By Ben Walker, the CEO for Transcription Outsourcing, LLC and has made contributions to Entrepreneur Magazine, The Associated Press & Inc.
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We haven’t seen a market decline like this in over 30 years. People are losing their jobs. Businesses are going under, and capital is drying up. It’s a scary time, and it’s been estimated that we are entering a long recession.
If you were about to start a new business as things turned sideways, you might be thinking it’s better to let this blow over and try again when the economy becomes stable. But is waiting the only option?
One thing that General Motors, Burger King, Airbnb and Uber all have in common is that they were started during recessions. GM opened its doors in 1908 in the aftermath of the panic of 1907. In the U.S. recession of 1953, Burger King began branding its famous Whoppers. In the most recent recession of 2008, Airbnb and Uber set up business and grew as successful startups.
If these successful companies could be established during recessions, so can yours. So, what are some of the factors that made it possible for these companies to launch?
1. There are better options for credit.
Many new businesses take out loans to satisfy operational costs until earnings reach a certain volume. Taking out loans is often the only option because most entrepreneurs don’t have the money to fund the expenses of an entire business. However, entrepreneurs sometimes get stuck paying high interest rates for low loan amounts.
There may be good opportunities now for more traditional credit options because banks and credit card companies are lowering interest rates to encourage spending. A new business may be able to get a loan or a credit card with fewer penalties and potentially higher credit limits. A credit line that didn’t make sense when the economy was strong could be fitting now.
2. The competition is struggling.
A healthy economy allows established businesses to continue being successful and gives startups more chances to get started or expand. A recession generally makes it harder for companies to continue with the status quo, and many new startup founders could get discouraged.
What those leaders don’t see, however, is that a lack of economic activity may be a benefit for starting a business. There’s no need to worry about other new companies leveraging the same position as you. You can instead focus on the established competition, and your marketing efforts are likely to have wider reach. Customers of the businesses that were forced to close down will be in the market for new solutions.
3. Running your business could be cheaper.
Many businesses start by cutting overhead costs, such as rent, when they are struggling, which consequently makes it more affordable to rent an office space, buy supplies, deliver products, advertise and more.
You could even get high-quality equipment that was previously way out of your price range, now at a hugely discounted rate. This applies to employees as well — top talent may be available at a more affordable salary than they would expect during a strong economy.
4. There’s room for negotiation.
If the products you need aren’t marked at a lower price, it’s worth a shot to negotiate. Because many companies will struggle during a recession, vendors may be willing to work out a deal with you. Try to find the vendor’s contact information (phone or email) and reach out to them personally. A recession puts you at an advantage in negotiating. When the economy is strong, the vendors set the rules, and negotiating can be frowned upon.
5. You can hire more qualified people.
When the economy is healthy, it can be tough to find the right people for the job. Most qualified people are already taken. During a recession, many skilled people get laid off and search for new jobs. This is your opportunity to hire a great team that can help your business innovate and grow during hard times.
As scary as it seems, there are still several benefits to launching a business during a recession. For some companies, it may even be easier to start during an economic downturn than it would be to launch during a bull market. It’s important to look at the upside, such as financing, hiring top talent and being able to carve a space for yourself in the industry.
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