There’s no denying it, these are hard times. And it doesn’t seem like it’s going to get better any time soon.
So you better hold off on starting a new business until the we turn the corner. Right? Let’s look at it.
What’s the common wisdom on why you shouldn’t start a business during a recession / depression?
1. Can’t get a loan / investment.
2. Can’t get terms.
2. Can’t get sales (customers don’t have money).
1. Can’t get a loan / investment – True.
It’s just much harder to get financing of any kind when banks aren’t lending and venture capitalists, angels, and even family and friends don’t have much money to put into highly speculative ventures.
2. Can’t get terms – Yes and no.
Although some companies don’t have the wherewithal to extend payment terms these days, plenty of other companies are happy to give you Net 60 or even longer terms. They want to book sales, and move inventory. Better to show revenue with higher Accounts Receivable than nothing. Many companies have excess inventory, and need to get rid of it.
3. Can’t get sales – Not so fast.
If you’re selling big ticket luxury items – yachts, jets, jewelry, sure, you can expect difficulties. But what if you’re selling software to help companies save money on billing? Or a restaurant with budget meals? Not all businesses are hurt during a recession.
Lots of famous businesses got their start during bad times – Procter and Gamble – Panic of 1837, IBM – Long Depression of 1873-1896, GE – Panic of 1873, GM – Panic of 1907, FedEx – Oil Crisis of 1973.
So don’t dismiss the idea of starting a new business during these times. But consider a business that doesn’t take a lot of money to finance, and that not only solves a customers problem, but saves someone money, and you can do quite well.
About the Author:
Paul Hynek is a Wharton MBA, President of Duborne Corporation, and creator of EZ Numbers, software that allows you to easily create a Proforma Template.