Entrepreneurship has boomed during the pandemic and continued its big surge in 2022. But obstacles have emerged, such as high interest rates, inflation, fears of recession, labor shortages, and cooling venture capital – all significant challenges new small business owners will face in 2023.
One key to entrepreneurial success is knowing how to weather economic uncertainty and upheaval, and having a strategic roadmap to navigate those potholes has never been more important, says James Webb, a successful entrepreneur in the medical and fitness sectors and author of A Country Boy’s Journey To Prosperity.
Q4 2022 hedge fund letters, conferences and more
“The pandemic allowed many people to pursue their dream of starting a business, due largely to millions being laid off early on, and to rock-bottom interest rates that made money cheap and widely available,” Webb says.
“But the economic environment that helped spark that entrepreneurial spirit has been adversely affected by high interest rates, high inflation, declining savings, and other factors. Startups are vulnerable, and entrepreneurs who are relatively new to the game will have to learn fast, plan carefully, adjust accordingly, and surround themselves with good, dependable people.”
Tips On How To Survive Challenging Economic Conditions
Webb offers these tips to help new entrepreneurs survive challenging economic conditions:
-
Do a financial forecast.
A lack of capital is a main reason start-up businesses fail, Webb says. Before making the leap, he suggests doing a realistic and conservative financial pro forma – a financial statement that uses projections or presumptions to try to predict revenues and expenses.
This can help you understand your true financial needs. “In simplest terms,” Webb says, “if your pro forma shows you breaking even in nine months, I would not start the business unless I knew I had access to capital to cover those projected nine months and many more.”
-
Hope for the upside, but plan for the downside.
Even under normal conditions, about half of new businesses fail in the first five years. Webb says considering the concept of failing and what path you would choose next is of critical importance.
“Take your leap and put a ton of your energy into the success of the business, but always have a contingency plan for when things go wrong,” he says. “That plan should include the ability to raise more capital and the ability to change courses or product lines.”
-
Build relationships.
Start-up owners have plenty on their plate. Responsibilities can be overwhelming and lead to inefficiency if they try to do too much themselves. That’s why it’s vital, Webb says, to build relationships:
-
With vendors.
“Developing true relationships with your vendors is of utmost importance,” he says. “They can be there for you in the tough times and actually provide guidance and direction based on their own experiences with other customers.”
-
With employees.
Success or failure will hinge in part on who the new business owner hires in the early stages of the company. And knowing when to fire, Webb says, is just as important as who to hire. Holding onto an underperforming employee too long can drag down the business.
“Set appropriate expectations and provide the necessary training and support to ensure mutual success,” he says. “If you’ve provided the necessary support and they still can’t get the job done, make the change.”
-
With competitors.
While this concept may sound counterintuitive, Webb says meeting with competitors occasionally is a way to help each other with general business challenges without giving away any secrets. “Competitors provide a unique relationship concept,” he says.
“Just imagine that once-every-few-months beer with your competitor, or a phone call to check in once in a while to swap stories and discuss mutual issues. The old saying, ‘Keep your friends close but your enemies closer’ could not be more true here, but I believe it can be a genuine and productive relationship.”
Conclusion
“This current economic cycle is a difficult one and even more difficult to predict,” Webb says. “There is no way to predict the future, but using these concepts will help you navigate the ebbs and flows of business and further increase your chance for success.”
About James Harold Webb
James Harold Webb is an author, investor, philanthropist and successful multi-business owner. Webb began his entrepreneurial journey in the health industry as the owner of several companies focused on outpatient medical imaging, pain management and laboratory services.
