Although it may sound counterintuitive, there are several strong arguments for starting a business during a recession.
Several noteworthy businesses got their start during fitful economic periods:
- GM was founded in 1908, the year after the “Panic of 1907” financial crises
- Although Walt Disney had been making cartoons since the 1923 it wasn’t until 1929, the first year of the Great Depression, when Mickey Mouse began dominating in theaters with synchronized sound
- Revlon – a brand that sells products that are somewhat synonymous with disposable income – started hitting shelves in 1932
- Microsoft was founded in 1975, a period in U.S. economic history remembered for struggle and stagnation
- Airbnb launched in 2008 during the previous economic downturn
There are several reasons why these businesses thrived.
Estee Lauder’s Leonard Lauder theorizes “the lipstick effect” – an indulgence that isn’t so cost prohibitive to be out of reach during tough times – makes cosmetics durable during depressions.
Bill Gates and Paul Allen simply had a revolutionary software idea that seems like an obvious inevitability to us today.
Disney’s Snow White and the Seven Dwarfs cost $1.5 million to make during the still difficult 1938 recession but is estimated to have brought in $8 million in its initial box office run – the most of any movie up to that point. It brought some much-needed levity and joy to a country reeling from nearly a decade of on and off recession and anemic growth.
These businesses succeeded during difficult times for different reasons, but each had some type of durability attribute that made them a good fit for the times.
An argument can also be made for unique recession characteristics creating competitive edges for businesses that start during downturns.
High Unemployment
You can help employ people when there are few jobs to be had if you start a venture during an economic downturn. You may also have access to some of the best and brightest; even top-tier workers are not immune to layoffs when businesses fold.
Start-Up Costs Are Lower
Most businesses need equipment, and there’s no better time to get discounted equipment than when businesses in your industry are liquidating or auctioning off their assets. A bakery may shutter their doors, but they won’t just throw out their ovens and refrigerators.
A software company may have to downgrade to a skeleton crew and sell off loads of excess computers at a fraction of what they paid for them.
Smart entrepreneurs can find opportunities to pick up high-quality equipment for steep discounts. This isn’t easy to do – it takes legwork – but it is worth it. You also may be helping those other business owners recoup at least some capital during a particularly difficult time.
The vendors your business may need to partner with are also likely desperate for customers. You may be able to negotiate better deals on materials or other key businesses services during a recession than you could during better economic times.
Be Wary of Short-Term Thinking
You can currently find quite a few startups founded to fit a specific short-term need brought on by the coronavirus pandemic. Businesses making specialized personal protection equipment (PPE) or running courier or personal shoppers have a unique window of opportunity right now. These businesses may be in high demand under specific conditions, but that need could evaporate once the pandemic is over and life returns to normal.
The Economy Will Inevitably Rebound
Recessions and depressions are temporary. Your business may start with a limited budget and may struggle to find clients to maintain enough revenue to cover your initial expenses, but things will bounce back. Once the recovery begins, you’ll be established to take full advantage of an uptick in consumer and B2B demand.
Making Smart Choices with Your Resources
Startups too often fall into the trap of sinking a significant chunk of their operating capital into accommodations that are excessive for what they need. Coworking offices are just about the most cost-conscious accommodations your business will be able to find without sacrificing quality and comfort.
You can get all the amenities your employees could want at a fraction of the price you’d pay out of pocket to deliver that environment in a traditional commercial office setting. Have access to a gym, kitchens, internet, IT specialists, conference rooms, security and much more for a low monthly rate.
If you’re worried about your operating costs ballooning past what you can afford – which should be a concern for every new business – it’s hard to argue with the logic of using coworking spaces like those available at MAC6 in Tempe.
Options range from private suites for up to 80 people to single coworking desks in common areas to manufacturing and warehousing space, all available at a variety of affordable price points.
Read through our pricing and amenities to find out how MAC6 makes it easy to get your business off the ground, even when economic times are tough.