Starting a Business in a Bad Economy Has Its Advantages

If you picture a booming economy, venture capitalists throwing cash at any idea that sounds good, and consumers having more to spend than they know what to do with, you might assume the stars are aligning for new businesses to crop up. However, there are also plenty of advantages to starting you dream business while times look a little tougher.

While there is nothing wrong with taking economic indicators into consideration when deciding to startup a business, most experts will agree that a startup business’s chance for success or failure rides on other factors. The quality of the startup and the foundation of its execution play a major role in whether it will fail or succeed. Basically, if it fails it was destined to fail anyway. If it succeeds, it will thrive in a good economy or bad economy. A great economy alone won’t save your bad business model just as the economy alone won’t doom an excellent business launch.

Once you realize a bad economy is not a deal breaker when deciding to launch a startup business, your eyes may open to a few of the advantages. One such advantage is the fact that a recession will force frugality. Being forced to operate your startup on budget due to tight cash flow will set a tone of financial discipline. Operating on a tight budget is a great lesson for any startup to incorporate. If you are forced to do it, you stand a better chance of being fiscally responsible with your business cash flow once things take a turn for the better. We all know in personal finance that being low on cash makes you more creative in how you get what you need. The same creativity would be sparked in your business model if you found yourself forced to operate tighter. That forced creativity can actually be a blessing in disguise.

While financial times are free flowing, investors and venture capitalists seem to have deep pockets and a willingness to take a risk. When times aren’t so free flowing, capital is harder to come by. Traditional lenders such as banks can severely put a squeeze on lending, making it hard for startups to get funding. When investors become pickier about jumping on board, it forces business owners to put their best foot forward. You will have to put forth a great plan, innovative ideas, and incredible passion and effort to get the backing needed. Once you have done this, you are in a better standing for success regardless of the economy. Having to fight harder for investors will only force you to create a better startup business plan than you might have attempted before.

Another advantage to starting your business during a bleak economic cycle is a better pool of employees to choose from. Simply put, talented folks out there will have fewer job opportunities and will join your startup for less rather than remain unemployed. You will be able to bring on more skilled and experienced employees ready to give you their all. Employees hired for startup businesses during economic downturns will also be more committed and loyal. They will work just as hard as you to see your startup succeed because they will need it to succeed.

During tough times, you will find better deals to get your startup off the ground. When it comes to real estate, leasing office space, or storage space, bad economic times means people are willing to cut prices and give you deals you might not have ever found before. You can also tap into cheaper supplies for your business by attending auctions for businesses that haven’t survived the downturn. Everything from labor to the actual infrastructure of your startup can be bought for a discount when times are scarce.

Starting your business during a harsh economy will also give you a head start. Most business visionaries naturally feel more secure waiting for things to get better before taking a shot at owning their own business. If you go against this thinking you will give your startup a jump over the competition. Your business will already be operational and working through the beginning bumps in the road while others with great ideas still wait on the sidelines. This will put you ahead of the curve by they time they can provide actual competition.

While there will always be reasons not to jump into starting your own business, don’t let a downward economy be one. A good business idea is good even in bad times. If you can provide a great products and services that go above and beyond what others turn out, you will succeed and establish customer loyalty that will be there even when things look up.

Last modification: Sat 26 Nov 2011

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