1. Money
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Entrepreneurship is the lifeblood of any growing economy. As we face possibly the greatest economic crisis in 80 years both here in the U.S. and globally, much of the immediate focus has been on salvaging the giant corporations that are collapsing under their own weight and inflexibility. But while these measures may help stabilize the economy for now, innovation and growth to pull us out of this mess are going to be driven by entrepreneurs.

The good news is that there are certain businesses that always thrive in a bad economy, and they generally fall into four categories. Entrepreneurs who can create new businesses, products or services to take advantage of these trends have a great opportunity for success.

To understand what these trends are and why they are so powerful in a bad economy, it helps to introduce a concept called Maslow's hierarchy of needs. Follow the link for a complete description, but in simple terms, it breaks human needs down into five levels, and says that we only pursue the higher-level needs when our lower-level needs are met.

In a down economy, many people have to focus on the second level, "Safety", which includes things like security of employment, financial resources, family, health and property. It's hard to focus on things like "esteem" and "self-actualization" when you can't pay your rent and you're eating ramen noodles and peanut butter sandwiches.

So when everyone's tightening their belts, how do you get people to spend money?

  1. Help people save money. Last quarter, most retail businesses were done, but Wal-Mart was up. Why? Because people who normally shop at upscale stores are looking for bargains. If you can help people save money on things they have to buy anyway, you'll have a hit. Just having a sale on your normal products and services isn't what I'm talking about -- I'm talking about things that help people save immediately, or at least quickly, on fundamentals: food, gas, utilities, etc.
  2. Help people make money. Who doesn't want to make a little money on the side? People are eager for new ways to make money online, and interest in network marketing is at an all-time high. You can help people make a little money on the side, or help them make a living. Social networking sites that help people find work, such as LinkedIn, are experiencing exceptional growth.
  3. Help businesses save money. This is the same basic concept as helping individuals save money, but the list of essential expenses is much longer, including things like office supplies, insurance, professional services, office space, etc.
  4. Help businesses make money. While many companies may tighten up on the big media buys, agency fees and celebrity spokespeople, they still have to reach new customers and try to earn more money with existing customers. If you can help them do that, you can make money. An important thing to realize is that in tough times, companies are interested in direct lead generation, not more general branding and positioning.

One important thing to keep in mind when exploring how to apply these trends in your business is ROI - return on investment. Obviously, in most cases you're not giving these things away for free - you're trying to make money. The question is how long it will take your customers to save or earn back what they spend with you. During tough economic times, you need to be looking at a break-even of probably no more than 2-3 months for individuals and 3-6 months for businesses. Everyone is cash flow conscious, not looking for long-term investments.

How can you apply this in your business? Feel free to come discuss it in the Entrepreneurs Forum and brainstorm with your fellow entrepreneurs.

Know of a cool start-up (even your own) that's following one of these trends? Let me know about it in the comments below - I'll highlight some examples of companies demonstrating these concepts in an upcoming post.

Comments
December 1, 2008 at 3:51 pm
(1) Bruce Huie says:

I’ve run a direct lead generation business for technology startups over the last 4 years. Whether it’s a Business2Business (B2B) or Business2Consumer (B2C) – response rates are always the best in targeted email, direct mail and telephone cold calling campaigns… you would be amazed at the viralness of email messages within enterprises today. It’s easy to pass along an email.

December 1, 2008 at 6:09 pm
(2) Richard Lockyer says:

Hi Scott, nice article, i like the way that you included Maslow’s comments in the article it is so true and really makes you think. A growing financial market in the UK is debt management/elimination which is very topical at the moment. People are making a lot of money by investigating banks that have overcharged on banking charges and reclaiming for their clients and taking a commission from their client. http://www.bankingrefunds.co.uk
is a typical example.
Keep up the great work!

December 1, 2008 at 6:52 pm
(3) Cleaning business guru says:

Maslow’s hierarchies of needs, very cool. Are you a Ken Wilber fan by chance? I have been using the Integral map and practice for my various online businesses for 2 years now.

In response to the blog post, I know from first hand experience that a cleaning business can do really well in a recession.

December 3, 2008 at 1:18 am
(4) Scott Allen says:

As a matter of fact, I am a Ken Wilber fan. To put it in his terms, in a down economy, many people shift their consciousness focus to the animistic self (at least some of the time). Serving that well both helps them shift their consciousness and can be lucrative for you.

December 3, 2008 at 8:00 pm
(5) jododds says:

I read a useful post today from Dan Wilson of MarketDifference Communications Group that I want to share with you about marketing in a downturn – his words not mine – I know that many of the small business owners that I know have not seen a downturn in their particular niche as yet, and long may it continue! But I thought some of the points made were worth sharing with you as they are just as useful during ‘normal’ times.

Look after your existing customers
There are only three ways to increase your sales:

put your prices up
get more customers
sell more to your existing customers

How can you do that last one: make sure that you are providing the best service that you can, are keeping in touch with your customers and always looking for new ways to provide more value, including new products, to them.

December 3, 2008 at 8:08 pm
(6) jododds says:

Look after your existing customers
There are only three ways to increase your sales: put your prices up, get more customers or sell more to your existing customers. How can you do that last one: make sure that you are providing the best service that you can, are keeping in touch with your customers and always looking for new ways to provide more value, including new products, to them.

Keep in touch with your customers
This can be through email, letters, leaflets, phone calls; any which way you can depending on your business and the type of customers that you have (in other words, ensure that you choose the medium that suits them).

Keep advertising (but, as always, do it sensibly)
Don’t stop advertising if things are quiet – if you know your ads work then keep doing them, and maybe even do more of them. If your ads don’t work, or you don’t know whether they do or not then you shouldn’t be doing them anyway! Easy ways to track your ad response: if you have more than one line into your business use different phone numbers for different ads; get the customer to quote a media code; put “ask for Karen” on one ad and then “ask for Lucy” on another – you then know which ad has brought that response.

Helping sole traders to attract more customers through ‘Attraction Actions’

December 4, 2008 at 3:38 pm
(7) Kenjamin says:

Interesting read…I just found an interview of a CEO of a business development firm who says the economy is BS. And in fact, it is not only a good time, but the BEST time, to start a business in a rough economy. You can call BS on his opinion even here: http://downtobusiness.com/bs-meter/start-business-bad-economy/

December 5, 2008 at 3:08 am
(8) Al Mac says:

Nice article I agree with jodoods being in the travel and tourism industry, holidays are often the first thing taken of the to do list however we have based our principles on Service Service and Service and in hard times it is far better to have your client come back to negotiate rather than find a new supplier this will only happen when you look after existing clients

December 5, 2008 at 4:10 am
(9) Steve Schwartz says:

Here in Israel I market English language courses in -are warning me that this coming summer may be bad for business even though the economy here is still strong. Why are people so influenced by the situation elsewhere.

December 5, 2008 at 4:28 am
(10) Dennis Bevers says:

The company I represent meets 3 of the 4 criteria you listed. Their business opportunity is excellent for individuals looking to make either supplemental income from part time work, or full-time income in a new career, with no large capital investment.

As far as business needs, our competitively priced products can save them hundreds of dollars on a single order or thousands per year, while providing them with tools to increase their sales and revenue. Additionally, some of the products can bring about additional savings through employee safety programs as well as boosting employee morale and improving productivity.

You are correct – Businesses from “Mom and Pop’s” to Fortune 500 need to shift their advertising to more cost-effective media that will target their preferred customers and prospects.

Dennis Bevers
BASSCO, Inc.

March 20, 2009 at 11:37 am
(11) LloydN says:

Excellent points!
People are less able to sell their homes, so they look to expand and improve them where possible in this economy. As a small civil engineering firm I’ve found success in offering homeowners and businesses a lower cost alternative for the design of renovation/small construction projects that they are engaging in.

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