Is It Good to Start a Business During a Recession?
The experts have been forecasting a severe downturn for the last couple of years. This begs the question, is it good to start a business during a recession?
In this article, share with you some of my insights into starting a business during a recession.
The U.S. economy: should you start a business during a recession?
Over the past few years, the US economy has faced many challenges. The COVID-19 pandemic hit the economy hard. But right now, unemployment is low and every company I know is hiring. There’s a real disconnect in the market.
The economy is showing signs of strength – inflation is a threat and inflation is rising. Yet, despite this strength, there are sectors that are experiencing mass layoffs. This is especially true in the tech world which, in recent downturns, has been the first and hardest hit. Thousands of people are being laid off, primarily in the innovation side of things. There is also a lot of M&A activity, leading to the decimation of duplicated roles.
It’s an interesting time, with many contradictions. Yet, despite the challenges, there’s a lot of money in the market. People have still got a lot of money, and they are still spending.
What are people doing with their money?
Uncertainty in the world economy is playing havoc with the stock market. There’s a lot of volatility, and this is making people reconsider what they should do with their investment capital. What people desire most are investments with capital stability and a good return.
The reaction to the pandemic forced businesses to operate differently. But I don’t see this situation happening again. Yet there was something unexpected that happened during the pandemic: many small businesses thrived. Experts didn’t expect this.
Another thing that the experts didn’t expect was for real estate values to continue to rise. We’ve been spoiled by super-low interest rates, but these have now normalized at around 5% or 6%.
People are still buying real estate.
There are a lot of businesses that can operate profitably in any kind of economy.
So, people with money are turning away from the stock market and toward business ownership and real estate. It’s these that have held up so well through the most challenging times we have faced in generations.
Should I start a business during a recession?
Is there a right time or wrong time to start a business or buy a franchise? The truth is, if we wait for the perfect conditions, we’d never start a business. We don’t know what the future holds. We cannot predict what the economy will do with any accuracy. And we have no idea how the job market will pan out.
Those who wait for the perfect time to start a business are those who want an excuse not to roll the dice. Often, this fear of acting is the result of ignorance, a lack of knowledge or experience, or simply not doing the research.
This is especially true of business ownership. Fear of failure is a huge roadblock for many, and this fear is also natural.
I’ve helped people into business ownership who have been fearful because the economy is so strong and they’re making huge dollars in their jobs. Their reticence stems from the question, “Why would I change all this?”
Then there are those who I have helped when the bottom fell out of the economy, who were fearful because “Why would anyone start a business in this market?”
Here’s a fact. Most of those who started a business in the darkest days of 2020, 2021, and 2022 have seen their business go from strength to strength. Their bravery has been rewarded.
So, is now the right time to start a business or buy a franchise?
You can’t time buying real estate or starting a business to perfection. But what you can do is make the decision that you want to start a business. Then go for it. If you’re considering starting a business in recession-threatened conditions, don’t wait. Seek out the advice you need, plan to be successful, and do it!
Should you buy a franchise now? Take our franchise assessment and see if you have the attributes to be a successful franchisee in all economic conditions.