For those of you toying with the idea of starting a business: Now is the time. Starting a business during an economic downturn may sound like a bad idea, while in fact, a recession is one of the best times to take business risks.
Why Start-ups Flourish in Weak Economic Times
Everyone is Suffering
This includes your potential competitors. Many established companies need to alter their business plans and marketing efforts to accommodate not only their customers budgets, but their own as well. Some companies may need to cut quality to produce cheaper goods, while some might increase prices to keep the business running. These changes often lead to the next reason to start your own business:
Brand Loyalty is Weakened
An important part of building a brand is maintaining consistency when marketing, targeting and selling products. As mentioned above, many companies are forced to make changes during times of economic unrest, often causing customers to lose some loyalty. As customers are looking for cheaper options, it is a great opportunity for you to build your brand and get your name out there.
Start-up on a Budget
Watching your spending closely when launching a start-up is usually a good idea, and during a recession budgeting is a necessity. One of the biggest factors in start-up failure is running out of money. A recession can be the best time to start a business because of the lowered overhead costs (rent, etc.) and smaller chance of going bankrupt right off the bat.
Bigger Employee Pool
Unemployment rates are usually higher during a weak economy. This means additional qualified and eager individuals are ready to work. Many times, potential employees’ starting salary expectations are adjusted to reflect the poor economy as well. You might be more able to hire quality employees to get your business off the ground in an economy that allows for lower salaries. One important quality shared by many successful start-ups is having a close-knit group of ambitious individuals.
Successful Businesses Started During a Recession
Still skeptical about starting your business? Check out these successful companies launched during a recession:
Launched in 1923 Disney, got its start in a Los Angeles garage belonging to the uncle of Roy and Walt Disney. The brothers decided to reincorporate under the name Walt Disney Productions in 1929. The Great Depression brought a lot of devastation and many hardships but it also gave birth to the largest media and entertainment conglomerate in the world.
Paul Allen and Bill Gates probably did not know the amount of success dropping out of college would bring them over the years. The pair leveraged the stagnant GDP, rising unemployment rate and inflation of 1975 to start a software company called Microsoft. Although their sanity was most likely questioned, the two pushed on and eventually produced one of the most successful companies in America.
3. Burger King
Burger King is a prime example of a company using the recession as an opportunity to target Americans’ needs. The chain was founded during the Eisenhower recession of 1957 by James McLamore and David Edgerton in Miami, Fla. The chain’s signature Whopper burger was introduced in 1975, which now is sold more than 700 million times each year.
Choosing to launch your start-up during an economic downturn is a smart decision and could increase your chances of success, but it is not the only factor that plays a role. Ambition, a solid business plan and strategic execution are also needed to fuel a new business.