Should You Start A Business During The Recession?

Due to some pressing issues here on the homefront, I will be running a few guest posts this week. The following is a post by DebtKid, who writes about his journey to get out of debt, and achieve financial stability. He runs a small software development company in Seattle and just launched a new coupon section on his blog.

There are so many terms floating around out there it is hard to pick one to describe “the current economic crisis”. Everyone is wondering how long their savings will last, how badly their portfolio has been effected or how long the recession will last. The stress for many people comes from the feeling of not having control over critical aspects of their personal and financial matters.

If you have decided that you are tired of waiting to see how things play out you can take back control over your life and start your own business. Before you do, you should know some of the pro’s and con’s of starting a business during a recession.

Reasons You Should Start Your Business During A Recession

Small Businesses Are Closing Their Doors– You may wonder why this is a positive when considering starting a new business venture. After all if those businesses are failing, how can you possibly thrive? The reason many small businesses are failing is due to the product or service they provide. When the economy takes a turn for the worse everyone becomes more aware of their spending; if you are able to provide a service or product that people actually need you will likely attract consumers looking to simplify their life at a relatively low price.

New Opportunities– The Internet provides many new opportunities that weren’t available to entrepreneurs in the past. While many facets of today’s business being conducted online there are some businesses that don’t even require a physical location. This can greatly reduce the need for funding as your start up costs will be much lower than businesses with a brick and mortar building. Freelance employees in several areas are currently seeing a spike in business as other companies begin outsourcing their projects.

You Are In Control– There is no such thing as job security anymore. Each person in a company is dispensable, that is unless you have your own company. There are no guarantees in life and less when it comes to a start up business in a down economy. That being said, if you have a well thought out plan and you offer a service that people need you may find the rewards of being your own boss outweigh the risk.

Reasons You Should Not Start Your Business In A Recession

Funding Is Limited– If you do not have money tucked away to get your venture off the ground and need funding to start your business you may be out of luck. Finding a lending institution that is willing to take the risk on a new business will be difficult if not impossible in the current economy. See alternative funding sources for your business.

Consumers Are Not Spending Money– Businesses that are doing well in this economy are for some intents and purposes recession “proof”. This is not the case with all business and your dream company offers a service or product that won’t be well received in a down economy you are better off waiting until things turn around before trying to launch your business.

You Are In Control– Yes, you are correct. This was listed as a positive however it is a catch 22. While being in control of your own destiny offers you the opportunity to make decisions and reap the rewards for all your hard work, you have no where to turn if you fail. You need to seriously consider if you have what it takes to start and run your own company before starting down that path.

Have you started a business recently? Are you thinking of starting one? Why or why not?

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Comments (7)

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  1. Miranda says:

    Some of the most successful companies were started during times of recession. I think this is an excellent piece that examines the pros and cons of getting started during a recession. And I think the point about the Internet is especially relevant. My entire livelihood is based on the Internet! We’d cut our satellite TV and other expenses, but we could never get rid of the Internet.

  2. Miranda makes an excellent point. Many big companies started during troubled economic times.

    I’d just be darn sure I have a strong business plan in place before doing anything. That’s always important but now more than ever.

  3. Craig says:

    If you have the beginning finances and drive and knowledge to start a business, I say go for it. As long as you have the drive there is no bad time to start.

  4. Risk brings reward! I say go for it 🙂

  5. Chris says:

    Ahh the power of bootstrapping yourself into a small business. The lack of funding really makes you frugal, justify all your expenses and actually build a business that is profitable quickly. This is how it happened before there was such a thing as VC’s!

  6. I was reading about the layoff at GM and thought it would be a good idea for one to start building a recession proof career or business to lead a more secure life.

    Something interesting I would like to share is that defense contracting has good financial opportunities for all and can give you a steady flow of big income. Its something one can do with the right guidance and tips and make good money even during the recession.

  7. Darren Ho says:

    I think starting a business during the recession can be a good thing as long as you look at your risks. If you can survive the recession, you can definitely look forward to more growth when the recession is over.