Should You Start a Business During an Economic Downturn?
2020 has been a tumultuous year, to say the least. Many of us have been impacted financially during the covid19 crisis, and for some, the financial consequences have been devastating. For others, however, this can be the very opportunity they’ve been waiting for.
Did you lose your job and now have the time?
Do you have a product or service that can help your community during these strange times?
Have you wondered what has allowed some entrepreneurs to keep their operations going despite Covid19?
What are the traits of those who were/are still going vs those who have had to close shop?
Entrepreneurs are typically born out of circumstance and a willingness to do the uncomfortable in order to attain long-term success. Launching a new business during a global pandemic is a very audacious act, but if done right, it can also be very rewarding.
During this time specifically, or really any economic crisis, you may find that the circumstances are just right for a successful run at entrepreneurship.
Crisis Breeds Innovation
Some of the most successful companies in U.S. history saw rapid growth during times of great economic uncertainty. Disney, the film industry, and Procter & Gamble are famous for having incredible success during the Great Depression. These companies chose not to scale back their efforts like their competitors, but in fact purposely spent money on ads and marketing, even investing in marketing efforts that were unorthodox for the time.
You could learn from these examples, even if you are a bootstrapped startup. There are many free and low-cost tools available to new business owners who are looking to market themselves. You could start a Facebook Group, join other groups, host free online events, and even join in the digital events of others who already have an audience. You don’t have to spend a ton of money on Facebook or Google ads to attract the right customer, you just
have to take the time to think outside of the box.
Crisis Could Equal Less Competition
Depending on the industry you could find that mass economic hardship could mean less competition in the marketplace, creating a high demand for what you have to offer. Many businesses are still trying to find ways to pivot, while others have simply run out of cash and are no longer in operation. With less competition, you can find it easier to stand out, attain talent, and access resources.
You may find that those competitors who are still around are scaling back their marketing budgets, laying off or furloughing employees, and vacating spaces. This could mean you don’t have to spend as much on marketing, you may be able to hire top tier talent as freelancers to help you get started, and you could find a landlord who is eager to fill office space.
You may not even have to start from scratch, as there may be opportunities to purchase a business during an economic downturn as well. Someone you saw as a competitor may very well want to sell their business during this crisis. If you do want to purchase a business, but need to finance a purchase, banks are offering loans at record low interest rates. It’s important to note that just because you’re buying a business that is already established, you should still do your due diligence and research the company's reputation, clients, and systems.
Crisis Means More People Indoors
Specifically, the Covid19 pandemic has kept people in their homes. Ecommerce sites have seen a very large uptick in sales, and platforms like Zoom and Google Hangouts Meet have seen an increase in signups. All because people are in their homes and still crave human connection.
While states are beginning to relax their stay-at-home orders, many individuals are still opting to spend the majority of their time indoors. This is fertile soil for business ideas that live primarily on the internet. Product or service businesses that can meet customers where they are, in their very own homes, and still provide them with a satisfactory user experience can win in this landscape. Check out this CNBC Op-ed predicting some of the hottest industries to break into during Covid19.
One thing is for sure, no matter what industry you’re breaking into, a global pandemic can be the right time. Assess the competition, brainstorm, and figure out the intersection of your interests, skills, and opportunity.
If you think you’re ready to take that leap, we are here to help you realize your dreams. Desnoyers CPA, is an accounting firm that offers a wide range of services for business owners. Check out our monthly blog and join our mailing list to get more information for small business owners seeking experienced financial advice.