In theory, starting a business during a recession seems like it would be one of the dumbest things you could possibly do. Who in their right mind would try to get a business off the ground at a time when the country is in financial ruins?
But in reality, starting a business during a recession is actually way smarter than you might think. It’s why you should seriously consider doing it if you have a great business idea in your back pocket right now.
Now, don’t get us wrong: Starting a business in a recession can be a bad move if you don’t play your cards right. You’re going to need to take the right steps when you do it to jumpstart a successful business.
But there are many businesses that do well in a recession. Let’s take a look at why you might want to think about starting a business during a recession below.
Advantages of Setting Up a Business in a Recession
You’ll Enjoy Cheaper Startup Costs
Starting a business from the ground up can be an expensive undertaking. There are all kinds of startup costs that you’re going to face during the first few months.
You’ll need to be ready to invest in everything from a commercial space to the equipment that you’ll need to run your business. You’ll also have to be prepared to purchase the things you’ll need to create an inventory for your business.
There is no getting around these startup costs, unfortunately. But when starting a business during a recession, you’ll usually find that these startup costs will be a lot lower than they would be otherwise.
Why? Well, it’s because all of the companies that you’re going to need to patronize to buy things like equipment and products to increase your inventory will be hard up for business. As a result, they’ll often extend lower prices to you than they would during a good economy.
You might even be able to get something like a commercial space for just a fraction of what you would pay for it during better economic times. This will help you tremendously when starting a business during a recession.
You’ll Encounter Fewer Competitors
Under normal circumstances, a new business is going to face some stiff competition when they enter the marketplace for the first time. They’re going to have a lot of competitors looking to put them out of business before they’re able to establish themselves.
This won’t be as much of a problem for you when you start a business during a recession. Other businesses are going to be so busy trying to stay afloat themselves that they won’t have time to focus on you and your business.
Additionally, many businesses are going to close their doors for the final time because of a recession. This is going to open up space in your specific industry for you and your business. It’ll make it much easier for you to get your foot in the door.
Just make sure that you do your market research on your industry on a site like stokestrategies.com. It’ll give you a distinct advantage over any competitors that you might have.
You’ll Find a Larger Employee Talent Pool to Choose From
When you first start your new business, you might not be able to bring in many employees to help you out right away. But over time, you’re obviously going to want to bring some other people on board to assist you in running your business.
This might be tough to do if you start a business during a good economic time. There aren’t going to be many people looking for jobs, which will limit your ability to hire great employees.
And those people who are looking for jobs in a good economy are going to want you to pay them top dollar for their services. It might make it almost impossible for you to be able to afford great employees.
But during a bad economy, there will be a much bigger employee talent pool for you to choose from. It’ll completely change the approach that you’ll take to hiring people to help you out.
You’ll Develop Better Habits
If you start a business during a good economy, you’ll have a better chance of making a lot of money right away. And while this might seem like a good thing, it could very well lead to your business developing bad habits in terms of spending.
You could get into the habit of overpaying for all of the things that you need to run your business. This is something that’s going to come back to bite you later on when the economy isn’t as strong anymore.
During a bad economy, on the other hand, you’ll have to take a more cautious approach to spend. Even if your business is making money, you’ll still want to squirrel away a lot of the money that you’re bringing in for a rainy day.
By doing this, you’ll develop great habits that will benefit you both now and well into the future. You won’t have to worry about trying to break bad habits down the road.
You’ll Feel More Confident Taking Risks
In order to start a successful business, you’re going to have to get comfortable with the idea of taking risks. There are lots of different risks that you’re going to have to take throughout the course of your time as a small business owner.
From introducing new products to changing the prices on your services, you’re going to have to prepare to take one risk after another. And since starting a business during a recession is a risk in and of itself, you shouldn’t have any problem learning how to feel good about taking risks while running your new business.
You will, of course, want to shy away from taking too many risks at first with any small business, especially during down economic times. But if you’re going to have any chance to grow, you’re going to have to transform yourself into a risktaker sooner or later. And what better way to get your feet wet than by taking some risks during a recession?
You’ll Grow at a More Manageable Rate
The No. 1 goal of your business when you start it shouldn’t be to make money. It should be to grow. You want your business to be bigger and better every month, which will, in turn, lead to increased sales and more money in your pocket.
But with that being said, you don’t want your business to grow too fast. If it does, it could put you into a position where you’re not able to keep up with all the growth you’re experiencing.
By starting a business during a recession, you’ll give your business the time and the space that it needs to grow. More often than not, a business isn’t going to be able to grow uncontrollably during a recession.
When you grow slower than you would normally, you’ll be able to make the necessary adjustments to accommodate for growth. This should make it more manageable for you and prevent you from getting in over your head as your business moves forward.
You’ll Attract More Potential Investors
Not all small business owners are interested in attracting investors at the beginning. But if you’re someone who welcomes the idea of attracting investors, you’ll often find that you’ll have an easier time doing it during a recession than during good economic times.
Reason being, investors like to try to get great deals when they’re investing in companies. And many of them have found that they’re able to do it when recessions hit.
This does not mean that you should give in to investors and fork over a large percentage of your business for next to nothing. You should avoid any sharks who want to bite off a bigger piece of your company than you want to give up.
But you should, at the very least, keep an open mind if and when investors come knocking. You might be able to pit several investors up against one another and get a lot more funding for your business by using their interest in your company to your advantage.
Starting a Business During a Recession Might Be One of the Smartest Things You Ever Do
As we talked about at the top, there are a lot of people who will try to tell you that starting a business during a recession is a bad idea. But for many small business owners, starting a business during a bad economy is the smartest thing they ever did.
As you’ve seen time and time again here, there are many benefits that you’ll get to enjoy when you start a business during a down economic time. It’s why you should strongly consider doing it even if the thought of it scares you a little.
Want to get more great advice on starting a business from scratch? Read through the other business-oriented articles found on our blog.