Actually, a Recession is a Great Time to Launch That New Startup

Actually, a Recession is a Great Time to Launch That New Startup

  • What are the positives of founding a startup in a recession?
  • Learn how hiring during a recession works in your favor.
  • Find out why some startups thrive anytime (even during a recession).

Worries abound about an impending global recession thanks to the economic slowdown that the ongoing COVID-19 pandemic has caused. With consumers watching their spending and uncertainty in the air, launching a new business probably seems risky right now.

But at the same time, that idea and reality may not line up the way you think. In fact, some argue that entrepreneurs actually should not worry about a potential recession. Why? For this simple reason: the state of the global economy doesn't directly impact startups on a large scale.

There are definitely factors that will determine whether or not a startup will succeed. However, they have less to do with coronavirus, an impending global recession, or other large-scale matters than you might think. Fiducial explains why now might be the perfect time to start a new business!

The positives of founding a startup in a recession: What you need to know

Want a reason to start a business in the middle of a recession? Fiducial has a great one! Generally speaking, the prices of products and services decrease during these periods of economic downturn. Smart entrepreneurs don’t get scared by this – they take advantage of it!

While larger companies look for chances to retract and shed costs, struggling businesses will sell off assets at bargain prices. Retailers and other organizations will drop prices to move as much inventory as possible before it's too late. Interest rates fall to their absolute lowest. This means that opening new lines of credit (or borrowing money in general) has never been easier.

Sure, none of this is exactly positive for those larger organizations – but it's good news for your new startup. And it couldn't have come along at a better time! Provided that you already have a plan in place, you can save on costs and bring your vision of the perfect company into reality.

A recession is a great time to launch that new startup

Top talent will always be looking for opportunities

Along the same lines, your startup will obviously need high quality employees. Though depending on the financial side of your business, getting to that point may often feel easier said than done.

But this is another one of the major reasons why this could actually be good news for your efforts. As soon as a global recession sets in, larger companies will begin shedding workers – fast! As unemployment rates rise across the country, there will be a far larger number of qualified, passionate, and talented people available.

By putting in the effort today to put a strong hiring plan in place, you'll know exactly what type of candidates to go after when they become available. Also, you may be able to secure these people at lower rates than if the job market had been stronger in your industry.

In fact, many agree that this is a great opportunity to bring in a co-founder to compliment your skill set. Never forget that the people with whom you surround yourself may mean more to your success than what you actually do. If you attract qualified individuals who A) believe in what you're trying to accomplish, and who B) fill in the skills gaps that you yourself possess, you'll be in a better position than you otherwise would have been – and earlier on in your company's lifecycle as well.

Entrepreneurs solve problems. That will always be true (and necessary)

In the end, the same factors that will impact whether a startup can succeed are as true today as they were before the coronavirus. They are and will always involve your founding team and their ability to solve a problem for a paying customer. Starting your business with a qualified, well-balanced, and experienced team is something you simply cannot overstate the importance of.

People will always have problems and they will always look to new and innovative companies to help solve them. Yes, the problems may change given what is going on in the world. However, the fact that people are looking for real, effective solutions will not.

In other words, it’s still all about the product-market fit. If your startup was founded on an innovative idea that spoke to a universal problem, it will find its success. It may take a bit longer in a global recession – but the odds are very much in your favor.

What’s next for your startup?

Oftentimes, achieving this product-market fit has little to do with wider macroeconomic trends, which is exactly why a recession is probably a better time to launch your startup than you thought. If you also remember that all recessions eventually come to an end – and that those startups founded on a stable foundation position themselves best to rebound at that time – you're looking at a very exciting position for any entrepreneur to be in.

Need help getting your new business off the ground? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!

For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.