Small business opportunities abound: in an economic downturn, statistics indicate more people start small businesses. While this may not make sense on the surface, it becomes clear when you realise that more people who get laid off in a downturn may go into business for themselves

Today's Manager, Oct-Nov, 2009 by N. Ravindran

[ILLUSTRATION OMITTED]

ACCORDING to most consultants, most new businesses likely to succeed in a downturn are those which are the tried and true as lean economic times cause consumers to be more cautious about what they buy.

Despite the adverse economic climate, innovation will create new opportunities for many startups. More innovative businesses will sprout. This is not unexpected as these start-ups will be forced to focus on cash flow, cost containment, customer retention, and survival.

New business owners will have to re-evaluate, re-design, and refine their products, processes, and business models as they will be driven by the need to improve productivity and increase customer value to survive.

Furthermore, the global trend towards market capitalism continues to be strong, as more governments try to jumpstart their economies by taking a more active role in managing and regulating their economies.

Market capitalism essentially means that producers are free to enter a line of business and sell their products at whatever price they can charge; while consumers are free to buy products they want at price they are willing to accept. The "capitalism" part refers to systems in which money is collected via savings and channelled to productive economic activity through the financial markets--so that savers get a return on their money and entrepreneurs get access to capital to invest in their businesses.

[ILLUSTRATION OMITTED]

For instance, the United States of America has injected a huge US$850 billion economic recovery package. The European Union, China, Japan, and other countries have also deployed large infrastructure spending programmes. Small businesses will benefit directly through government programmes targeted at them and indirectly through providing goods and services to larger firms.

Lim Sze Kian, a business consultant with Knightsbridge Consultancy says that in Singapore, there will be several factors to consider when one decides what business they want to pursue. He believes the biggest influence will be demographic. The change in the population's age make-up will be a large influence over the next decade.

He says: "Many baby boomers won't want to be inactive after they retire. The current economic downturn will make this trend even stronger. These older folk have taken a series of major blows. The values of their homes and retirement savings have all declined substantially. Some have lost their jobs. These older people will look to extend their working years and starting a small business may be one way for them to move forward."

But Lim also believes that Generation Y will turn to entrepreneurship in the downturn as well: "Generation Y has exhibited an entrepreneurial streak over the years. The economic slump will make this trend stronger as more people from this age group face limited employment opportunities. Being on the wrong side of 40 without solid job prospects, many Generation Y-ers will be tempted to go into business for themselves."

Previous downturns have seen small business formation rates increase. And with starting a business made easier and cheaper, Lim expects a bumper crop of new firms in 2009. However, he warns that failure rates will also increase, but not enough to offset the number of new small and personal businesses.

Influence of Technology

More start-ups will leverage on technology. They will expand on the use of online marketing. Over the last five years, most studies have reported that online marketing is often more effective and cheaper and than traditional approaches. Although online marketing can be complex, many of the programmes and offerings are available to start-ups off the shelf or can be configured through easily implemented online purchases. Many of these software are easily installed and automated and thus, easy to use.

Lim expects the use of online marketing to grow in 2009: "Again, this would appeal to the Generation Y and baby boomers who have a reputation for being DIY (do-it-yourself) savvy. With small businesses focused on customer acquisition and re-defining their business methods, E-marketing will fit their needs."

He reckons the type of business that one should consider nonetheless needs some deep thought: "This is crucial because it is vital to pick business opportunities that have 'legs'. New business-owners must take into account the economy and consumer trends as their businesses should be profitable not just for 2009 or 2010 but also for years to come."

He warns that not every business opportunity is right for everyone: "You always need to do your homework and I recommend writing a business plan as it is an excellent way to work out if the business idea is worth investing your time and money in."

Good bets for the Singapore business scene are to venture into a food enterprise. "Singaporeans love food. They may skimp and save on many things but they enjoy a delicious meal, especially if it is not hard on the pocket," says Lim.

But not everyone is a chef in the making. You don't have to be a Cordon Bleu chef by training to start a food business. Just pick the right food franchise in the right place and this business opportunity could be a real money-maker.