Starting a business during an economic downturn

A good business idea is essential to setting up a successful business. You can use what you know about the volatile financial climate to help you develop a targeted and specific business idea.

Find the right business idea for the economic conditions

If you don't already have an idea, consider which of your skills could be used as a base for starting a business.

Even at this early stage, you may want to think about your preferred type of business. For example, are you thinking of buying a franchise, or starting a social enterprise or a home-based business?

Once you have a business idea, you should research whether there is a market for your product or service and formulate a business plan. If you need start-up capital, lenders will usually request a business plan.

Testing your business idea for tough economic conditions

You can use the economic downturn as an opportunity to define what you and your business want to achieve - and how best to set about achieving this.

Tougher market conditions are often caused by very specific issues, such as unavailability of loan finance. Diagnosing these issues and seeing to what extent they affect you will allow you to rethink the nature and scale of, as well as the market for, your business.

It is worth looking at the business news for information about the issues involved in an economic downturn and their effect on businesses. Understanding these issues will help you develop strategies for coping with them.

You can also think about practical tests of your idea without large financial overheads by starting a business from home or looking for opportunities to test your idea with a pop-up shop.

What business ideas work in an economic downturn?

You should ask yourself:

• What sorts of business are thriving at the moment?
• What is it about them that makes them resistant to an economic slowdown?
• Is the customer truly central to your business idea?
• What evidence do you have that people are likely to buy your product or service in a tougher economic environment?

Bigger established companies may struggle when their business-as-usual model is affected by a sudden economic shift. Smaller businesses and new entrepreneurs may find success by operating in a more flexible way.

Economic downturns can be a good time to bring a fresh business concept to the market. With established business sectors struggling, a disruptive product, service or business model could thrive – see setting up an innovation start-up.

Once you have tweaked your business idea for current market conditions, it needs to be implemented through a full business plan and a decision on the legal structure of your business.