Article | August 12, 2021
Starting a small business is challenging due to tough economic times in this pandemic. However, this time is both a blessing and a test to conquer.
The world economy has suffered significantly because of COVID-19. Additionally, the tough times exposed company owners to unforeseen and unfathomable difficulties and compelled them to devise novel business methods. As a result, starting a firm became more accessible, as new owners could enter the market with specific recession-savvy equipment and techniques.
Crucial obstacles to beginning a new small business during challenging economic times include:
A sluggish economic recovery.
Uncertain consumer spending.
Funding was becoming scarce due to tight credit markets.
According to The Wall Street Journal, numerous major financial institutions, including Bank of America, Chase, and Capital One, have tightened lending rules in response to the uncertain financial environment.
Despite the challenges mentioned earlier, a new small business can succeed with proper preparation and business strategy.
According to New Business Statistics, applications fell to slightly more than 1.1 million in the 4th quarter of 2020 before increasing to 1.37 million in the first quarter of 2021. Then the figure increased to 1.44million in the second quarter. More than 448,000 new company applications were lodged in June 2021 alone. Mentioned statistics show that launching a small business during this economic downturn is also possible, albeit with some caution.
This article will put forward a few tips to be considered when going for a new small business in tough economic times.
Create A Well-Researched Business Plan
2020 was one of the challenging economic times in history. The success of every firm is contingent upon its business plan; small business owners must have a well-researched business plan. Therefore, small business survival is heavily reliant on a sound and well-planned business strategy.
Since tough economic times have altered market demands significantly, you should build your company plan accordingly. Work on many business factors such as marketing costs and tactics, budget planning, pricing strategy, sales strategy, personnel capacity, and needed infrastructure, among others.
Difficult economic times may work to your advantage as well since fewer competitors mean less competition and lower overhead expenses.
Consider all the obstacles associated with the pandemic's time and tailor your business plan accordingly. If you intend to pitch your firm to investors, your business plan does not have to be complex.
Securitize Capital for Investment
The economy received a significant blow due to COVID-19, and many financial lenders tightened their lending requirements by demanding a higher credit score and income verification.
Numerous financing alternatives exist, including personal savings, personal or small business credit cards, bank loans, venture capital, crowdsourcing, and angel investors. Before considering pursuing any of the mentioned options, consider having your business plan examined by expert advisers, close friends, or a loan officer.
With a well-planned company strategy, it is feasible to securitize funds for investment. However, before getting funding, ensure that you have a financial backup plan in place for both your business and personal affairs. Then, budget carefully to ensure that you can afford the other critical payments.
Credit cards are the most often used form of financing amid tough economic times.
Enlightened Market Savvy
Evaluate your redesigned company plan and develop game-changing new marketing components that include innovation. By narrowing your focus, you increase your chances of success.
Keep a careful watch on your competitors to develop an intelligent marketing and promotion strategy and budget for marketing. Competitive assessments educate you about your competitors' strategies and advertising tactics. In addition, competitive analyses can provide you with the vision necessary to develop polished and intelligent marketing strategies.
You need to make a list of what you're giving. For example, what is the nature of your product/service? Who is your target audience for your business? Which social media platform would you utilize to promote your business?
By segmenting your clients, you may increase the effectiveness of your marketing. For instance, if your firm sells sports items, you should target young clients interested in pursuing a career in sports. This will ensure that your marketing approach is highly effective.
Utilize Cutting-Edge Technologies
Cutting-edge technology in businesses is the newest trend in reaching out to customers in a tough economic time. By leveraging contemporary technology, you may automate several areas of corporate operations, resulting in cost savings.
Utilize cutting-edge digital technologies such as cloud-based apps and software to streamline company processes while being cost-effective.
Online marketing, namely online advertising, may help you reach out to the relevant audience and offer your products and services.
Several advantages of contemporary technology include the following:
Increased brand visibility.
Additional payment options.
Easy remote operation.
More in-depth market research.
Act with Consummate Customer Service
When you give outstanding customer service, you may build stronger customer relationships. Conversely, as is frequently stated, one negative review from a client may jeopardize your entire existing customer.
It is critical to provide timely and pleasant service to your consumers, especially in tough economic times. Excellent client relationships do not arise by accident; they require much effort.
You can give excellent customer service and keep your clients satisfied by following the below tips:
Make your consumers feel valued for their patronage.
Anticipate and resolve client issues before they become a significant issue for your organization.
Attend to their inquiries and respond. They are deserving of being heard and appreciated.
Provide an excellent support network and a diverse array of client resources.
Anticipate what services the consumer will require in advance.
Develop A Robust Networking Infrastructure
Networking is pivotal for reaching out to consumers during tough economic times to start a small business. Connect with other entrepreneurs, meet your competitors, visit your suppliers, and keep a contact list of everyone you know.
Expanding your network enables you to establish relationships with people; in exchange, they may suggest clients to you and vice versa, thus assisting in the growth of your organization.
You can join a local business networking organization, attend business seminars, or become a member of professional associations. Exchange business cards, exchange information about your product/service supplied and seek out their experience or perspectives, which they will share with other small business owners, assisting you in expanding your network.
Often, the small business owner's networking activities provide the most extensive returns in their firms.
How can you start a small business with tough times?
You may establish a small business during difficult economic times and succeed. The key to success is building a well-researched and solid business plan, getting adequate finance, designing an intelligent marketing strategy, and cultivating vital networking.
How do you deal with tough economic times?
While difficult economic circumstances can make any company owner anxious about making choices, it is critical to be mindful of the economy and cautious with long-term planning. Concentrate on rivals' methods and entice clients away from them. Try to learn from their successes and mistakes and provide your consumers with something more or different from what your competitors provide.
How can small businesses engage customers in tough economic times?
Provide your consumers with unique discounts on your products/services. Respond quickly to their questions or concerns, establish a customer loyalty program, and engage them on social media.
"name": "How can you start a small business with tough times?",
"text": "You may establish a small business during difficult economic times and succeed. The key to success is building a well-researched and solid business plan, getting adequate finance, designing an intelligent marketing strategy, and cultivating vital networking."
"name": "How do you deal with tough economic times?",
"text": "While difficult economic circumstances can make any company owner anxious about making choices, it is critical to be mindful of the economy and cautious with long-term planning. Concentrate on rivals' methods and entice clients away from them. Try to learn from their successes and mistakes and provide your consumers with something more or different from what your competitors provide."
"name": "How can small businesses engage customers in tough economic times?",
"text": "Provide your consumers with unique discounts on your products/services. Respond quickly to their questions or concerns, establish a customer loyalty program, and engage them on social media."
Article | July 29, 2021
The first and crucial part of building your small business is setting up finance for your business. Overhead costs for small businesses are also included in this broad category of business finance. An old proverb, “You need to spend money to make money,” gels perfectly with the business notion.
Business owners spend a lot of money creating a product or service, which is considered “direct costs.” Some expenses are not directly related to the creation of a product or service but aid in the operation of your business; these are referred to as "overhead costs" or "indirect costs." However, from an accounting standpoint, overhead costs are not considered expenses at all.
Small business owners have a lot of costs to consider especially overhead costs. Here are a few examples of overhead costs: a business license, accounts payable, invoices, office supplies, accounting, and legal fees, bank fees, and many more to pen down.
Business owners are behooved to be careful and make sure that their expenses should not outweigh their income. Business overhead is one area that most businesses face, and it is worth investigating further and managing it accordingly.
Overhead expenses consume most of the remaining space on your profit and loss statement. However, cutting your overhead costs will improve your business finances.
Let us further discuss few aspects of overhead costs and how to reduce overhead costs for small businesses.
What Are Overhead Costs?
Overhead costs are the indirect but requisite expenses for running a business. These costs do not directly generate revenue for the company, but they do not change as your business grows. Overhead costs must be borne even if no products or services are produced or sold for a period and cannot be
Here are few examples of overhead costs for small businesses:
Electricity bill, gas, water, internet, etc.
Rent for office spaces, warehouses, etc.
Business licenses and permits
Marketing and advertising materials.
Salaries and wages
Insurance for vehicles, employees, and properties.
The key is to keep track of your overhead costs and not let them interfere with your efforts to grow your business and turn a profit.
Once your concept of direct and indirect costs is cleared, the calculation of overhead costs becomes relatively easy.
Types of Overhead Costs
The overhead costs are divided into three main categories that can directly affect your small business fixed costs, variable costs, and semi-variable costs. Fixed costs are easily trackable. Below are few types of overhead costs for small businesses.
Fixed Overhead Costs
The majority of your business expenses fall under fixed overhead costs and do not change regardless of the profit earned by the company or change in the level of output; it remains the same each month. Fixed costs are easily tracked and managed as well.
Fixed costs are pretty predictable and are required to keep a business running smoothly.
Few examples of fixed overhead costs
Renting a manufacturing facility or a corporate office.
Fixed asset depreciation expenses.
Software subscription fees.
Fixed overhead costs are stable and do not deviate from the amounts budgeted for them. However, there are a few exceptions, such as if sales exceed what the company budgeted for, in which case fixed overhead costs may rise as new managers and administrative staff are hired. More employees are added to the company.
Similarly, if you decide to purchase a few additional pieces of machinery to increase production, this will result in a permanent change in fixed overhead costs.
Variable Overhead Costs
Variable overhead costs are those that change depending on the business activity, such as sales volume. Variable costs rise as your sales rise and fall as your sales fall. Variable overhead costs, as opposed to fixed overhead costs, vary from month to month.
Here are some examples of variable overhead costs:
Maintenance of equipment.
Unless the number of workers increases or decreases with production volumes, the labor involved in the production, or direct labor, may not be a variable cost.
Semi-Variable Overhead Costs
Semi-variable overhead costs have qualities of both fixed costs and variable costs. A business may incur such costs at any time, though the exact cost will vary depending on the level of business activity.
Utilities are classified as a semi-variable expense. These costs are only fixed up to a certain level of output. For example, the office’s electricity bill is a monthly cost but varies as per the season.
Semi-variable overhead costs include:
Utilities (power and water costs).
Company vehicle expenses (i.e., gas).
Ways to Reduce Your Overhead Costs
Going paperless is a simple way to save money. Although it may not appear to be a high cost, paper and ink do add up. Instead, adopt technology such as a cloud-based system to store all of your vital corporate data online. This will save you time and money while also allowing you to keep track of details for a more extended period. In addition, going paperless is cost-effective too.
However, going digital also reduces clutter and makes it easier for business owners to stay organized. In the event of a computer or program failure, make sure you have a backup of all your documents.
Going paperless is an intelligent decision to reduce overhead costs for small businesses because of few advantages such as being environmentally friendly, easy access, and digital file system easy to organize.
Create a Systematic Purchasing Process
It's a good idea to appoint one person in the company to handle, examine, and authorize purchases so that he can see all the expenses that management plans to incur before they're paid. In addition, negotiating contracts and placing office supply orders should be the responsibility of this person.
By putting one person in charge of purchasing, that individual can devote all of their time to finding the most incredible deals. The individual in charge of purchasing should be a skilled negotiator who is not hesitant to ask for a discount. Request that your purchasing manager go shopping for better prices on the things you buy frequently. Consider rewarding your purchasing agent with a bonus if they achieve specific cost-cutting goals without sacrificing quality.
Purchasing equipment such as computers, photocopiers, and other necessities every year is a significant expenditure. As a result, leasing equipment is frequently the best option for businesses looking to reduce monthly costs. Renting or leasing equipment makes it easier to upgrade to newer versions of computers and other equipment. Additionally, while leasing, costs such as equipment repairs and maintenance will be reduced if not eliminated.
Tax benefits are frequently available for equipment leases. In addition, depending on the lease, you may be able to claim your payments as a business expense by utilizing specific legal provisions.
Leasing equipment is one of the most productive ways to reduce your overhead costs for small businesses.
Market to Your Existing Customers
Marketing to your existing customers can be a good strategy to reduce costs. This step reduces your marketing costs and shows that you care about rewarding loyalty, which gives your brand a boost.
Customers who are happy with your products or services are more inclined to tell their friends and family about them, and word of mouth is still the most effective marketing method.
Organic promotion from peers is more likely to be trusted by potential customers than paid advertising.
Choose a Business Credit Card That Suits You
Choose the best business credit card that suits you for your business expenses. Your company can benefit from credit cards in several ways. For example, Cash-back benefits, travel miles, or a point system are all available on cards targeted for corporate use.
When buying office supplies and paying for travel expenses with a credit card, these incentives can pile up quickly. First, examine the annual fees and interest rates associated with your credit card. Then, it could be time to apply for no-fee credit cards with lower interest rates.
Choose a credit card that is ideal for your company, particularly in credit limits, interest rates, and fees. This could be one of the methods to your cost-cutting.
Frequently Asked Questions:
What are typical overhead costs?
Overheads are business costs associated with the day-to-day operation of the business. Accounting fees, insurance, advertising, legal fees, interest, labor burden, rent, supplies, repairs, taxes, travel expenses, phone bills, and utilities are examples of overhead expenses.
How do you calculate overhead costs for a small business?
Divide the total overhead costs of the business in a month by the monthly sales to calculate the overhead rate. To calculate your overhead rate, multiply this figure by 100. A lower overhead rate indicates greater efficiency and profits.
Are overheads fixed costs?
Typically, overhead does not fluctuate with increases in product production, which is why it is a fixed cost. Mortgage or rent for buildings such as the corporate office are examples of fixed costs.
"name": "How to write resolutions for small businesses?",
"text": "Examine all aspects of your small business from the previous year to create a solid list of resolutions for the coming year. Consider your successes and failures and work to alleviate them."
"name": "What is a resolution for a business?",
"text": "In business, a resolution is a proposal made during a meeting of the company's shareholders or directors. It is discussed, and its approval represents an official confirmation of any action that the company will take. Resolutions are classified into four types: elective, extraordinary, unique, and ordinary."
"name": "Why should every business have a resolution?",
"text": "Resolutions help to focus your efforts and energy on new goals and reaching new heights. In addition, resolutions enable business owners to understand where they can increase efficiency and grow over the coming year."
Article | February 26, 2020
Kudos if you have a website for small your business because many small business owners still don’t have websites for their businesses. According to the latest survey from Visual Objects, about one-third of small businesses (29%) plan to begin using websites for the first time in 2020. Needless to say, a good website can work like a well-oiled machine to generate leads. However, not all small businesses have websites. In fact, around 36% of small businesses are working without websites, states the Small Business Association (SBA).
Article | April 13, 2020
Competition is fierce in the business world no matter what your industry and competition can be daunting—especially for small business owners. However, agile entrepreneurs have access to a tool that may give them an advantage over the big players. It’s relatively new to the business world and it’s HOT. Young people most definitely remember Kesha’s 2009 hit single “Tik Tok,” but are you young enough to know about the other TikTok? It’s a short film-based app for 15-second videos. Teens are the primary users, but it can be beneficial for small business owners as well. So, how can TikTok help your small business? Here are just a few ways.