Are you looking for reasons to start a business in a recession? Should you start a new business during challenging times?

Starting a new business in tougher economic times might seem counterintuitive on the surface. Yet, there are actually many reasons for trying it. In fact, it could be the best possible time to start a company. 

Here are just some of the benefits you’ll find to taking the leap of faith now…

Recessions Are When The Best Businesses Are Built

It’s true that anyone can seem like a genius at starting and growing businesses in blindly optimistic bull runs. There are periods when it seems like it is almost impossible to lose.

An upturn may make it seem easier to raise money, and benefit from all of the dollars floating around. Yet, most of those short term easy successes can be revealed to be total duds when the economy changes.

Keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

In contrast, many of our biggest businesses and startup success stories have been born out of recessions, depressions, dips, and crises. This is also when most personal wealth is made and a critical factor as part of the reasons to start a business in a recession

Check out the patterns and throw your hat in the ring to become one of the next generations of hyper-successful companies forged in recessionary times.

Less Competition

During economic upswings, everyone wants in which is something to keep in mind while you are looking into the reasons to start a business in a recession. Big corporations are in growth mode and are expanding into new areas. Countless small businesses and entrepreneurs are jumping in to take advantage of the next hot thing.

During recessions, there is a lot less competition. Fewer others have the courage to move into new verticals or to start businesses. This is really important. It means that you can focus your time and budget on your own business, customers, and product, instead of worrying about fending off the competition.

This can give you a tremendous lead, and allow you to grow, dominate market share, and establish your brand and be in a position of strength before others try to copy you. 

Lower Startup Costs

Almost everything gets cheaper during a recession. Especially many of the things that startups need to get off the ground. With fewer people starting, other companies want to attract new business. So you’ll find sales and free trials. Many other companies may be going out of business and liquidating their inventory.

Not that anyone needs it anymore, but in previous recessions startups have found as much as three to six months of free rent on new premises. 

Lower Labor Costs

One of the most important reasons to start a business in a recession are is the decrease in labor costs. You need a team and a very talented and experienced one. 

This can seem prohibitively expensive in good times. It’s hard to compete with big corporations and their giant salaries and benefits packages and plentiful parks. 

Yet, in recessions, those same companies may not only be freezing hiring, but they can also be laying off thousands of very talented individuals. They may even be buying them out of contracts and retirement plans.

This means more potential recruits who may have the luxury of working for a startup and will be more grateful for a job opportunity than ever. You may have hundreds of candidates lining up, instead of having to pay thousands to recruiters in other phases of the economy.

Marketing Is Cheaper

Marketing is 90% of your success. In good times marketing and advertising are far more expensive. Plus, there is more marketing happening, which can dramatically reduce results and effectiveness.

This is the time to cut deals on outdoor advertising, print, and social. You may even find Google pay per click costs are a fraction of what they were just months before.

Look for ways to look in these savings with multi-month contracts, or exclusive partnerships.

It Gives You Time To Perfect Before Scaling With The Next Boom

No matter how much you think you’ve nailed it with your idea before you start, it can still take months and years to perfect your product-market fit and business model. This is an often forgotten piece when thinking about 

This downtime can give you the room to test and hone and be ready to really scale smoothly and ride the next wave. This is an often forgotten piece of the reasons to start a business in a recession.

Urgency

If you have the right product and service for a recession you’ll find your customers more motivated and ready to take action than ever. The pain is real and searing. They have more urgent needs. That is essential for securing sales.

Access To Friends & Family Funding

The first round of funding for new businesses is the friends and family round. A recession is often the best time to raise money from them.

They should be fearful of the stock market, wary of losing the equity in their homes and real estate, and may need to completely restructure their retirement portfolio to escape ruin. 

You can offer them the best opportunity to invest their money. Also, the rounds that include friends and family members are labeled as Seed rounds. 

Incumbents Are More Vulnerable To Innovation & Disruption

Bg incumbents are often reeling from the impact of the recession. They are cutting jobs, closing offices, and shuttering locations. They are trimming expenses and are pulling back to their basics.

This is your chance to innovate, step up into the void, be aggressive, and take their customers. 

It’s Better Than Job Hunting

What are you going to do if you don’t start a business?

If you have a job, are you going to hide under the desk in fear, hoping they don’t find and fire you? Then spend your nights worrying about your 401k shrinking? The longer you wait the harder it may be for you to start your own business.

If you are already unemployed then starting your own business can be a lot more attractive than standing in long lines competing with hundreds of others for a lower-paying job where you’ll be treated poorly and which provides no security.

Why not bet on yourself?

Hopefully, this piece provided you with some perspective as you are looking into the reasons to start a business in a recession. You may be interested in the video below reasons to start a business in a recession where I cover the topic in detail.

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