Business Management
4 min read

5 reasons why to start a business is during a recession

Amant Fejzullahu
Written by

Despite the setbacks of the pandemic, 2021 actually looks brighter regarding economic projections and business possibilities. In this article, we explore why a recession should not be seen negatively by entrepreneurs who have an idea and believe in its success.

What really distinguishes an entrepreneur from the rest?

The global economy has been severely affected by the Covid pandemics, prompting one of the most significant recessions in a generation. As per International Monetary Fund, during 2020, the global economy shrunk by 4.4%. The Swiss economy was not immune to this worldwide downturn; it experienced the worst decline since 1975, with an output fall of 3,3%. However, this didn't stop Swiss entrepreneurs from starting their businesses.

47,000 new companies were created last year (4% more than in 2019). This way, the entrepreneurship mindset of Swiss people proved wrong many economic predictions. Despite the other developed countries where people and companies mostly were waiting for state subsidies to ease the adverse effects, some Swiss entrepreneurs saw this as a perfect time to take their ideas into the market.

Starting a business is challenging in planning, finding a market niche, analyzing competition and creating the business model. Then add to this the difficulties due to Covid, creating even more problems and barriers to success. But, in the end, the level of risk you endure to make your business idea a reality is what differentiates an entrepreneur from the rest. The entrepreneurship journey itself means learning through obstacles, creating, and finding different opportunities that bring you the desired results.

 

Take control of the situation

Many businesses' success stories start with a low moment or job loss. Last year, a lot of people in Switzerland filed for unemployment and the unemployment rate in Switzerland reached 3.7% in January 2021, the highest level since April 2010. Many weren't able to find work, many of those have decided to set up shop on their own as this seems a better way to steer through their future. Yes, the risk is higher as an entrepreneur, but there are greater potential rewards - and having the right resources helps mitigate some of the risks. Being your boss also leads to having more control over your career. For all those wanting to be entrepreneurs, the satisfaction of being responsible for their failures or successes is high. 

 

Business success stories born from past recessions

Starting a business in a recession is not an easy task. However, you might look back on it in a few years and see that it was the best decision you ever made. If you are jobless or have just finished your studies, you can use this opportunity to get into a completely different sector to follow your business dreams.

Here are some examples of major corporations who took their first steps during a crisis or recession:  

  • Microsoft: During the recession of 1973, Bill Gates, a Harvard dropout, started a small company specializing in developing computer languages. 
  • FedEx: Founded in 1971 as Federal Express, FedEx didn't start operating until the recession in 1973. 
  • Hyatt: Jay Pritzker bought the Hyatt House motel in 1957 in the middle of a recession and turned it into a five-star hotel chain.

To give you some inspiration and reassurance if you are still undecided, we aim to provide you with five good reasons why the recession is a great time to start a business.

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1. Available resources

One important thing, of course, is that you don't want to put all your entire life savings in when you start your business during a recession. Based on where you operate, you can look for state-based and other funding programs to help you start, along with tips and tricks on how to research potential investors and the writing of a business plan. By taking the independent route, you will be able to participate in different training programs and continuously receive support from the various organizations that support start-ups. 

 

2. Less competition 

With the economy down, many people will use this time to be their own boss. However, with fewer funding opportunities, the economic downturn will deter many businesses from starting up. Interestingly, franchised companies have a strong relationship with the banks and are considered to be less risky, so you would still be in an excellent position to get funding if you were to consider starting a franchise.

It's also worth mentioning that your friends and family will not be willing to invest in stocks during a recession, however, they may be interested in financing a part of your venture with their real money. They trust you and know your strengths, so if you have prepared a robust business plan, this is an excellent chance to raise the capital you need. 

 

3. Better rates

When the economy is weak prices tend to go down, and as a result, many businesses will try to remain competitive by offering better deals. You will be able to get a lot of necessary items for lower prices, e.g., from office rental space to furniture, vendors will be looking to shift their offers quicker. For the same reason, you will be positioned to negotiate better deals that will benefit you.

 

4. Professionals looking for work

Every business wants to make sure they recruit the right people who share their values and are a good fit in the group. With business layoffs being more present during a recession, there's a greater amount of qualified individuals looking for work. It will also be a great benefit when you will expand your team and grow your business later. 

 

5. More motivation

Sometimes, resting too comfortably can mean you lack the necessary motivation to take your business to the next level. With fewer options, you have better reasons to push harder, and you are more likely to do your best to make sure your business is a success story. Take some time to create a robust business plan that will cover you for any future business or health crisis. The present crisis time is a good lesson on creating a more sustainable business for your future. To give you maximum protection, we recommend you begin a crisis contingency plan for your business.

 

Determination: the secret to launching a start-up

Not every company that started during an economic downturn have shared their success story. However, what they all have in common is belief in an idea that made it possible to overcome challenges and ultimately succeed. Armed with the appropriate planning and proper resources, your business can work and thrive even during an economic crisis. 

If you have a great idea but are uncertain due to recent economic developments, we encourage you to start your business because this is a great time to work for yourself. You can use platforms as Newco that will help you start your business faster and share the necessary tools and insights. 

Written by

Business Intelligence at NewCo Switzerland SA

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