It might seem contrary to common sense, but historically, starting a small business during economically tough times makes a lot of sense. Consider for example that Microsoft was started by Bill Gates and Paul Allen in the midst of a recession and right in the middle of an oil crises to boot. If that gives you some confidence, consider the five reasons below on why a down economy is a good time to start a small business.
- Low interest rates: If you have your heart set on starting a business that is going to require some borrowed capital, the middle of a recession is almost always a good time to give it a shot, provided of course you have a really good credit history and maybe some trustworthy backers. Recessions or any other period of low interest rates are a great time to get off the ground because it will mean less of a debt burden as you try to make it past that ever critical one year mark where nearly half of all small businesses fail.
- You’re out of a job anyway: If it’s a down economy and the unemployment rate is high, chances are you are already unemployed or may be in the near future. So, rather than sitting around fretting about your job status, why not start that business that you’ve always dreamed about.
- Better supplier deals: When times get tough, those that sell supplies to business find things tough as well and to keep their business up, they start to offer really good deals, which is great for a start up because operating capital is everything when you’re a new business still just trying to get its feet on the ground.
- Lower start-up wage costs: If your start-up requires the labor of other people there is no better time to start up then when unemployment is high; because, quite obviously, there is a wider pool to choose from what with so many people being out of work, and those in the pool are more likely to work for lower wages than they would be when times are good, thus helping you keep your costs down as you are just getting started.
- Lower rent: If your new business needs to a place to call home, and that places isn’t where you already live, than the odds are good that you’re going to need to rent some space; and one of the great things about a down economy is that rents tend to drop, sometimes rather precipitously, thus, you are likely to find some great deals which could help you stay afloat through the times ahead with lower overhead costs as you try to get your business established.
These five reasons on why a down economy is a good time to start your own small business are intended as a means of discussion points and should not be taken as business advice. Starting a business is a very serious business and anyone considering doing so should first seek both business and legal counsel before proceeding with any great new ideas. But if you do choose such a path, good luck.