Everyone knows recessions are bad for business. When the economy takes a downturn, companies suffer; they go out of business or struggle to stay afloat. Business dries up, investors put their money away, and banks tighten purse strings. So starting a business in a recession seems like the last thing anyone should do, right? Well, surprisingly enough, this isn’t quite the case. For most established businesses, recessions are terrible news. But the situation for entrepreneurs is different. Recessions are buyers’ markets, and before startups can begin earning profits, they first have to make some big investments. Though it may seem contrary to common sense, here’s why you should consider launching a business while the economy is on the rocks:
Though it may seem somewhat cannibalistic, one of the great advantages of starting a business in a recession is the simple fact that many other businesses are shutting down. As they do, failed companies auction off their infrastructures. Office supplies, industrial equipment, inventory, warehouse space, and just about everything else a new business needs goes up on the auction block as banks try to recoup their losses. This means great deals for those with the wherewithal to snap them up.
Everyone Wants Change
During recessions customers begin looking for cheaper alternatives to the products offered by their favorite brands and many carefully consider their investments and choose to make strong purchases on quality items rather than throwing their hard earned money away on cheaper, low quality goods they will have to replace quickly.
Businesses also make chance, they seek out lower-cost suppliers, and suppliers look to expand their networks by offering great deals to new clients. The old way clearly was not working, so recessions motivate everyone to seek out something new. So make your company that ‘something new,’ and put yourself in a unique position to profit during tough times. It could be that you offer high quality products, handmade goods, or fill a gap in the market.
The Stimulus Plan Advantage
Recessions are the best time to find tax breaks, subsidies, government grants, and new business incentives. As the government seeks to turn the economy around, they do everything possible to promote and support emerging companies.
The media loves inspirational stories and news about those who go against the trend. So there are enormous PR opportunities for businesses that defy the economic outlook by launching when others are shutting down.
As sellers get desperate, prices fall. Everything becomes cheaper, and deals start popping up all over. Special financing options are one of the most common, and it is often easy to find ‘no money down’ bargains on the products you need to start your business.
Recessions are the best time to hire. Because of widespread layoffs and failed businesses, tough economic times are rife with highly qualified unemployed professionals. With a vast pool of applicants to choose from, startups can find the best employees in the workforce, and have the chance to hire experts who ordinarily wouldn’t be attracted to the positions and pay scale offered by an emerging business. So whereas a booming economy often limits the applicant pool to recently graduated applicants, recessions give new companies the chance to hire industry pros with years of experience.
For many emerging companies, there is no better time to launch than a recession. Historically, most recessions are immediately followed by growth cycles lasting 50 months or longer. So the opportunity to establish a quality infrastructure at a low cost is invaluable, especially as it allows for rapid growth as the market bounces back. Of course, there is risk. Entrepreneurial enterprises involve risk by definition. But the savvy business owner learns to adapt to tough economic times and use them as an advantage. With the right business model and an eye for opportunity, recessions can be enormously advantageous. (104)