Should You Start a Business During a Recession?
What do some of the biggest companies in the world, Burger King, CNN, Uber, and Airbnb all have in common? They were all formed during the midst of an economic crisis.
Starting a small business during a recession is certainly feasible; some even thrive in a difficult economy. Of course, if you are starting up a business during this period, there are things you have to consider, including whether the current economy will help or hinder your business prospects.
Businesses That Are Currently Thriving
Here is a list of just some of the businesses that have reported an increase in activity since February 2020:
While many may assume that these businesses would take a hit during a recession, recent studies have suggested that many businesses feel more confident when they have an accountant during times of economic uncertainty.
Auto Repair Services
All types of repair services do well during periods of economic uncertainty, as people generally become more reluctant to solve their problems by purchasing new things.
People who specialize in writing top-tier resumes will find that many more people have recently become unemployed and therefore require their services. This business is a perfect example of one business seeing an increase in activity during an economic crisis.
Many people will find that they have a lot more time on their hands and may feel like taking the time they have to learn a new skill. This idea gives some people the opportunity to start teaching businesses.
All of the listed businesses can thrive during times of a recession for varying reasons, but they can all benefit from times of financial crisis.
Forming a Business In a Recession Can Make Your Business Resilient
Many of the best and longest-lasting companies are set up during times of economic crisis. The difficult economic backdrop makes them both tougher and more nimble for years to come. One possible explanation for this is that businesses are trying to make it when you can't get financing and the customer demand is low.
This fact can be tough to hear, but the theory is if you can thrive in a recession, you can survive in much better economic conditions.
A good place for entrepreneurs to start thinking is to think of ways to use this current global crisis to their advantage. For example, if you are a teacher who normally teaches face to face, consider starting a business online. There will be higher demand while everyone stays at home, and you can save both time and money on equipment; all you’ll need is the laptop in your home.
You can take your skill or business idea and see how it can fit into this pandemic. Maybe your business idea is specifically designed to help people during these times, such as providing personal protection equipment (PPE). In those cases, you should consider if it is financially viable to start this business now, and if there will be a way your business can continue when this pandemic is over.
For more information on the impact of recessions on US small businesses, check out Small Business Lending and the Great Recession from the Consumer Financial Protection Bureau.