Starting a Business

A Recession is Not a Roadblock

If you play your cards right, a recession can yield plenty of profit for entrepreneurial ventures.
3 min read
Opinions expressed by Entrepreneur contributors are their own.

In the face of it, it sounds like a bad idea. Who starts a business during a global recession? Well . . . Disney, for one, and Microsoft for another.

Gregg Vanourek, a founding partner of New Mountain Ventures, agrees, arguing that many of the best companies are born in times of economic malaise. "Many people assume that entrepreneurs are allergic to recessions," he writes in Harvard Business Review. "It turns out that downturns can be times of tremendous opportunity--and, yes, profit--for entrepreneurs. But only if they play their cards right."

Safety first
As a rule, starting a small business is safe. Most home-business owners don't overextend themselves, they provide excellent customer care and their attitude reflects how much they value their business. Plus, they make sure their customers really need and appreciate their unique blend of goods and services. Sarah Newcomb, a freelance writer, agrees.

"Several of my clients used to hire big PR firms, but they felt lost in the shuffle. They don't any longer. They get my full attention without the hefty price tag they were paying. It's win-win for me and my clients."

Newcomb started freelancing last year when she and her husband decided they needed an extra cushion. "My husband is a teacher, and when the state started making noises about cutting $34 million from the education budget, I got worried. I had been working part time in a job I enjoyed, but I had been thinking about starting a freelance business for a while. With his job iffy, it seemed like a good time to start a business," she says.

Less competition
One reason that starting in a recession can give you a boost is that you'll have less competition. Many other entrepreneurs will be scared off by economic dark clouds, so when you jump in, you'll receive more attention from potential funders and customers.

This could be an opportunity to target a customer group that is shielded from the recessionary hit. Or your new business may be able to capitalize on companies that want to cut costs by outsourcing some of their work. Additionally, in a recession the economy tends to shed jobs, which can mean that savvy entrepreneurs might be able to snatch up some talent looking for a home.

Consulting opportunities
An economic downturn may affect the type of business you begin. For example, unemployed people need assistance finding new jobs. You could start an employment agency, a life coaching service, a personal image consultancy, job-skills training or a resume-writing service. Debt collection agencies, home staging and auto repair are all especially recession-proof.

Save people time
Operating a business in a recession requires a different focus than when money is flowing freely. But even in a recession, the most valuable commodity we have is time. Create a business that clearly offers a benefit to your customers, whether it means learning to streamline business processes or to simplify their home life. They'll not only thank you for it, they'll pay you, too.
 

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