There’s never an ideal time to start a business. Look back through history and there are few periods when economics, politics, healthand a general sense of optimism have all lined up. In fact, what’sinteresting about entrepreneurship is that everyone has a different opinion on when the best time to launch is. Some believe you should hit the ground running when markets are strong and businesses are thriving.
Others, like American billionaire Mark Cuban, believe the best time to start is when others are struggling. In his words, “recessions are the best time to start a company” because other companies are failing or not pushing forward like they should be. Again, there’s never a “right” time to start a business. However, there is merit in making moves during a dip.
How Do You Start a Business During a Recession?
Given the uncertainty of the 2000s, where recessions, political issues and health scares have been common, learning to take a chance when times are tough is essential. The question, however, is how? How do you start a business when banks aren’t lending, consumers aren’t spending and when there’s a general air of uncertainty? The first strategy is to identify a niche or an area where innovation is required. It’s rare that entire industries collapse. Instead, it’s the companies within that industry that collapse because they fail to adjust.
Uber and Airbnb are great examples of this. During the Great Recession (2007-2009), these tech companies tapped into the need for cheaper travel and accommodation. People still wanted taxis and somewhere to stay but their wallets were hurting. Uber stepped up with a more affordable and, in many ways, more convenient solution. The same with Airbnb. Instead of paying for a hotel, travellers could stay in someone’s home, often for a lower price. In turn, both Uber and Airbnb also gave people new ways to make money (drivers and hosts). Neither company reinvented the wheel, they simply tweaked systems that were already there but had failed to modernise.
Innovation, Cash and a Lot of Courage
Once you’ve found a niche, money should be your next focus. When times are tough, it’s not easy to get funding. Banks are the go-to option, but modern methods mean a loan rejection isn’t the death knell for your ideas. Crowdfunding is a neat idea but you often need a following before you reach out to the masses. Flexible business loans are another innovation that can help. Instead of fixed terms and rates, lenders now offer flexible overdrafts, revolving credit and merchant cash advances.
Merchant cash advances are interesting because they allow you to borrow money based on the sales you make through card machines. However, if you’re just starting out, this might not be an ideal solution. Flexible overdrafts are good because they allow you to dip in and out when needed and the rates will shift as you do. The trick, of course, is to ensure you don’t overdo it with credit and borrowing. As long as you can strike the right balance, you should be OK.
The only other ingredient you then need to launch a business is courage. It won’t be easy, especially during a recession. However, investor Warren Buffet often preaches that the best way to get rich is to be greedy when others are afraid. If you’re willing to take a chance when everyone else is hunkering down, the road is clear for you to walk down. All it then takes to thrive is a little bit of luck and a lot of hard work.