Speaking of saving & making money in a recession, entrepreneurs can do it too. It requires some financial discipline, but it’s certainly possible. Countless businesses and smart entrepreneurs have done it. You can too.
Prices fall in recessions. That means it’s a great time to go shopping for cheap supplies, raw materials, and services. Outsourcing sites like Elance and oDesk can help you find lots of affordable contractors. A year ago, I saw software developers on Elance going for $40/hr. Now, the cheapest ones are $12/hr. The downside is that quality can vary significantly. So caveat emptor.
Renegotiate Your Vendor Contracts
This is a good time to renegotiate all of your vendor contracts for lower prices. Chances are, many of them will be willing and able to lower their prices to keep you as a customer. Try to lock in these prices with long-term contracts too (assuming you’ve got enough in the bank), so you can benefit from these lowered prices when the economy improves.
Hire the Best
It’s layoff season. That means there will be a lot of good talent on the streets. Look for them and woo them. Do everything you can to keep those smart individuals around, so that they’ll continue being there after the recession. It’s a great time to find great talent.
Learn Financial Discipline
Tough times call for strict discipline. This is what separates the script kiddies from true programmers, the boys from the men, the girls from the women. Learn how to bootstrap, trim the fat, and make smart choices. Ask yourself how each decision will benefit your business. Don’t just focus on the short-term either, tempting as that will be. The financial discipline you’ll learn now will benefit you when the economy rebounds.
Impatient for Profits, Patient for Growth
Though this is very counter-intuitive to many Web 2.0 companies, the book The Innovator’s Solution advises entrepreneurs to be impatient for profits and patient for growth. This, in my humble opinion, is great advice. If you don’t have a real business model, you don’t have a real business. At best, you have an “Acquire Me!” business, which is a horrible model, especially in a recession.
Negotiate Your Credit Card Rates
This tip works for both personal and business credit cards. Lots of credit card companies will give you a lower interest rate if you just ask. So ask! Every little bit of savings can help.
Look Into Recession-Proof Businesses
Some industries aren’t as affected by recessions as others, such as health care, funeral parlor, debt collection, and repair services. Repair services are good because people want to maintain what they have instead of buying something new. If your existing business can be extended into any of these areas, give it some consideration.
Be creative about your marketing, your products, and your services. Think outside the box for new customer solutions. As you increase your financial discpline, you should also increase your creative solutions. Perhaps it’s engaging in a catchy PR campaign or creating a viral marketing piece. Or a streamlined development process or distribution channel.
Treat Your Customers Very Well
If you aren’t getting any new customers, treat your existing customers really well. (Honestly, you should be doing this already.) Any practices you start here could be the start of new customer service practices later. Customer loyalty will come in very handy at a time like this.
Prioritize, Prioritize, Prioritize
Finally, be strict about your true priorities. What is absolutely critical to you? Every decision you make has trade-offs. If you really want those product features or direct mailers, think long and hard about the trade-offs you’ll be making – more design & development time in creating the feature or more design & supply cost in creating the direct mailers. Make a strict priority list and stick to it.
Another benefit of a recession is seeing weaker competitors drop out of the race. Businesses who don’t learn financial discipline won’t survive. So if you have a spend-happy competitor who’s been creeping into your market, don’t worry – they’ll soon be gone.
Do you have any other money-saving tips for entrepreneurs?