Building a business for yourself is always a great idea and starting one during an economic slump allows for some distinct advantages that provide a great launching board for entrepreneurs. In fact, many individuals have created successful companies during difficult economic times and are now known worldwide. If this has sparked your interest, then dive into this article on why starting a new business during a recession is a good idea.

Why You Should Consider Starting a New Business During a Recession

Suggesting that it’s a good idea to create a business during a recession may sound like a crazy notion, but in reality, it’s actually the perfect time to create a company of your own. There are many good reasons for this, with the most important being, in my opinion, that you will be protecting your financial stability during a recession, as well as for future economic collapses. Below you will find a list of reasons why a recession provides favorable conditions for start-up companies.

1. Recessionary Periods Provide Free Time for the Unemployed to Become Entrepreneurs

Millions of workers were let go during the recent recession and placed on unemployment, with some being out of work for a year, and longer. This forced unemployment status was a golden opportunity for some to start a new business.

There were those who have always wanted to create their own company, and there were also individuals who were hit with the hard reality that they really can’t rely on anyone but themselves for their financial livelihood. Because of this, they knew it was time to make a change in their career by building a business they could call their own, and they had the free time to devote to making it happen.

Being sent home from the jobs they relied on for years was a complete shock to those who thought they were indispensable at their place of employment – it was certainly an eye-opener. But not all was lost; this time of reflection, and time off from the daily grind has provided so many people the opportunity to start a new business that can reel in a steady income stream.

For some, it’s a dream come true to not have to trade time for dollars in an office all day, with a long commute on top of that. It turned out that for many people, becoming unemployed during a recession was a blessing in disguise.

2. Equipment & Supplies Can Be Less Expensive Amid a Universal Financial Collapse

In a typical recession, where you have decreased economic activity, businesses may have unsold goods and are forced to sell them at a discounted rate to increase their cash flow. This enables entrepreneurs to purchase start-up supplies, equipment, and products at a lower price point.

If a recession is damaging enough, many companies will be forced to go out of business and sell off their operating equipment at extremely reduced prices. This might include such items as computers, printers, desks, machinery, and the like. So, everything needed to start a new business, which may have been out of reach financially in the past, could possibly be obtained for rock bottom prices during a recession.

3. There is Less Competition During a Recession

Building a business during an economic decline may allow you to have a foothold in an industry of interest. Why is this the case? Because there may be less competition during economic downfalls. This is true because companies may go out of business, as well as the fact that most are not comfortable taking the financial risk associated with starting a new business in the middle of a recession. So, that eliminates a portion of the competition, which can increase the success rate of your new company.

4. Start-Up Loans Can Have Lower Interest Rates When the Economy is Down

Interest rates have a tendency to lower during a recession. This can happen when the government takes action to try and reverse the economic decline by stimulating growth. This low-cost financing makes borrowing money cheaper and more accessible to those who may need funds to build a company.

5. Starting a New Business During a Recession Gives You a Pool of Available Workers to Choose From

Unemployment and recessions can go hand in hand, and because of that, there are typically a lot of quality people who are looking for steady work. If you’re interested in starting a new company that requires employees, and the economy is on a downward trend, there will most likely be a pool of talented workers available and ready to work.

6. Certain Companies Can Thrive Because of Particular Recession Conditions

When you think of an economic collapse, thriving businesses usually don’t come to mind. However, certain business types have a tendency to do well during a recession. This might include thrift stores where people can get discounted clothing and home items. Thrift stores may pick up the pace because when people are out of work, this type of store is very affordable for them. Additionally, auto repair shops stay strong because new car purchases are low during economic hardships, so current cars are brought in for repairs.

It’s a common fact that rental real estate investment businesses can thrive during a recession since everyone needs a place to live. Because of this, the owner of the property will continue to have a steady cash flow coming in. You might be interested in reading this other article we put together on the topic of recessions that also touches on rental real estate – How a Self Directed IRA can Recession-Proof Your Retirement Savings. Additionally, if you think you might want to get involved with creating cash flow from rental properties, but need some funds to get started, I recommend taking a look at this page that details how to obtain low-interest funding, specifically 0% interest introductory offer business credit cards that you can use to purchase a property.

Examples of Companies that Did Well During the Pandemic Recession

The recession that was brought about by the pandemic caused some companies to stand out in the spotlight. They were the companies that had a business model that lined up with providing products or services that reflected a feeling of safety.

For instance, during the height of the pandemic, when many people were homebound because they were concerned about being around other people, they needed an alternative way of getting the products and services that they normally left the house for.

One company, Stitch Fix, filled this need perfectly. They’re an online-only business where users provide all their clothing sizing stats, as well as preferences, and a stylist picks out clothes and ships them out. The customer is then able to try everything on, and what they don’t like, or what doesn’t fit, is then easily sent back to them in a large prepaid envelope. Many people feel uncomfortable with purchasing clothing online because they can’t try them on, and it’s a hassle to return the items. Stitch Fix presented a perfect solution for both those concerns.

Then there were the food/grocery delivery companies that exploded during this time, such as DoorDash and Instacart. If you want to start a new business during a recession, think about how these companies presented a solution, and how your new company can do the same. These companies not only met the needs of the people, but also created a lucrative income stream for the owners during a financial crisis – when many businesses were closing up shop, they beat the odds and came out on top.

7. It’s Easier to Build a Remote Business Since the Pandemic Hit

The covid pandemic really changed the way we do business these days. Because many companies felt it was best for their employees to temporarily work from home, it placed home office technology in the spotlight. This includes video conferencing technology such as Zoom, document sharing software, robust business team communication platforms such as Slack, and so on. Now, when someone wants to start a new business, it’s so much easier with all the technology that is available to help streamline everything.

One basic element of starting a business is having a solid website that lets the world know you exist. With that in mind, you will need a place to park your website files. I’ve used Bluehost and highly recommend them. You can take a look at the main Bluehost signup page to see what they offer and determine if they are right for your business goals.

8. History Proves You Can Launch a Successful Company During a Recession

If you’re not sure if starting a business during a recession is a good idea, you may want to look to our past for some confirmation because many great companies had their start during the worst economic times.

Walt Disney Productions, which started out as Disney Brothers Cartoon Studio, reincorporated in the middle of the great depression, and their company took off to unimaginable heights. In addition to this, during a notably bad recession in the 1970s, an easy-to-use computer system company had taken root, that company is Microsoft. Other companies that didn’t let bad economic times stop them were Groupon, General Motors, Airbnb, just to name a few.

One secret to creating a company that is capable of generating wealth, as these companies did, is to be on top of your game in regards to taxes. This will ensure you keep more money in your pocket instead of sending it off to the government. Your best bet is to dive into this book that I have read several times, it’s called Tax-Free Wealth, and you can just pick it up on Amazon.

Additionally, it’s worth mentioning that your tax savings will be much greater when you incorporate your company by forming an entity such as an LLC. I’ve used Corporate Direct in the past to do this for me. They helped me set up my LLC so that all my expenses could pass through it, so they become a tax write-off.

9. Starting a New Business During Uncertain Times Can Protect Your Financial Security

If you were a loyal worker who was let go during the economic decline that was fueled by the pandemic, then you know all too well how believing a job is 100 percent stable, and that a company will take care of you no matter what, is just not true. The bottom line is that although a boss may be nice and treat their employees well, creating cash flow and taking care of their company is typically their number one priority.

With that in mind, most people now know that they can be let go at any time, as were millions of workers during the pandemic. Because of this, since so many hard-working individuals were laid off permanently, a harsh reality was realized – you can’t rely on your job, the government, or anyone else to provide the money you need for rent, food, and other basic necessities, let alone retirement.

Here are a few things to keep in mind regarding financial security and recessions:

Won’t Have to Settle for Low Wages During Financial Hardships

During the pandemic, when a large number of companies either closed down or had to cut costs, it created major layoffs. Many people were let go from low-paying retail or fast food jobs, and were placed on unemployment. When the unemployment ran out, they were forced to take another low-paying job to feed their family, and continue to struggle financially.

In contrast, some decided to start their own business during this time. For those who had no extra money to invest into a company, they simply created an at-home business, such as a graphic design company, and the like. There were also those who started a business using funds from their savings, or they used a portion of their unemployment benefits, as well as stimulus checks they received.

These people had the free time to work on building a business because they were forced out of their 9-5 day job. With this free time, they started a new business that generates income – now they won’t have to rely on a low-wage job, or two jobs to keep their family afloat.

Creating Your Own Business Ensures You Won’t Lose Your Income Stream During an Economic Decline

During the most recent recession, there were many hard workers who had been with the same company for years. They devoted their time and energy to making the company a success, only to be rewarded with instructions to pack up their belongings and leave for good – nothing personal, it’s just a matter of business financials.

So, what happened to those who were living paycheck to paycheck, with no savings, or those who had a family to feed? In reality, everyone was most likely hit hard because being let go is stressful, scary, and financially devastating.

But those who were able to take advantage of certain aspects of starting a new business during a recession may never have to worry about being put in a situation where the rug is unexpectedly pulled out from under them, and they are left financially broken.

You see, when you build your own company, you are in complete control of your income stream, and no one can take that away from you no matter how bad the economy is doing.

Allows You to Invest in Yourself Instead of Someone Else’s Company

Starting a new business during a recession will allow you to get the ball rolling when it comes to investing in yourself! What I mean by this is the time you spend building your company, and maintaining it, will go towards building financial independence for you and your family, instead of for your boss and their family.

At the end of the day, if you own a business that’s performing and generating an income stream, you will not only be all set during a recession, but will also be taken care of during your retirement.

It all boils down to the fact that when you work for someone else, that income stream ends when you leave the job, which means you will have to continue to work for someone else if you want that steady cash flow to keep rolling in, especially when the basic 401(k) does not provide enough to retire on. It’s all coming together now, right? You can see how taking advantage of the business start-up opportunities a recession provides would be a good idea.

Related Articles from Just Build Wealth

Take a moment to read through our other articles that pertain to starting a new business and working for yourself:

Don’t Wait for Brighter Days – Start a New Business During a Recession to Take Back Financial Control!

I hope that after reading through this article that you’re inspired to create a new business, even when the economy is crashing before your eyes. I truly believe that recessionary periods present a great opportunity for entrepreneurs to build a successful company that will allow them to generate wealth, and never have to rely on anyone for their financial security again.

As a final thought, I highly recommend that you take a look at this Financial Freedom Academy website to learn how to stop trading time for dollars so you can build wealth the right way.