The reality of Starting a Business in this Economy

Starting a business is a scary proposition anytime but starting one in a recession makes it even more nerve wracking.  Such fear can freeze us to inaction unless we take a closer look.  The reality is that a slow economy can be the ideal time to start a business. With high unemployment rates starting a business is a great career alternative for many people but what are the realities and how can we deal with them?

The first reality is that recessions are a normal part of our economy.  According to the National Bureau of Economic Research we have experienced a recession about every 4.7 years since 1948.  Some recessions are mild and some more severe.  No matter when you start a business, you should expect to experience cycles in the economy.  The key is to see how a particular business does when times are slow.  

A second reality is that not all businesses are affected in the same way by a recession.  There are many types of businesses that thrive in a down economy. Many fast food operators are reporting increased business as casual dining customers “drop down” a notch to save money.  Fire and water damage companies are reimbursed by their customers insurance and are relatively unaffected by ups or downs in the economy.  Other industries like elder care or tutoring businesses are “must haves” which customers will make other sacrifices, if possible, to purchase such services.  The one strategy for dealing with the economy is to focus on industries that are not impacted as much by economic cycles.

A related reality is that franchises tend to be in fairly basic industries.  Contrary to popular belief successful franchises do not emerge in hot trendy industries where spending is more discretionary.  Restaurants, dry cleaners, haircuts, cleaning services are all things that will always be needed and have thriving franchise systems right now.  Even business to business franchises such as a sign business provides a basic service that their customers need in any economy.  Nothing is totally recession proof but a franchised business is less prone to extreme cycles both up and down.  The reality is that starting a franchised business minimizes your risk.

Another reality of a slow economy is that rent may be lower and more negotiable.  Suppliers may be more responsive and flexible on price.  Great employees can be available.  The truth is that no matter when you start a business, there will be a ramp up period before you make any money.  Taking advantage of the benefits of the slow economy can position you for greater success as the recovery starts.  

An additional way to create safety for yourself is to focus on established brands with a longer history in business.  Look for a business with a proven system that has weathered economic cycles. Starting a franchised business gives you that opportunity and these companies have probably been through several recessions and have experience adjusting to the market changes.

There is no denying that it is scarier and may take a little longer to start a business in a recession, but it doesn’t mean you need to give up.  As always, careful research is the key to success. With any big decision you should always speak to experts and starting with a franchise expert in this economy is the reality check you need.