MBA2265 Q&A Wednesday: Is a recession a bad time to start a business?

Summary

Summary of "MBA2265 Q&A Wednesday: Is a Recession a Bad Time to Start a Business?" – The $100 MBA Show

Podcast Information:

• Title: The $100 MBA Show
• Host: Omar Zenhom
• Episode: MBA2265 Q&A Wednesday: Is a Recession a Bad Time to Start a Business?
• Release Date: March 15, 2023

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Introduction

In episode MBA2265 of The $100 MBA Show, host Omar Zenhom delves into a crucial question posed by a listener named Nelly: "Is starting a business during a recession a bad time?" Leveraging his 20+ years of entrepreneurial experience and success in bootstrapping multiple multi-million dollar businesses, Omar provides insightful strategies and perspectives on navigating the challenging economic landscape to launch a successful venture.

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Listener's Question

Nelly reached out to Omar with a thoughtful inquiry:

"I'm thinking about starting my first online business, but I'm highly aware that we're in a recession. Is it a bad time to start a business during a recession? Is it better for me to wait 12 to 18 months or should I jump in and get started right now? Would love your take. Thanks, Nelly."
— Nelly [Timestamp: 01:11]

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Omar's Response

Recession as an Opportunity

Omar emphatically responds that starting a business during a recession can be one of the best times to launch a new venture. Drawing from his personal experiences of founding businesses like Webinar Ninja and The $100 MBA Show during economic downturns, he outlines several advantages that a recession presents for budding entrepreneurs.

"Starting a business during a recession is probably one of the best times."
— Omar Zenhom [Timestamp: 02:30]

Key Advantages Discussed

1. Reduced Competition:

   • Economic Downturns Lead to Business Closures: Many established and smaller businesses struggle to survive during recessions, leading to fewer competitors in the market.
   • Easier Customer Acquisition: With fewer businesses vying for the same audience, new entrants find it easier to attract and retain customers.
   • Quote: "This makes competition a whole lot less. And, it makes it easier for new businesses to actually get business to compete and earn customers." [Timestamp: 04:15]

2. Market Positioning Over Time:

   • Building a Foundation: The initial phase of establishing an audience, growing an email list, and refining products aligns with the recession period.
   • Timing with Economic Recovery: By the time the business achieves product-market fit, the economy is likely recovering, leading to increased disposable income and higher spending among consumers.
   • Quote: "By the time you get that right, the economy will be back on an upswing, people will have a more disposable income." [Timestamp: 05:45]

3. Lower Initial Expenses:

   • Cost Efficiency: Online businesses typically incur lower expenses during the first year, which is beneficial when capital may be limited due to the recession.
   • Quote: "With your first year or so, your expenses are quite low." [Timestamp: 06:30]

4. Historical Success Stories:

   • Airbnb and Eventbrite: Omar cites these companies as examples of successful businesses that were founded during recessions, highlighting the potential for innovation and growth even in tough economic times.

Practical Tips for Aspiring Entrepreneurs

To maximize the advantages of starting a business amidst a recession, Omar outlines four key strategies:

1. Personalize Your Business:

   • Develop a Personal Brand: Creating a personal connection with customers fosters loyalty and distinguishes the business from competitors.
   • Showcase Personality: Infusing personal traits into the business and brand makes it more relatable and memorable.
   • Quote: "People love buying from people. So don't be afraid to show your personality through your business." [Timestamp: 07:00]

2. Get Scrappy:

   • Adopt a Grassroots Approach: Embrace a bootstrapping mentality by utilizing cost-effective marketing strategies tailored to a specific niche.
   • Focus on Niche Targeting: Concentrating on a well-defined niche allows for more efficient use of resources and positions the business as a leader within that segment.
   • Actively Engage in Marketing Efforts: Participate in podcast interviews, optimize for SEO, write blog posts, host webinars, and conduct workshops to organically grow the customer base.
   • Quote: "Roll up your sleeves and get on some podcast interviews to do some SEO, to write some blog posts." [Timestamp: 07:30]

3. Grow Steady, Grow Slow:

   • Sustainable Growth: Avoid the pitfalls of rapid expansion by monitoring marketing expenditures and hiring processes to ensure long-term viability.
   • Avoid Overextension: Maintaining a controlled growth trajectory prevents the business from imploding due to financial strain.
   • Quote: "Many businesses I've seen along the way just implode because they try to grow too fast." [Timestamp: 07:35]

4. Stay Flexible:

   • Adaptability is Key: Be prepared to pivot or adjust the business model based on customer feedback and evolving market demands.
   • Customer-Centric Approach: Prioritize solving customer problems over rigid adherence to the initial business idea, ensuring the business remains relevant and valuable.
   • Quote: "Don’t fall in love with your business idea. Fall in love with serving your customer." [Timestamp: 07:45]

Encouragement to Take Action

Omar emphasizes the importance of taking the first step despite economic uncertainties. He underscores that delay can lead to missed opportunities, and the act of starting itself cultivates learning, improvement, and growth.

"Most entrepreneurs, their biggest regret is not starting earlier. You gotta get started."
— Omar Zenhom [Timestamp: 09:00]

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Conclusion

Omar concludes the episode by reiterating that a recession, while challenging, offers unique opportunities for entrepreneurs willing to adapt and persevere. By leveraging reduced competition, focusing on personalized and scrappy strategies, maintaining steady growth, and staying flexible, new businesses can not only survive but thrive during economic downturns. He urges listeners to overcome hesitation and take proactive steps towards launching their ventures, assuring them that time and adaptability will work in their favor as the economy rebounds.

"You gotta get started and have time on your side."
— Omar Zenhom [Closing Remarks, Timestamp: 09:00]

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Key Takeaways

• Recession as a Launchpad: Economic downturns can lower competition and create unique opportunities for new businesses.
• Strategic Branding and Marketing: Personalizing the brand and adopting cost-effective, targeted marketing strategies are crucial.
• Sustainable Growth: Focus on gradual, manageable growth to ensure long-term success.
• Adaptability: Staying flexible and customer-focused allows businesses to pivot as needed to meet market demands.
• Proactive Initiation: Overcoming the fear of starting during uncertain times is essential for entrepreneurial success.

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For more insights and actionable business lessons, visit The $100 MBA Show.

Transcript

[Ryan Reynolds]

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[Omar Zenhom]

Hey oh welcome to the hundred dollar MBA show. Business truths to deliver daily every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company. I started with my co founder back in 2014 and and today's episode is Q and A Wednesday. On Q and A Wednesdays I answer a question from one of you, one of our listeners. If you got a question you want to ask, go ahead and email me over at Omar MBA Net. Today's question is from Nelly and Nelly asks. Hey Omar, Love the podcast. Got a question for you. I'm thinking about starting my first online business, but I'm highly aware that we're in a recession. Is it a bad time to start a business during a recession? Is it better for me to wait 12 to 18 months or should I jump in and get started right now? Would love your take. Thanks Nelly. Absolutely love this question from Nelly. Because many people worry if the economy is bad and people are not spending their money, maybe it's not a good time to start a business. Why would anybody buy my products or services? But I'm here to tell you that starting a business during a recession is probably one of the best times. I started many of my businesses including Webinar Ninja and the $100 MBA during a recession. It wasn't intentional, but there are advantages. Plus I'm always in favor of getting started and I'll explain why. Not just because I want you to be an action taker. But when it comes to business and getting started, time is not on your side until you get started. I'll explain in today's episode. So let's get into it. Let's get down to business. During a recession, many big businesses don't make it. Many mom and pops don't make it. Many smaller businesses don't make it and close their doors. A big reason is because they just can't pay for all the expenses they need to run their business. Many of these businesses have been running for years, sometimes decades, and this is just the cyclical nature of an economy. But if you're starting a new business, this is actually good news. No one wants to see anybody go out of business. But this makes competition a whole lot less. And, and it makes it easier for new businesses to actually get business to compete and earn customers. It's less crowded, it's less noisy, and it's easier for you to acquire the customers you need to get started. Here's the thing. When you start a business your first six months to a year, you're just trying to establish your audience. You're starting to grow your email list, trying to establish what your customers want and need. You're tweaking your products and services, you're improving your website, and maybe you're earning some money and that's great. But most businesses don't really hit the ground running and start having explosive growth until a few quarters in. This is why it's a good time to start a business. Because by the time your business has product market fit, meaning that you've honed in your product and you're offering to your customer to the point where you know, okay, this is exactly what people need at this price point, at this offer, at this packaging, by the time you get that right, the economy will be back on an upswing, people will have a more disposable income, and people will be willing to spend a whole lot more. Now, having said this, even right now, it's not like people are not spending money. And there's a lot of people that have a lot of money and are willing to spend regardless of the economy. But most of all, with any online business, with your first year or so, your expenses are quite low. You don't have a whole lot of traffic, so your server costs are low. You're not serving a whole lot of customers, so your expenses are quite low. So you are not spending a lot of money, which is great during a recession, as you start growing a customer base and your expenses go up, you'll be able to afford it because you're making money, your business is getting traction, and the economy is making a turn. Some of the biggest companies started out of a recession. Companies like Airbnb, Eventbrite. When there's a recession, there's opportunity. People are looking for different ways to spend their money. They're trying to be smarter. They're looking at other options. They're not stuck in their routines of just doing what they always do or buying what they always buy. They're a little bit more selective, which means this gives you an opportunity to stand out and be one of their new options. And that leads me to some of the tips I want to share with you when it comes to starting a business during a recession. My first tip is to focus on personalizing your business. Grow a personal brand. Focus on making it yours and standing out. People love buying from people. So don't be afraid to show your personality through your business, through your brand, through your website. This really helps. And I'm speaking out of experience when it comes to making a mark, having people remember you when they see you online. My next tip get scrappy. One of the things I love about a recession is it forces you to really get scrappy about your marketing. Have a grassroots bootstrapping mentality. This means not trying to cast a net so wide. That means working on one niche at a time, focusing on targeting a niche that you can serve best, and then moving on from there. The great thing about that is that when you just focus on a small niche in your market, it's not that expensive to market to them. But in that niche, you become the leader. They think you're everywhere and they tell other people and it helps you grow organically. So don't be afraid to roll up your sleeves and get on some podcast interviews to do some SEO, to write some blog posts, to speak on stages to do webinars to do workshops to serve your people. Tip number three Grow steady, grow slow. Many businesses I've seen along the way just implode because they try to grow too fast. They spend way too much trying to over market and over hire. Don't do this. It's better for you to grow slow and steady and still be around in 10 years. My final tip? Stay flexible. Don't fall in love with your business idea. Fall in love with serving your customer. Sometimes that means changing your idea, pivoting, improving it, and catering it to your customer's needs. As you start your business, as you start talking to customers, as you start serving them, you'll start learning what they actually need. And you may need to change your product or service you're offering or even your whole business altogether. And that's okay, because the end goal here is to have a successful business. And in order to do that, you, you need to have happy customers. And to do that, you have to serve them properly. We think we know what's best until we enter the marketplace and start learning what reality really means. It means solving your customer's problems the best way you can and not being precious about your business model or your business idea or what you initially thought your business should look like.

[Ryan Reynolds]

Ryan Reynolds here from Mint Mobile with a message for everyone Paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying, no judgments. But that's weird. Okay, one judgment. Anyway. Give it a try@mint mobile.com Switch upfront.

[Voiceover Artist]

Payment of $45 for three month plan equivalent to $15 per month required intro rate first three months only, then full price plan options available, taxes and fees extra. See full terms@mint mobile.com and we're back, folks.

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[Omar Zenhom]

So to wrap up today's Q and A, Wednesday's question from Nelly. Go ahead, get started. Grow slow, grow steady and take advantage of the fact that people are looking for new opportunities and new options. Thanks so much for asking your question, Nelly. On Q and A Wednesday, if you got a question you want to ask, go ahead and email me over at [e-mail] and I'll make sure to answer it right here on Q and A Wednesday. If you love this podcast, do us a favor. Share it with your friends and family. Go ahead and share it on social, Facebook, Twitter, Instagram, you name it. Just Send them over to100mba.net and let them know the show rocks. Thanks in advance for doing that. Before I go, I want to leave you with this. Remember, I said time is on your side until you get started. Well, most entrepreneurs, their biggest regret is not starting earlier. You gotta get started. You gotta get out there because as soon as you start, you start learning, you start improving, you start growing. But if your business still lives in your head, it's not real, it's not in the world. And you're not moving forward. So get started and have time on your side. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

[Voiceover Artist]

Got a 7am meeting on a Monday? Expensing breakfast because it's in policy wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.

[Ryan Reynolds]

Yay.

[Voiceover Artist]

Free your team from expense reports today. Switch your business to ramp.com.