Lots of focus is currently on the gloomy economy, I seem to hear/read the phrase ‘credit crunch’ a couple of times every day! With companies listed on the FTSE losing value fast, retailers complaining of ‘tough trading conditions’ and capital harder to come by you would think now is not an ideal time to start up any business. These negatives actually make a business using the dropship process look a lot more attractive and make now as good a time as any to start a business dropshipping products!
START-UP FINANCE – banks are now taking less risks and lending less money. If you are setting up for the first time they may see you as quite high risk, even with a very good business plan. Luckily dropshipping requires a lot less start-up capital then a traditional retail business. Try and use personal savings and ask for small loans from different friends and family to raise the money you need to star your business.
COST OF WAREHOUSE – a massive benefit of dropshipping is not having to hold stock, you can run the whole business from home. Although the property market may be falling banks are making it harder for you to ‘get your foot in the door’ (see what I did there!). Last year 85%-90% LTV (loan to value) was readily available from commercial banks, today LTV’s are much lower, typically 65%-70%. So if you need a business premise you have to raise more equity. As a dropshipper forget paying for an office, run the business from home!
LOW RUNNING COSTS – running your business from home means much lower running costs. Working from home you can also claim back a percentage of your gas/electricity etc costs from HMRC. Energy costs are also surging, some large companies are facing the prospect of a 100% rise in annual energy bills!
ECONOMIC CYCLES – all economies go in cycles, we have been in a long upturn and have now entered into a downturn (slowdown). This is a natural cycle. Start making money from dropshipping now and when the economy starts to pick up again your business should really thrive.
TOUGH TRADING CONDITIONS – This has become a popular phrase amongst retailers but don’t let it make you think starting a retail business is a bad idea. Online sales are still rising so it is still a great time to become an online retailer. Tough trading conditions also mean you have to excel to succeed, this will keep you on your toes and make you get the most out of your business. Tough trading conditions will also mean companies going bust, including big companies, watch your competitors fall as you get bigger and you know you are on the right track!
I posted in May about why now is an ideal time to invest in your e-commerce site despite the economic downturn. This post ties in nicely with that one so I highly recommend you also read that post.
Sources: The energy cost figures were taken from the “Surging energy costs hit UK plc” article and LTV figures were taken from James Caan’s article “Opportunity knocks when the gloom seems deepest” , both articles were published in yesterday’s Sunday Times.