Should You Start a Business in a Recession?

Should You Start a Business in a Recession?

Eighteen months—that’s how long TD Securities said we have left before a recession hits according to an article Forbes published in July.

The good news? TD Securities also said there’s only a 50% chance of this happening. The bad news? If it does happen, it could derail any plans you may have of starting a business.

Or will it?

The short answer: not necessarily

Problems don’t necessarily go away in a recession. In fact, even more pop up. People lose their jobs. Companies go bankrupt. Investors lose money. And when there are problems to solve, there is money to be made.

The key, then, is to find the right problem to solve. If you can find a way to make things a little more bearable—or better yet, provide people a way to save or make money—then you know you’ve got a great business idea on your hands.

Of course, having an idea is only the first step. You need three other things if you want your business to survive until the economy recovers.

1. A long-term plan

The good news is that recessions don’t normally last forever. The bad news? If you build your business solely around the conditions during one, it may end up being obsolete once the economy gets better.

The goal, then, is to make sure your business is designed not only to thrive during an economic downturn, but also to adapt and keep growing in a healthy economy.

2. A cash buffer

Any business needs a cash buffer. A business started in a recession needs even more. With people having less money (and motivation) to spend, there’s no telling how long it would take for your business to become profitable.

The good news is that it’s not necessarily more difficult to secure funding for your business during a recession.

Banks, for one, are eager to lend money, so you can enjoy significantly lower interest rates and more negotiating power. A lot of investors are also looking for new ventures to invest in for cheap, hoping to cash in once the economy bounces back.

And if, for some reason, you’re unable to secure funding from investors or the bank, there are other avenues you can explore.

3. A lean operation

Finally, you also need to make sure you keep your operation lean. Only get people and equipment you absolutely need. Keep your workflows as simple as possible. You can always scale once things get better.

The idea is to keep your operating costs as low as possible to make your cash buffer last until your business finally becomes profitable—that and to keep your team small and agile enough to adapt to whatever challenges and opportunities your business comes across along the way.

The bottom line

A recession brings massive opportunities if you know where to look. If you can find the right problem to solve (and follow the tips we’ve shared with you today), you’ll be in the perfect position to capitalize.

Already have a winning business idea? Secure the funding you need today by applying for an Asenso small business loan.