From the January 2002 issue of Startups

The question of whether to start a new business during a recession or wait for the economy to improve is on the minds of many entrepreneurs these days. Certainly there are pluses and minuses to starting a new business in a recessionary economy. But the reasons to launch a company during weak business cycles may far outweigh any reasons for delaying the launch. In fact, the reasons against starting a new venture during an economic downturn may be the very best reasons to get started in the first place:

Demand is down. The biggest reason often sited for delaying the start of a new business during a recession is that demand is down-thus it is reasonable to assume there are fewer buyers for a new company's products and services. In fact, this may be the most compelling reason to launch. Because demand is down, prices are down. Therefore, it should require less start-up capital. The rent on your office space will be less than it would have been one year ago. Your employees will no doubt work for less because unemployment figures are increasing every month. How about office furniture, equipment and supplies? They will cost less today. Even the cost of hiring a lawyer to incorporate the business and assist with other important documents will be less because they need the work, too.

You've got time on your hands. Another important reason for getting started now is that there is more time to get organized in anticipation of better (and busier) times ahead. This is the time to launch the Web site, get the marketing materials written and printed, hire the best people and get them trained, make sure your support systems are in place, and generally ensure that the business is cooking on all cylinders by the time those orders start pouring in. Once things do pick up, the time you have for these important tasks will be significantly diminished.

You've got strategic opportunities. Weak economic times often create tremendous strategic opportunities, ones that are often not available during bullish economies. For example, there may be a competitor in your space that has been so weakened by the economy that they are ready to throw in the towel. You might be able to buy their business for cents on the dollar, buy their customer lists or equipment, or hire some key individuals.

It gives you a mission. Lastly, launching a new business is challenging, exciting, exhilarating and all-encompassing. Recessions can have a depressing effect on most people, thus launching a new business can provide a significant psychological lift. It provides you with a distinct, tangible mission. You are entering uncharted waters of great possibilities while those around you are just surviving from day to day, wondering when things will get better.

Let's say, after examining your options and the business opportunity in front of you, you've come to the conclusion that now is not such a bad time to launch your new business venture. Here are some useful tips to give you an even better chance of success during these precarious times:

  • Have a first-class business plan that's well-thought-out, well-documented and ready to implement. If your key players have not participated in the writing of the plan, be certain that they have read it, understand it and agree with it. Everyone needs to be pulling together toward the same goals.
  • Spend some considerable time researching, understanding and then communicating what differentiates you from the competition. Every business has the opportunity to differentiate itself from the competition, but too few actually take advantage of this very important strategy. Communicating these differences through your sales and marketing efforts is critical and can help you ensure the successful launch of your business.
  • Make sure your funding is in place (yes, there is still money out there looking for good business opportunities). Because you are starting in tough times, allow for a larger cushion than you might require during good times.

On Wall Street, the most successful investors do not try to time the markets. Rather, they invest their money when the point of entry is to their best advantage. Hopefully, you will agree that the point of entry for your new business is not when everything is great, but rather, when it is to your advantage to launch.


Bill Fiduccia is a founding partner of BizPlanIt, a professional business planning consulting firm that helps early-stage, emerging-growth and established companies prepare clear, concise and compelling business plans that get results.