7 Smart Decisions For Those Running or Starting a New Business In a Recession
For those “entrepreneuring” their way through this recession
Running a business, any kind of business, is a herculean task. It requires insane time management skills, people skills, frugality skills, rapid fire thinking, tons of mental stamina and a won’t-take-no-for-an-answer attitude.
And that’s on a good day.
Running a business in the middle of a recession, well, you either have to be out of your mind or part of the millions of (un)fortunate entrepreneurs hustling in the country called Nigeria in 2016.
There’s a silver lining though.
While it may sound counterintuitive, in many cases, starting with a small amount of capital is preferable to launching with a large chunk of cash. That’s because it makes you pause to ask the all important question intermittently: Is this absolutely necessary? Do we absolutely need to do this?
Ask that enough times and you’ll be the next Scrooge McDuck.
Either way, you’ll have to switch your budgeting and frugality skills to uber mode if you, your business and your sanity are going to survive this recession. The trick is to run your business as though you’re on a limited budget. Because, let’s face it — money is never enough.
Here are some things to keep in mind:
- Cut out the cost of office space
Office real estate is one major blackhole for capital. Landlords aren’t smiling either so it’s not like office spaces are gonna get any cheaper.
Your first option is to takethe coworking route. The average coworking space would cost you around N40,000 a month. That’s N480,000 a year. On the other hand, a traditional office space would cost somewhere between N600,000 and 1 million.
Do the math.
If the numbers make sense, and it should, we can help you get started with shared workspaces in Lagos. (See bottom of article).
Your next option is to work out of your home office. If your home doesn’t have an office, you should build one, pronto. That way, you’ll be getting an office and a home for the price of one. Many of the tech behemoths today (Amazon, Google, Apple) started in someone’s apartment or garage. If a garage was good enough for Bill Gates and Stve Jobs, let it be good enough for you.
2. Leverage on Barter
This transaction method dates as far back as 1555 (yep, we’re digging that deep into the bag of tricks).
Listen, your transactions don’t have to be cash based. You can get more value when people pay you in kind instead. For example, when one of the Buffrspace founders was looking for an office space in 2012, an office space in Yaba space was going for about N750,000/annum. That was too much for his budget. Fortunately, some guy in his church wanted a website. The standard cost of designing a website was N120,000 per website. But the church guy said he didn’t have that kind of budget so offered instead to pay N50,000 plus free workspace.
So for N50,000, our founder got a serviced office space for a whole year, for “free”. The highest expense he had was fueling the generator on weekends.
3. Engage your network of family and friends
Nobody can be as invested in the success of your business as family and friends. The only other folks who are that invested are your employees but you pay them to do that.
Depending on how amiable you are, your family and friends should end up being your first customers and product or service evangelists.
Think about it.
If you have family and friends “working” for free, that drastically reduces your customer acquisition cost. Which is something all entrepreneurs pray for daily.
So start calling in favours. Beg. Blackmail. Anything to get them onboard.
4. Use the free version. Always the free version
Use the free version of every software and service you need, for as long as you can. A lot of those services are designed to lure you in with the free versions, but sometimes, if you temper your expectations, the free version is all you really need.
5. Embrace the sharing economy
Why own 100% of something when all you need is 20% of it once in a while? For example, if you’re into agriculture, you’ll only need a tractor intermittently, not everyday. So there’s nothing stopping you and a few other farmers to pool together resources and purchase a tractor. And then draft a timetable of usage.
In such situations, regardless of the industry, sharing is wiser and more cost effective than acquiring. Pooling resources together means more value for less the price. It also means shared risk, shared capital and ultimately, better business.
6. Hire interns and corps members for your repetitive tasks
Think of this as a knowledge-for-service exchange. You need more hands to handle your low level and intermediate tasks. Maybe even marketing. These are usually repetitive tasks that take your time but require no high level decision making.
The interns and corps members on the other hand, need experience to be relevant in today’s labour market.
Working together would benefit both parties.
That doesn’t mean you won’t pay them but you pay less. Note, cheap labour doesn’t mean slavery. Your leadership style and the kind of experience and learnings your interns acquire will determine if your interns feel like they got the shorter end of the stick. So do your due diligence and treat them right.
Side note: You’d be surprised how many people would be willing to work for free. I worked for peanuts at my first job and that job opened up the world to me.
7. Encourage advance payment from clients
Cash flow is important. Running out of cash can kill your business. So staying liquid is a priority.
That’s why leveraging on trust with customers and clients could be a lifesaver. Get them to pay in advance for your goods and services, and you’ll be having more cash at hand. Discounts are a good incentive to drive this action.
If your business operates on foreign exchange rates, highlight the fact that, ordering early means they get to pay less. For all we know, the Naira could become N1000 to the dollar by next month. So, paying now means paying less. And everyone likes a good deal.
If you have a great business idea, don’t let limited funds hold you back. Today, it’s easier than ever to start a company with less than what was needed in previous years. Many companies today are founded with little more than a laptop, a simple website and a registered domain name.
Welcome to the art of the bootstrap.
BuffrSpace is making telecommuting in Africa easy, by building Africa’s largest platform of on-demand workspaces for remote workers, business travelers, distributed teams, startups, freelancers and anyone else in between.
For businesses or individuals who have surplus workspaces and would like to become hosts by listing on our platform, please start here.