A Good Time to Start A Business?

Are recessions a good time to start a business? This is an interesting question that was raised by a recent article in the Economist (economist.com). Many of the world’s best known companies were founded during recessions – General Motors, Disney and MTV. And for many people - no longer in paid employment, a business start-up might be the only obvious option. A few points are worth bearing in mind.

Recessions swell the ranks of potential entrepreneurs so if you are thinking about business ideas, the chances are others are as well. Prepare yourself for a competitive environment and pay attention to how you are going to be different and better. Add to this the fact that consumers have less money to spend and will be more discerning on how they spend it. Again this means that your customer value proposition will have to be compelling. And as we have seen over the past few years, finance and credit becomes very scarce during recessions adding further to the start-up challenge.

On the plus side, getting traction during the hard times augers well for the future of your business. One of the persistent research findings is the different attitudes and management styles of firms formed during recessions or run by people who have experienced recessions. These businesses tend to be more risk averse, they take on less debt and tend to be more conservative. These can be good habits but of course as business cycles change, management attitudes need to be flexible as well.