Start a Business: Reasons That Recession Is a Good Time to Start a Business
- One advantage of starting a business in a recession is it allows your company to build resilience by sustaining itself through a tough time. Businesses that can survive when the market is tough and customers are few will be poised for great success when the economy improves, says a 2008 article from the London Times. In contrast, businesses that start during good economic times may fail during recessions, because their owners are often unprepared to weather economic storms.
- Prices tend to drop during recessions, both due to currency deflation and distressed companies looking to increase sales. Due to these factors, a new business can often find better deals on rent, merchandise, land and equipment, allowing it to save money and pour it back into its operations or put it toward expansion plans. Additionally, the lower costs of operating during a recession allows a business to offset the costs of slow sales periods common during these times.
- During a recession, many individuals lose their sources of employment because of layoffs or company failures. While this is bad for them, it allows a new business to attract high-quality talent that would not be available during good economic times. Additionally, because of the desperation factor, prospective employees often have lower salary requirements during recessions than they do when the economy is in better condition, allowing new businesses to save on labor expenses.
- Although many solid reasons to start a business during a recession exist, some financial sources advise against founding a new company during an economic downturn. According to a 2009 article from Inc., a business owners trade magazine, recessions limit the ability of new businesses to gain access to "risk capital," such as loans and credit financing, making it difficult for new company owners to get the money they need to successfully start their businesses.