Tip 3: Starting a business in a down economy

This is the third blog post and tip number 3 for starting a business in a down economy. In the first tip we discussed how to avoid a common mistake when choosing a business to start. In tip 2, we talked about what industries to look for in a down economy. Today we are going to expand alittle further into starting a business in a down economy and how to succeed with it. So here is tip number 3, recognize that you have a market advantage over other businesses in a down economy. In theory, the longer someone has been in business the more money they should have saved up and the more finanically secure their business should be. However, since most of us don't have functioning crystal balls a common mistake is that businesses over leverage themselves out of impatience to grow quickly. During an economic slow down, these businesses are often crushed by the weight of there own success. It's the same reason during the housing boom so many growing real estate investment companies fell. They grew buy taking out large mortgages to buy cashflow properties but when the economy starting going down hill many of their tenants could no longer afford rent. This created a chain effect, the real estate companies started losing tenants and then started losing rental income. With limited cashflow the real estate companies couldn't afford the notes on their properties and then they started listing properties for sale and when the properties didn't sale they started forclosing. Many of these companies ended up in bankruptcy and are no longer in business today. However, there are always two sides to every coin. During this same time period there were other Real Estate companies that were probably smaller but didn't have nearly as much debt. They also started losing tenants when the economy started crashing but they had a stronger cashflow because they had less debt. This puts the smaller company in a position with loss of cashflow but not getting squeezed by their huge debt payments. These companies have been able to weather the economic storm and are probably buying new properties at discounted prices while their larger competitor has been put out of business.

This was a very simple example of how a more established company could be disadvantaged during economic slow downs. Another example is during the "good times" most companies do not pay attention to their overhead as careful as they should. They often take on alot of employees and expand their overhead. If they do not shrink this overhead fast enough during economic slow downs, and most don't, then their finances will become an anchor weighing them down during economic turmoil. This works in your favor and you want to recognize that. Starting out with low or no overhead in a down economy makes you flexible to changing market conditions and allows you to profit easier than the company with high overhead. This is extremely important to you when starting a business in a down economy.

Thanks for reading,
Jackie O'Quinn
1-888-390-5759