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Why Recessions Are A Great Time to Start a Business

  • Purple Realtors by
  • 21 April 2020
Why Recessions Are A Great Time to Start a Business

Recessions are the perfect time to start a business: FedEx, Microsoft, Burger King and even GE were started during the recessions the U.S. has experienced over the last century and a half.

If you’ve been thinking about starting a new business, the fact that the economy is down should not stop you. In fact, there are many reasons why the national economic situation should encourage you to start a new business now.

You Have Motivation

If the recession is affecting you directly, you’ve got something that can make all the difference in how successful your business will be: motivation.

When we’re comfortable, it’s often difficult to ramp up a business to something that will actually pay a living wage. After all, there are fall back plans like landing a job.

When we don’t have as many options, though, we have an incentive to push harder. If letting a business fail simply isn’t an option anymore, we’re more likely to dig deep and find solutions that will help our businesses succeed.

It is possible to create some mental motivation without a recession, of course — but the mindsets of entrepreneurs during economic downturns are the reasons that companies like FedEx and Burger King grew quickly. They served a niche and provided products and services that customers wanted, but, especially at first, the company founders needed to get the company going in order to make a living.

Motivation can be what carries you through from the initial enthusiasm for your new business, past the hard work necessary to get any new venture going, to the point where that business is successful. It won’t be easy, but it can be done.

You Can Get Better Deals

One of the big concerns for starting a new business is whether you can find the money to launch the project you want to work on. While the costs to start many types of small businesses have dropped dramatically over the past three decades, a recession makes it even less expensive to start one.

The vendors you may be hoping to work with are likely to be willing to negotiate more on their rates than if you went to them in a boom time. Everyone, from manufacturers to marketers, is willing to discuss special recession pricing, if only to make sure that income is coming in. Make sure you are taking advantage.

There is a downside, of course: you probably won’t be able to increase your profit margin despite getting lower prices. But, depending on the contracts you’re willing to sign, you may be able to ensure that these lower rates continue for quite a while.

You can also negotiate other considerations, such as when you actually pay for the services or products you need. Cash flow is often a concern for a new business: a loan is often necessary to cover your early costs. If you can delay even some of those costs until you’ve got money coming in (something more vendors are willing to discuss now), you can reduce the amount of money you need to borrow.

Lower initial costs for starting up your business means that you don’t have to make as much money to both support the business and yourself. That benefit can make the difference in not only how soon your business can be profitable, but also in whether you need a job or another source of income to support you in the short-term.

Right now, a job is not always as easy to come by, making it especially important that a new business be profitable as fast as possible.

You’ll Be In Shape for the Long Run

Right now, many companies are looking for ways to trim their budgets and reduce costs. If you’re starting a business now, you’ll have to be aware of costs and keep them down — but you’ve got the opportunity to start from scratch and build a solid base.

Companies that are launched during good economic times may have difficulty determining which of their expenses are truly necessary: if you’ve never done business without an expense account, it may seem impossible to keep doing business after you’ve lost it.

But a business that starts out lean will have a clearer view for the future. Your company may grow and allow you to add on perks in the future, but you’ll always know what’s really necessary for you to run the business.

When the next recession rolls around, you may not even need to trim your business’ budget: a lean operation can simply sail on through. You can even find new ways to do things that aren’t apparent to people who are looking at an established method of doing business.

Don’t Let a Recession Stop You

Any point in the continuing cycles of the economy has its pros and cons, at least in terms of entrepreneurship. Simply because we’re in a recession, though, doesn’t mean that it’s a bad time to start a business.

Now may not be the best time to start if you never considered creating your own company until the economy started having problems — the more time you can take to plan a business, the more likely it is to succeed — but if you have done the research and know what it will take to get your new venture going, don’t wait.

It’s not just certain types of businesses that will do well if you start them now, either. While it might seem that people would be reluctant to spend money on entertainment and other unnecessary expenses during a recession, any sort of business can do well in a recession if you’ve got a way to bring in income.

 

 

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