Rajesh about his top tips on starting a business and thriving in a cost-of-living crisis.
Tip 1: Focus on the Essentials
During any economic downturn, consumer behaviour shifts. Luxury spending takes a back seat, and essential goods or services become the primary focus:
“In times of a squeeze, people stick to essentials. Things like food, healthcare, utilities and affordable entertainment are considered essential spending. If you can spot a gap in these areas and make it your own, you’ll be well-positioned for success. Maybe it’s better prices or quality. There’s always room to stand out, even with the basics,” said Rajesh.
Understanding these behavioural shifts and identifying a niche within these essential sectors can provide a steady market and income.
Consider the food industry. Despite economic fluctuations, people always need to eat. A business that offers unique solutions within this sector, like affordable meal kits or organic produce delivery, can thrive.
What to do: Carry outthorough market research. This helps identify essential goods or services within your area of interest. Explore new ways to deliver these essentials that stand out from the competition.
Tip 2: Make the Most of Digital Platforms
The digital age has opened up tonnes of opportunities for businesses. With the right digital platforms, businesses can reach global markets from anywhere.
“The power of digital cannot be underestimated, especially during a cost-of-living crisis. Digital platforms are a cost-effective way to reach customers, deliver products, and even run your entire operation.“
“There’s a platform for almost everything. You’ve got eCommerce platforms to reach a wider market, social media for marketing and customer engagement, and cloud-based collaboration and project management tools. And be sure to keep an eye on AI tools,” said Rajesh.
A handmade jewellery store, for instance, could leverage eCommerce platforms like Etsy to boost sales. It could also use social media channels for marketing and automate customer service with chatbots.
What to do: Identify digital platforms that align with your business operations. Incorporate these tools to enhance reach, improve efficiency, and reduce costs.
Tip 3: Be Flexible
Economic crises bring changes, but within these changes lie opportunities. Flexibility in your business model, and the ability to adapt when necessary, can be the difference between success and failure.
Rajesh said that “Flexibility is key in a crisis. The business landscape can shift quickly, and you need to be prepared to adapt. This could mean altering your product offering, adjusting your business model, or even rebranding. Being open to change and having the ability to adapt quickly can help your business weather the storm and emerge stronger on the other side.”
Consider the restaurants that, during the lockdown, shifted to home delivery models. They adapted to the circumstances, meeting their customers where they were.
What to do: Ensure your business model has room to adapt. Regularly review and adjust your strategies to meet changing market conditions and customer needs.
Tip 4: Look for Funding Opportunities
External funding can provide a valuable lifeline when the economic waters are choppy. Numerous government schemes, grants, and funding opportunities are often available to support businesses during a crisis.
“While starting a business during a cost-of-living crisis may be challenging, there are funding opportunities that can make it easier. Government grants, low-interest loans, and even crowdfunding can be viable options.”
“It’s important to research these opportunities thoroughly and take advantage of those that work for your business. Having funding can give your business the money it needs to take off,” said Rajesh.
For example, in the UK, schemes like the government’s Startup Loan Scheme or regional and industry-specific grants can provide crucial financial support for startups.
What to do: Take the time to research funding opportunities available to your business. Apply for relevant schemes and grants to help stabilise your finances during the crisis.
Tip 5: Get Expert Help
The entrepreneurial journey can be daunting, especially when you’re navigating through a cost of living crisis. During these times, expert assistance can be invaluable:
“Don’t be afraid to seek expert help. This can be from mentors, business advisors, or professionals in your industry. Their insights and advice can help you navigate the tricky business landscape during a crisis.”
While it’s possible to do everything yourself, it takes time and can be expensive, and you’ll probably make mistakes. Having expert guidance can significantly improve your chances of success,” said Rajesh.
For example, when you’re starting your company, you’ll need to register it with Companies House. If you do this yourself, you’ll need to understand and complete multiple steps to comply with Companies Houses’ requirements. Whereas if you use a company formation agent, they’ll do everything for you and guarantee success for a small price.
What to do: Don’t be afraid to seek out expert assistance. Identify areas where you need
advice and engage professionals who can help guide you on your journey.
Ready to Start Your New Business?
Times are tough. No doubt about it. But as Rajesh reminds us, it’s in these tough times that innovation can truly shine. Focusing on essentials, staying flexible and tapping into expert knowledge can make the difference between floundering and flourishing.
Look at Wilko, PC World, Sipsmiths, and those Fortune 500 companies — they all got their start in trying times.
The bottom line? Don’t let the cost-of-living crisis deter you from your entrepreneurial dreams. Rather, see it as a nudge to think smarter, be more resilient, and find those hidden opportunities. Who knows? You might just be the next big success story coming out of a crisis.
