The Trick is Treats

Starting a business during a recession may seem rash, but Rachel Bridge believes there are opportunities out there, in the form of affordable treats Lipstick cheers women up in tough timesDON’T THROW AWAY those business plans just yet. On the face of it, starting a business when a recession might be looming sounds crazy. Yet, provided you choose the right type of business and go about it in the right way, you can still succeed. One business model worth investigating is modestly priced luxuries. “When times are hard you have to satisfy people’s emotional needs beyond just value,” says Jim Surguy, senior partner of Harvest Consulting. “In the last recession in the early 1990s, one of the things that was successful was Häagen-Dazs ice cream. It was luxurious in its sector, but it wasn’t hugely expensive and so was an affordable treat.” Häagen-Dazs and tea are affordable treatsOther cheap treats which fare well in times of austerity include the gastro-pub meals. London’s first upmarket, openkitchen pub, The Eagle on Clerkenwell Road in Farringdon, was founded in 1990, and continues to thrive, drawing in the business trade when expense accounts are slashed. Lipstick purchases are equally crunch-proof. Leonard Lauder, chairman of Estée Lauder (which includes Clinique and Bobbi Brown), noticed that, after the bursting of the dotcom bubble in 2001, his company was selling more lipstick than usual. His hypothesis, which has since been called ‘the lipstick effect’, is that, when times are hard, women like to give themselves a little lift. Demand for chocolates and champagne follow similar patterns. Tony Kinch is one entrepreneur who is banking on the demand for affordable luxury. Earlier this year, he launched The Real Tea Club, a business based on the model of a members-only club that will sell high quality, loose-leaf tea. Each month members will be sent a selection of five teas from around the world. The Eagle was London’s first open-kitchen gastro-pub“We are quite confident that even though we are hitting a recession there are still enough people out there who would like to join this club,” says Kinch. “People who join clubs do it for a reason, because they are quite passionate about it. I believe that if we can get the type of customer we are trying to attract, this business is sustainable through a recession. That is why I am very comfortable about doing this. The possibility of recession is certainly not concerning me to any great extent.” Indeed, starting your business in an adverse economic environment can prevent failure in the future, as Richard Denny, a business-development adviser, explains. “If you can start in a tough market, your chances of success and real growth when things ease off are phenomenal,” he says. “Most people start businesses in an easy trading climate, then they get up against a tough market and haven’t a clue how to cope. They then go seriously wrong and get into difficulties.” On the other hand, Häagen-Dazs, Estée Lauder lipstick and three course pub meals will remain on the menu for some time to come. Rachel Bridge is enterprise editor of The Sunday Times. Her new book, You Can Do It Too: The 20 Essential Things Every Budding Entrepreneur Should Know is out now, published by Kogan Page www.koganpage.com)

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