Wednesday, February 4, 2009

Recession: The Right Time to Start a Business?

I just read a refreshingly optimistic article on zwire which makes a compelling argument for starting a business during economically troubled times.  I've surmised the more important points from the article while including some ideas of my own...

1. Pick a sound market.  
That means no luxuries. Simply stated, now is not the time to invest in that fair trade, all natural Starbucks alternative you've always dreamed of doing.  Zwire writer Mark Miller suggests considering what he calls "recession proof" markets: anything related to health care, car insurance, etc. This rule has always applied to a sound business, but now more than ever, think: practical, universal, and necessary.  

2. Appeal to demand.
Everyday on my way to class, I pass a newly opened, eternally empty all vegan ice cream store with a thoroughly depressed manager behind the register.  If that store's not making it in the middle of the West Village in NYC, it's not gonna make anywhere.  It's always risky to invest in a niche market, and now is probably not the time to try.

3. Cut the Strings.
Consider self proprietorships- aka, starting a business solo.  It's more common then you think-according to the article, 85 percent of business tax returns are filed by companies with no employees. It means that you earn all the profits, control all the assets and... assume all losses and liability (see numbers 1 and 2). Instead of hiring employees, look for other small businesses offering the services you need and align with them.  A self proprietorship keeps overhead down and profits up- as long as you know what you're doing.

4. Know What You're Doing.
Have a great idea for home delivery of prescription medications? Do you have any experience? Connections? Marketability? No?  Stick with something you've got a handle on.

While helpful, all these rules can be applied in times of economic prosperity. In the other half of his article, Miller explains the specific advantages of starting a business during a recession:

1. Survival of the Fittest. 
We're seeing it everywhere-  businesses are failing. And when businesses fail, it means less competition, with greater opportunities for brand expansion for stronger companies.

2. Sale! Sale! Sale!
While it may be more difficult to get a loan for your business, suppliers are cutting prices on the raw materials, and service fees for website design, etc, can be found for a bargain.  Also, with the real estate market plunging, office space can be had for lower prices than ever before- even in the NYC.  

Miller makes some compelling points with his article, but I'm not sure I'd have the daring to begin a business in today's world. What do you think?


  1. Personally, I think you'd have to be off your rocker to start up anything right now

  2. I understand the logic, if you can hit a market that still has demand despite slowed spending then you are in the gold because startup costs and products are generally cheaper right now. Of course, you sell them for cheaper as well, but if you were planning on jumping into the fray there is no denying it will be cheaper to start now than in financially healthier times. Still, no reason to go in if you weren't planning on it (or in desperate need due to layoffs).

    I think a critical element missing from this list is to GO DIGITAL. Don't pay for a brick and mortar store when you can hit up the online market. You widen your potential customer base from the get go, the money saved on overhead can go into advertising (which by the way would still cost less than owning/renting brick and mortar space, with the added benefit that you have money left over and you'll probably be the top sponsored link of google for that kind of cash). Plus, then you really do not need to do anything but go solo, considering without a storefront you probably won't need many (if any) employees.