Starting a business during an economic downturn

Start-up survival strategy for an economic downturn


It's never too early for an entrepreneur to identify start-up risks and learn how to address and manage them.

Risk management for start-ups

It is important to identify the key risks your business may face and develop strategies to eliminate or reduce them. This will make your business more flexible and more able to withstand volatile market conditions.

Common start-up business risks include:

  • losing customers and failing to attract new ones
  • increased competition
  • poor cashflow
  • failure to anticipate problems/inability to adapt to a changing market environment

Market strategy in an economic downturn

You must have a clear strategy for identifying and looking after key customers and growing relationships with them. It also pays to plan for certain worst-case scenarios which might arise, such as losing a major customer. Try to expand your customer base as soon as possible – then the loss of a major customer will have less effect.

You also need to consider potential opportunities that could arise, for example, if one of your competitors ceases trading. 

How to keep your cashflow healthy in tough economic conditions

Cashflow is the balance of money entering and leaving a business. It is important to anticipate cashflow problems as early as possible so that solutions can be found before the problem is urgent.

At all times you need to know how much money your business has in the bank, how much it owes and how much it is owed. If you regularly update your financial records and develop forecasts showing likely sales, profit and loss, you should be able to identify when additional funds might be required.

If you anticipate serious cashflow or funding problems in the early stages of your business, seek advice from your accountant and your bank.