When you’re starting a business, there are a lot of things to take into account, from the initial planning stages to scaling up as your company grows. But what if you aim to start a business during a recession?
In this roundup, we polled CPAs across the nation to help us answer this single question:
“What advice would you give someone who’s starting a new business during a recession?”
Remain Flexible
“Keep your business plan FLEXIBLE. Be ready to change how you’re making money. Stay focused on customer sentiment – and adapt to what they’re currently willing to pay you for.”
Deborah Roque, President/Founder, Affordable Accounting Services & Tax Preparation, Inc.
Be Open to Opportunity
“Those seeking to start a business during a recession should look to buy a business that is already having financial difficulty.”
Norm Blieden, CPA
Do Your Research First
“Do the research and make sure the business you are starting can be profitable during a recession. Spend extra time learning the best way to market your business with your target audience.”
Altitude-Solutions.com
Make Smart Business Decisions
“1) During a recession, people reduce their non-essential spending, only spending on basic survival needs. Focus your new business around basic needs!
2) Choose a business with the least number of employees to help fight the inflation and increased costs of doing business.
3) For now, don’t borrow funds if you don’t have to. Borrowing and paying interest at such a high rate will add to the payment burden, and losing your collateral if the business does not succeed.”
Soni Dass, Dass & Dass Accounting & Business Services
Utilize the Expertise of a CPA
“Find an experienced CPA that looks at your needs as would a “financial social worker.” With the CPA’s help, prepare a 24-month projection showing balance sheet, income statement and cash flow. A good CPA will critically pick this apart to arrive at a ‘worst case scenario.’ Now you have the information necessary to make decisions/changes to increase your probability of success and are ready to move forward.”
Douglas A. Sutton, CPA
Planning is the Key to Success
“A recession has little to do with business survival if you know what you’re doing. Planning is the key. I started a business in the early 1990’s just as the economy began to tank. That business lasted for 20 years. My current venture began November 2019 right before the virus happened, and now we’re in a recession. But business is still strong and will remain that way because I planned ahead.”
Ernest L. Tomkiewicz CPA PLLC
Expect Some Hardships
“Expect to lose money for at least 12 months and whatever your projections for cash requirements (negative cash flow) double it. Wherever you are trying to cut corners, absolutely do not target the fees to your team of professional advisors. You probably know how to do something very well or you wouldn’t be starting a business, but don’t fool yourself into thinking that you naturally know how to RUN a business.”
William T. Fricke, CPA, Fricke & Associates, LLC
Work With an Accountant
“A good accountant can look at the numbers and tell you where you’ve been and why. More importantly they can tell you where you are going AND how to get where you want to go faster.”
Kimberly C. Shaw, MIM, MAAc, EA, FA Fellow, Owner/Senior Tax Advocate, Individualized Systems
Invest in What’s Working
“Buy a business that already has established profits coming in!”
Della Kirkman, CPA, Kirkman CPA Group, Inc.
Listen to Your Target Market
“As the recession deepens, consumers will be forced to consider how to spend what discretionary dollars they have. You have to understand your target market and make smart guesses about how they may respond in a recession.”
Susan Mathisen, CPA, Mathisen Tax & Consulting
Specialize
“If you specialize in one product or service, you can create an invaluable reputation. Don’t spread yourself too thin—specialization will attract scarce dollars during a recession.”
Randy Orr, CPA, CFE, CFF, Owner of Orr Forensic Accounting
Remain Focused On The Goal
“1) Appraise your marketplace and your ideal customers. Do you have what it takes to be in the top 20 percent of your local industry? Only proceed once you have answered this question honestly. For the calculated risks you’ll be making to be worthwhile, you need to be confident that you can solve problems for customers effectively enough to be in the top 20 percent of your market.
2) Every day, keep your dream in front of you. Building a successful business is a commitment, and it’s work. Remain continually focused on the ultimate goal every day.
3) To flourish, your business needs to build your community, too. Your business will only prosper to the extent that your community succeeds.
4) Are you prepared? Do you have the necessary capital, experience, training, knowledge, ambition, support, and commitment to thrive? Have you truly counted all the costs? Your preparation is the best indicator of your business’s outlook.”
Donald J. Sauder, CVA, CPA | Partner, Sauder & Stoltzfus
Hire An Accountant
“Hire an accountant to help you determine whether or not you are making money.”
Vickie Nitzsche, EA
Just Do It
“If you have confidence in what you’re doing, just do it. If you don’t, someone else will.”
Ralph Rosenbaum, CPA, PFS, Rosenbaum Financial Services
Carefully Manage Cash Flow
“Be prepared to weather the storm with your cash flow. There’s a very good chance you won’t be able to take a salary for at least the initial year. Don’t get discouraged.”
Joseph A. Cannova, CPA, CFP | Joseph A. Cannova CPA, CFP
Get Comfortable with Change
“Change is the only certainty in any business and certainly this is the case in a recessionary environment. The ability to adapt to changing situations will be important for both the survival as well as the success of the business.”
Michael B. Allmon, MBT CPA | Michael B. Allmon & Associates, LLP, CPAs
If you have an answer to our single question that you’d like to share, we’d love to hear from you, too!
Contact us today with your answer to the following question:
“What advice would you give someone who’s starting a new business during a recession?”
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