Today, Americans are more driven than ever to launch a new business – after all, the economy is strong, resources for startups abound, and with a new decade come new aspirations. Millennials in particular are driven by a sense of innovation, values, and independence, and other age-groups are increasingly starting off small business projects at an increasing rate too.
But there is no getting around the fact that starting a business requires accepting an element of risk. Whether it be in quitting your job, borrowing money from family and friends, or dipping into your retirement fund, starting a business often means stepping outside of your comfort zone financially. And with experts predicting the next financial crash may be just around the corner, many wantrepreneurs may be getting cold feet.
While a recession could throw cold water on certain business types, there are others which can thrive in this environment. I had a business during the financial crash of 2007-08: NuKitchen, a pioneering healthy meal daily delivery service which actually saw its greatest period of growth during the global recession. We did this by adapting to the new realities of the economic downturn, and by operating under this mantra: always create value for your customers.
No matter the context, provide transparency, be upfront about your mission, let your customers know about the quality of your product and why it matters to them. This is how we survived the crash, and how your business could do so too.
1. Maneuver your way through the danger zones
The clearest effect of a financial crash for the business world is that consumers will have less expendable income. And the first thing people cut out of their lives are luxuries, non-immediate needs and superfluous buys like fine dining, subscriptions, or organic produce.
However, weathering the storm does not mean giving up on quality. Whether your product is high-priced or low-priced, you have to make it of value. And the consumer has to know it.
Even when tightening their belt, consumers still crave after those small luxuries that elevate their (probably tougher-than-ever) work days.
Offer them ways to turn those daily essentials, like food, toiletries, etc., into moments of pleasure. Scented toiletries or healthy but indulgent diet food, are all it takes to make your product a more special experience. At NuKitchen, we did this and more, offering our clients a more personalized touch by gifting them nutritional consultations or additional services. Although this was of cost to us, our returns were much higher.
If your product is for a high-end market, you will need to experiment with more affordable models. For example, by renting your products out instead of just selling them, your consumers can access the same luxury items without breaking the bank. Rent the Runway did just that with designer clothing while the economy was still reeling from the 2007-08 crash, and it has recently been valued at $1 billion.
You can also launch new models of your product that are specifically catered to people feeling the pinch. For example, a smaller, “tastier” version of your product that costs less but will make the consumer come back for more. I’ll explain other ways of giving consumers more for less further on.
Communicate why your product is always essential. Make sure your customer knows the incredible value your product or service will bring to their lives. While they’re trying to figure out how to get through a recession, get the message through that you are far from expendable.
2. Know your customer
… and predict how their behavior will change during a recession – but not their morals or desires. In any recession, middle-class consumers will likely be the most affected. They tend to care a great deal about, and seek products that will help them:
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Save time on routine activities so they can fit more activities into their busy lifestyles.
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Be principled in their lifestyle choices – be sustainable, organic, fair trade, etc.
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Eat healthily and live healthily.
An economic downturn may force them to forgo those values for the sake of their wallets. But they are on the lookout for ways to not have to do so.
Especially in the midst of the chaos of a financial crash, people strive to maintain control of certain aspects of their lives. Give them that chance. If what you’re offering can remain affordable while respecting their desires to do things right, you’ve embedded your product into their lives.
One important lifestyle choice that people don’t want to sacrifice in times of need is healthy eating. At NuKitchen, we took essential tasks out of consumers’ hands so they had time for other activities while making sure our meals were not just delicious but health-conscious, without being much more expensive than their regular food costs.
Sparks & Honey CEO and founder Terry Young told me, “For modern consumers, ethical buying is becoming a necessity. Companies which position themselves as doing the right thing, while keeping their prices affordable, will get more ‘social capital’ in return. Customers will become their ambassadors by organically promoting products via social posts and recommendations.”
Put even more effort into doing things in the right way by seeking eco-friendly, vegan-friendly, conflict-free, climate change-conscious options. Again, make these qualities visible to make sure your existing and potential clients know all about it.
Show customers you care about the same issues as them by contributing to causes that are within your reach. For example, we showed our commitment to combating food insecurity by donating and volunteering at food banks.
3. Boost value without cutting price
I know all of the above goals may seem overwhelming – how can I make a product valuable yet affordable while wrestling with a financial crisis? Although a crisis can make many things an uphill struggle, it actually opens quite a few doors if you know where to look. You can “leverage” the recession to turn a profit in the following ways.
Keep in mind that you are not the only company working its way through the crisis, which means that other businesses will be as interested as you are in boosting their appeal at low cost. Capitalize on this by seeking partnerships with like-minded brands, for example by giving your customers access to the partner’s services in exchange for publicity. At NuKitchen, we partnered with Equinox, who offered our clients 1-week club passes at no cost to us. This was great for both companies, as our customers got unexpected freebies, while Equinox got exposure in a new field of potential customers who might want to buy their services beyond the first week.
People will be on the lookout for money savers and freebies more than ever. Get them hooked on your business by giving consumers more bang for their buck by adding free services, like online access or regular bonus extras. Offer discounts for bulk buys or for prepaying customers. Using this method at NuKitchen meant that even though our profit margin wasn’t as big, we kept our customers on board for longer and increased our lifetime revenue. It was also not as expensive as acquiring a new customer. We used a combination of other strategies too, such as offering complementary nutrition consultations at a low incremental cost for us that was offset by the additional purchases. Or organizing meetups for exclusive members, and running competitions with impressive prizes that had been gifted to our company.
For you as a business, surviving a global crash demands creativity and adaptability. You will have to work your way through consumers’ new realities to make yourself an essential part of their lives.
Be aligned with your customer’s needs, not just momentary wants. Be a brand that they love and are loyal to, through thick and thin. Not changing your game plan when a recession comes up means that it will take you down with it. Before that happens, there is plenty you can do – much of what I’ve laid out in this article will be of great benefit to your business, even when the economy is nice and stable. But it will be particularly helpful in helping you outlive your less-prepared competition when the time comes.
Bryan Janeczko has 15+ years’ experience founding startups including NuKitchen (acquired by Nutrisystem in 2008). His current endeavor Gro. Academy guides would-be founders on their path to becoming profitable entrepreneurs and includes Gro X, a free tool that helps users from any background design and validate business ideas based on expert feedback.
