Economic Down Turn…Could This Be the Opportunity?
Starting a business during a period of economic decline may seem like a mad idea, but is it better than you first thought. As according to Forbes, 8/10 new businesses fail within the first 18 months, is an economic slump really the best time to be thinking about starting a business. We will look at some of the advantages and disadvantages in this piece –
Advantages
Starting a business in a hard time does have a great list of benefits such as a decrease in the price of resources and property. During this period, sales for suppliers will be down, so they will be cutting their prices in an effort for you to buy more of their stock.
People will also be looking to rent property or sell their property cheaply as fewer people will be able to afford rents as incomes fall. Any labour costs will be lower as there is increased competitiveness for jobs, so your wage bill we be much lower than in a period of low unemployment.
Moreover, you must consider that hard times may not be universal for all sectors. Some business sectors will be experiencing growth during a period of economic decline. You must consider all of these options and more when thinking about whether to start your new business during hard times. Finally, if your business can succeed through this period then it shows it has the foundations of a good business during periods of prosperity.
Disadvantages
Despite the number of advantages, there are some severe disadvantages to starting a business at this time. The obvious one is the high failure rate within the first 18 months, a serious concern for potential business owners and the government. In addition to this, people’s incomes will be falling so they’ll have less money to spend on your potential business.
If your business were to go bust, you could face losing possessions or even your house to pay for the debt that you have got yourself in, which would’ve been avoided if you hadn’t started the business. Furthermore, a good business may collapse simply because they enter the market at the wrong time, if they had waited, they may have succeeded during a period of growth.
Conclusion
In my opinion, starting a business during hard times is pure and utter madness. You need to look at the other opportunities that you can use your money for. This could be in the form of investing in assets for you, or in others businesses, this minimises personal risk. Also look at the interest rates, keeping the money in the bank will allow you to cover for any emergency spending that is needed and may give you a better return than if you started a business.