When Is It The Right Time To Start A Business?

by Silicon Valley Blogger on 2008-11-2035

Nowadays, the marketplace is rife with risk, so you may wonder whether it’s a good idea to launch a business during a downturn, especially with layoff numbers mounting daily. When is it ever the right time to start a business?

Starting a business during an economic crisis sounds absolutely crazy but let’s put aside our concerns of risk for the moment, and think about some of the advantages. If you are afraid of losing your job due to the economic meltdown, starting a new business may be the perfect antidote. No more bosses, no more pink slips, and no more backstabbing by your fellow workers 😉 !

Why Start A Business Today?

There are more than 27 million businesses in the U.S. with less than 500 employees, of which 20 million have no employees, according to the Small Business Administration.

With millions of businesses having less than 500 employees, a good chunk of the American population depend on these small businesses for their livelihood. That’s why the SBA (Small Business Administration) is offering funds to help those who have a good plan for starting a business now. They may be worth checking out; they may have some solutions for the budding entrepreneur.

Opening a business is an exhilarating and frightening experience. But think of the rewards; when everybody is hunkering down, you will be very well positioned to take advantage of the inevitable recovery. These ‘no-employee’ businesses are usually family affairs where everybody has a share of the pie, but a sizable portion is owned by independent professionals who work alone. Again, if you were contemplating opening your own business, now may be a good time to do it, especially if you’ve got the resources. Could you be rewarded for bucking the crowd (and the trends)?

start a business

Some Advantages To Starting A Business During A Downturn

Let’s consider some of the advantages of starting a business during slow economic conditions:

  1. Space is cheaper. Finding an office, a warehouse or even store space is much easier and much cheaper. If I were a commercial real estate owner, I’d rather rent out my space for less than have no tenants at all.
  2. Great deals available. Businesses going under have to get what they can for their furniture and electronics. Auctions may offer ridiculously low prices for items that you’ll need.
  3. Cheaper employees. A well trained professional will gladly accept a cut in salary rather than face unemployment. Same with clerical workers.
  4. Cheaper services. There are all kinds of service providers who have to lower their prices due to the lack of demand. Think of advertising specialists who can prepare your marketing campaign for much less than normal.
  5. Less competition. While your competition is waiting out the storm, why not make yourself available, ready to offer people what they need? Even now, though they may be a little harder to find, there are always people in need of a service or product who are willing to pay (albeit possibly for less). Go and find them, don’t wait for them to find you.

Are You Ready For Entrepreneurship?

Everyone can become an entrepreneur, but not everyone can be successful at it. It’s great to envision such possibilities, but before I reel you in on this idea, let it be known that opening a business is not for everyone. The reality is this: not everybody may be qualified or prepared to start and run a business — and just like with the stock market, if you make big mistakes and are not sure about what you’re doing on your own, you can get hurt….badly. And in a downturn, financial wipeout scenarios are all the more common, and dramatic. So if you’re doing this, you MUST have a good plan, you MUST have done your homework, and in many cases, you’ll NEED access to cash.

Depending on the type of business you’re interested in launching, you could potentially face an enormous amount of risk. Plus, in today’s tight credit era, banks are reluctant to loan money, even to the well-qualified clients. So if you’re serious about your business idea, where can you turn? Well, you can approach people you know; start with your network. Or you could use some of your savings (gasp) or show your solid business plan to some of your wealthy friends (if you’ve got any). Some people I know have started their businesses with credit cards, but going down this path is not the most prudent way to go. In today’s era, it may very well be that you’ll have to bootstrap yourself using your own savings or you’ll need to consider the type of business that won’t require money upfront, such as a service-oriented venture.

Despite all the challenges, you may still find this to be your calling. If so, get creative. People still have to eat, buy clothes, and have fun. You can negotiate lower prices from your providers — they are anxious to sell their surplus. Drum up business by visiting churches (why not, the pastor may become your best salesman), schools, hospitals, clubs, and make them an offer they can’t resist. Note however, that this may not be the best way to promote your business 😉 .

Most of all, plan your business very carefully by analyzing the trends in your neck of the woods. Creating a niche has never been easier. But certainly, look before you leap and read our tips for small businesses. This article is about contrarian thinking, and contrarians are often vastly rewarded for their guts (no guts, no glory), patience and shrewdness. Whenever we contemplate a particular endeavor, we need to weigh risks vs rewards — the only sane way to really make a financial decision.

Copyright © 2008 The Digerati Life. All Rights Reserved.

{ 24 comments… read them below or add one }

Neko November 20, 2008 at 3:59 pm

I think that timing depends on what kind of Business you are looking to start. For instance, if it is a ‘Dull Normal’ Business not affected too much by market volatility then any time would be good as long as you have all of your ducks in a row.

However, if you are looking to open a consumer driven business like a retail boutique then you need to open it when the economy is good. Same is true for restaurants.

Personally, I would stick to something ‘dull normal’ like an A/C Heating company, feed store or a small concrete plant. Something that is always needed.

Retail is too risky as it is since margins are so small and most retailers wait all year for the day after Thanksgiving just to turn a profit.

– Neko

Eric J. Nisall November 20, 2008 at 4:02 pm

Very interestesting time to pose this question. I personally agree with the benefits that were listed, as many small business are failing it opens new opportunities to replace them. Aside from that, new innovations such as shared office space, virtual administration, easier access to vanity and toll-free phone numbers, etc. have made it much easier for smaller business to spend their resources on more important tasks such as marketing and promotion. Unfortunately, there are so many more issues that face potential entrepreneurs, that it sometimes overwhelms them and actually makes it seem easier to remain an employee rather than put in the effort to go out on their own.

Silicon Valley Blogger November 20, 2008 at 4:40 pm

Unfortunately, whether you’re a business owner or an employee in today’s financial climate, you’re not spared the worry.

You may think that you have a stable thing going as an employee, unlike those entrepreneurs whose revenues shift with the economic wind (unless they’re in some recession-proof industry).

Problem is, even as an employee, there’s much to be worried about these days, especially if you don’t perform a “core role” at the office. If you’re seen as dispensable, you’re first to go when the economy sours. But I suppose, unemployment benefits and possibly severance can help you for a little bit (and some COBRA too).

If you feel jumpy about your finances these days, you’re not alone. Count me in as one of those who’s been furrowing her brow over the antics of our government, stupid big companies and the stock market.

Kevin November 20, 2008 at 6:09 pm

Today truly is a great time to start a business. There is a ton of money to be made in poor economic times, this is when fortunes are made. More and more business are starting to create service that support small business as well. Here in Phoenix, AZ there are places that will rent non retail office space on a term as small as 1 day per week.

jatt November 20, 2008 at 6:12 pm

I would say the right time to start a business depends on what kind of business you want to start. Let me make it simple this way. The keywords that are important for us to consider before starting any business:

1-Time frame
2-Type of business
3-Business Size
4-Enough resources (money etc)
5-Wide Target market
6-Fewer competitors

Lindsay November 21, 2008 at 12:46 am

A person who has a great marketing strategy, capabilities to read competitor’s mind can start a business anytime, but other resources are also necessary like money and time.

jim November 21, 2008 at 6:06 am

I think the “right time” varies from business to business, it’s always nice to wait until the business climate is friendlier than it is now but then you have to compete with all the other bellweather businesses. 🙂 If you start now, others aren’t thinking about starting and so you might find yourself competing with fewer businesses (but you may be compete for fewer customers!). Ahh tradeoffs…

Curt November 21, 2008 at 7:30 am

Agree. Now is a great time to start a business.

Middle Way November 21, 2008 at 7:58 am

I was asked an interesting question the other day by a client. She wanted to know if I was planning to move my business elsewhere because of the economy.

To be honest, I was thrown by the question because the thought never crossed my mind. I have not plans to move because I do not believe the current economic downturn will be permanent. It is a cycle like my yearly business cycle. Not all years will be a good year and not all months will be good month.

So to answer you question. I believe this is a good time to start a business. The slower economy will mean more due diligence with respect to startup costs and may mean starting from home before signing a lease but we achieve nothing by sitting and waiting. The tighter the resources, the more creative we are forced to be. That’s not a bad thing.

DES November 21, 2008 at 8:17 am

I have been a entrepreneur and business owner for 15+ years. It requires hard work and discipline. I have many times thought I had better start looking for a job but lo and behold, here I still am. There may be a lot of talented people out of work right now giving this question some thought.

Eric J. Nisall November 21, 2008 at 8:41 am


I would have to disagree with a couple of points. I don’t think that business size has much to do with the situation. Regardless of the size of the business, the key factors such as having a business plan, clearly defined target market, a product/service that is needed, marketing plan, and resources are more prevalent. That leads me to the second point of contention: target market. Having a wide target market is not necessary, as many niche businesses cater to a narrow, more specified market and still thrive. Having a market targeted, whether it is wide or specialized is the important part. Regarding competitors, the number isn’t really all that relevant either. Business succeed or fail based on their own merits, not due to competition level. Having a product/service that is of better quality, reasonably priced (depending n the target market), and what I believe is the most important factor in exceptional customer service will tend to stand out from the competition.

vilkri November 21, 2008 at 8:45 am

As other comments have already said, it all depends on the type of business to decide when it is good time to start. However, I think any great idea, i.e. a service or product that fulfills a read need, should survive an economic downturn, which also means that it is probably advantageous to start right now.

Arlene November 21, 2008 at 2:45 pm

I myself is thinking of going into business. Yes, it’s harder than being an employee, but it can be done. It takes a lot of hard work, knowledge and determination to make it work. I’m reading good resources online and offline and I found articles on business mentors pretty useful.

Jacques Sprenger November 21, 2008 at 3:06 pm

Nobody has mentioned the possibility, very real, to go into business with a partner. I know, the risks are great, but look at Apple, Yahoo, Google and Microsoft as shining examples of partnerships gone right.

Maybe Des can give us some pointers on how to choose a partner, but usually it’s either a relative (more dangerous) or a buddy interested in the same area. The Web is still wide open to future Facebooks daringdos.

Brentos November 21, 2008 at 7:22 pm

The business partnership is only good if all of the counterparts are passionate in equal measure and are in business for more than just money.

I had a teacher at a start-up business school walk up to the blackboard and say, “The first thing we need to know about business partnerships is……don’t do it.”

All depends…..on the people.

Vincent Scordo November 22, 2008 at 5:32 pm

Nice post! I think two key items to keep in mind when thinking about starting your own business include (and you mentioned them both): 1. you need to have a superb business plan and 2. you need to have the stomach to run your own business.

A business plan will help with the strategic side of things (making sure you think through audience, product, ROI, etc.) while the “stomach” part will ensure you are willing to work 24/7 (and maybe for no money initially) on your idea/business plan execution.


http://www.scordo.com/blog/blog – a practical living blog

Friends and Money November 24, 2008 at 12:27 pm

I think that starting a business always depends on your individual product. For example starting an ice cream business in November is not clever. However the points you make about the advanatges of starting your business in a downturn are excellent, especially about renting office space being cheaper. I’d also add that if you can start and build a successful business in a downturn then when the good times come you’ll be home and dry. In many ways it sorts out the serious entreprenuers from those who are just interested in a job

moses November 24, 2008 at 3:41 pm

Take a look at any chance, even if it is small, because with great willpower, that small chance can turn into a great things. So we have to be dare to start our own business.

G1 November 25, 2008 at 12:07 pm

Gutsy article, you’d definitely need some major self-confidence to start your own business but your points make sense.

Murtza November 25, 2008 at 9:31 pm

I think you should Assess your strengths and flaws and should include the following questions for the assessment.

At which part of the business am I best?
Would others agree?
Which parts do I struggle with the most?
Where do I want to improve?
Does the service I provide have staying power?
How will it need to change in the coming years?
Could I be considered an expert in my field?
Would I want to work with other people as an employer, or an employee?
What would expansion or growth look like for this business? More clients? Hiring employees? Better paying projects?

I have started a logo design company with my own successful assessment with the help of the above points. I hope it will work for all of the readers for this post.

Thanks for the usefull info you share with us.

Stephen McFarlane December 2, 2008 at 7:55 pm

Thanks for sharing trends and investing strategies for coming days. It is very helpful to know future trends of share market in short term as well as long term perspective.

Matt | Small Biz Bee December 13, 2008 at 2:20 pm

Some of the benefits of starting a business in down economic conditions could be:

* Reduction in cost
o Deals with suppliers
o Reduction in rent
o Labor cost reduction

* Provide Value = Get more Sales
o Companies are looking to save, if you can give them the value you’ll get the business

* Greater Pool of Qualified Labor
o You cold be able to hire great people for a fraction of the cost during boom times

* More Bang for your Creative Buck
o If you can offer customers a creative way to save they will appreciate it more than when times are good, and reward you with more business.

Great post,

Matt | Small Biz Bee January 23, 2009 at 9:38 pm

Starting a business in a tough economy can make a lot of sense. Money is usually cheaper, labor and overhead less expensive, and you have the ability to get creative and win over customers. Make no mistake though, you need to have a sound business, and a clear plan to make it work though.


Jamain May 11, 2010 at 4:32 pm

There is never a right time to start your own business; it’s just like the traffic lights of life will never all be green at the same time.

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