Key Takeaways

• Economic uncertainty and inflation make launching a business riskier, but opportunities still exist.
• Aligning your business with a higher purpose provides resilience and motivation in tough times.
• Staying lean, pivoting quickly, and avoiding excessive leverage reduce startup risk.
• Counter-cyclical solutions perform better in downturns, offering more stability for entrepreneurs.
• Earned media, word of mouth, and social media are cost-effective ways to build awareness.

Business formation rates fell 5% in the United States last year after several years of strong growth, according to data from business registration firm Registered Agents.

The decline was due to “a mix of economic uncertainty, inflation, and election-year caution, which weighed on new business creation across multiple states,” Registered Agents said.

That third factor is behind us, if not for long, but the other two – economic uncertainty and inflation – remain top-of-mind concerns for business owners and prospective entrepreneurs. If anything, they are more salient today as job growth flatlines and annual consumer inflation tops 3% once more.

Should you put off your dreams of launching a business until the economic outlook is clearer? It’s a sensible idea, but one that brings its own set of uncertainties along for the ride. For example, sitting here today, you can’t know when (or if) conditions will improve meaningfully while your business idea remains relevant. There’s something to be said for striking while the iron is hot.

However, if you do choose to move forward with your idea, you need to prepare for a bumpy road ahead. So take a cue (or several) from leaders who launched successful businesses in economies good, bad or just so-so.

1. Align Your Business and Your Purpose

It’s said that if you love what you do, you’ll never work a day in your life. Most successful business leaders would disagree; work is work, they’d say. But they’d certainly advise you to align your entrepreneurship with a higher purpose, if not your passion.

“I spend most of my time making sure I’m working on things that align with my purposes,” says Sky Dayton, a serial entrepreneur who founded the Internet dial-up platform EarthLink and early WiFi provider Boingo.

“With that in place, the hard work is easy,” Dayton adds. “The rest sort of takes care of itself.”

2. Keep Your Enterprise Lean

Many hands make light work, but not at the expense of the business itself. Especially in challenging economic times, it’s important to grow at a sustainable pace. Doubly so if startup capital is scarce, which is more likely than not to be the case.

3. Be Willing to Pivot Early and Often

Don’t throw good money after bad. Instead, keep an open mind and avoid becoming too emotionally attached to what you’re building. If and when you decide that it’s time to pivot, do so quickly and without regret. The longer you delay, the more cash you’ll burn and the harder you’ll have to work to remain a going concern.

4. Avoid Excessive Leverage Early On

You might not have much of a choice in a down economy. On the other hand, you might have hungry investors banging down your door.

If you’re fortunate enough to find yourself in the latter situation, be careful who you partner with – and what you give them in return. Excessive leverage can be a startup-killer, especially when there’s a personal guarantee involved, says CrunchBase contributor Itay Sangie.

5. Focus on Counter-Cyclical Solutions

Cyclical businesses tend to be exposed to the waxing and waning of consumer or business spending patterns and thus rise and fall with the macroeconomy. Though the strong ones endure through multiple business cycles, the risk of failure does increase when consumers or purchasing managers pull back.

One way to win this game, of course, is not to play. Or, more accurately, to play a different game altogether. Businesses that fare well under grim conditions – think utilities or discount retailers – are known as “counter-cyclical.” And while you’re not likely to launch the next Walmart, you can take a page from their playbook and focus on solutions that do well in any economic weather.

6. Build Awareness Through Earned Media and Word of Mouth, Not Big-Budget Advertising

You don’t need a bottomless advertising budget to gain traction in your market. You just need to resonate with the right people at the right time and build from there. Many a successful business has built itself on earned media, word of mouth and guerrilla marketing; these days, a strong social media game can do a lot of the heavy lifting.

Look Before You Leap

Any entrepreneur, no matter how successful, will tell you that starting a business is not something to be done lightly. You might have the greatest idea in the world – or so you think – but turning that idea into a profitable enterprise is no small feat.

The flip side is worth contemplating as well. Because starting and scaling a startup is so hard, there’s no shame in deciding it’s not the right move for you to make right now. It’s important, in other words, to look before you leap. Your best shot at building the business of your dreams could still lie ahead.

FAQs

Is it smart to start a business during economic uncertainty?

Yes, but only with careful planning. Many successful companies were built in downturns by staying lean and adaptable.

Why is aligning a business with purpose important?

A higher purpose keeps entrepreneurs motivated, making the hard work easier and more sustainable.

What does it mean to keep a business lean?

It means growing sustainably, controlling costs, and avoiding over-expansion when capital is limited.

How can startups reduce risks in a challenging economy?

By pivoting early, avoiding excessive debt, and focusing on counter-cyclical products or services.

What’s the best way to market on a tight budget?

Leverage earned media, social media, and word of mouth to build traction without large advertising spend.