How many of you heard the familiar phrase, “You are crazy! Why would you ever do something like this!”? Well, I have heard it many times in my life, but boy did I hear it when I announced I was going to start a healthcare consulting company from scratch, especially at a time when hospitals and medical practices where facing severe revenue cuts along with increased regulatory oversight. These entities were experiencing loss as well as not being able to meet the ever-increasing demands being placed on them to meet quality and outcome measures. During this time the notion of “paying for performance” was raising its head and healthcare providers found this to be foreign territory.
Having worked in both healthcare and business, I knew that it was a matter of time before "pay for performance" would be introduced into the healthcare environment. While many of the healthcare consulting giants, such as Accenture, Deloitte, etc. were very experienced and entrenched in the traditional healthcare consulting, these firms did not have the ability and wherewithal to address this new payment method. So ignoring the naysayers who told you “You are crazy!" I jumped feet first, accepted the risk, and focused my consulting company on hospital and medical practice performance in a soon to be "pay for performance" world. Fast forward the business became very successful and profitable allowing me the option to sell it a very nice price!
Why was it successful? The crux is the fact that it ceased in a very uncertain time, but there was a great need for a company like mine. Often it is the uncertainly that can make for a very successful business. Here are some thoughts for you to consider especially when you hear the famous phrase mentioned prior! You may want to ignore the naysayers and/or those who portend doom and gloom!
During an economic crisis, businesses sell off most of their items and assets at prices far lower than their original value, so they can have some cash to make more important ends meet. Great examples are e-commerce companies; they rollout heavy discount campaigns to acquire more customers since they know people would only want to spend far lesser in these times. As a new or existing business, you can take advantage of the low priced sales and or need for businesses to increase revenue flowing through the market, and buy important items for your business that you would otherwise have paid high sums for. This way, you cut costs while you achieve more.
It’s difficult for many new businesses to startup during an economic crisis, because of the low access to funding at the time. Businesses that would have otherwise given your business a run for your money, would have a hard time convincing investors and banks that their business model is recession-proof. Since you know there’d be fewer startups during an economic downturn, you should work towards starting up a business that solves a real problem and also has some adequate funds to push it through the crisis. The lesser competition then means faster sales and growth for your business.
People want to spend little to nothing during an economic crisis. The mere fact that their purchasing power, income, and maybe even their jobs have been affected, means they’re in no financial mood to part with cash on just anything. Knowing this, you could take advantage of the fact that you’re a new company with low expenses, to sell your products and services to these consumers at a very low price. Doing this will not just make them your customers, but would also retain their loyalty to your brand long after the economic crisis has subsidized.
During an economic crisis, the central bank moves to lower the interest rates on loans. This triggers an increase in both the capital lending rate and consumer spending rate. Local production, lesser importation, and more investments are critical to getting any country out of a recession, and one way to achieve this is by lowering the interest rates on bank loans. The lower the rates, the more businesses can loan, and the more investments that go into the country.
In a recession, people are looking for businesses that can come up with creative ways to solve their problems at an even far lower cost than they currently pay for. Startups especially are looking for innovative business solutions that don’t just make their business operations easier, but also generally lowers their overall expenditure. When you build innovative solutions that solve consumer problems by making their lives a lot easier and saving them more money, you can grow a profitable business that’d scale through the crisis.
There will always be pros and cons regarding when the right time to start a business might be, but don't let an economic crisis scare you away from thinking right now is a poor time. Having a positive mindset and believing the economy has opened a door for an opportunity will lead you toward a pathway of success.
The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area. Click here to request free consulting, or contact the SBDC for additional help and information.
Rich Longo is a Business Consultant and the Interim Director of the Duquesne University Small Business Development Center where he assists new and existing businesses with developing and implementing business plans. He is also certified in Technology Commercialization. Rich has extensive experience with Federally Qualified Health Centers and has been a Senior Vice President of Network Management for Devon Health Services, Inc., one of the largest regional PPOs in the northeast. He has been an adjunct faculty member at Robert Morris University and the University of Pittsburgh.