Starting a Business in a Cooling Economy

The most important thing any fledgling business owners should watch for is where demand for their product or service lies in reference to the current economic cycle. Once you understand demand for your service/product, you will be better suited to make more impactful decisions. Which could inevitably be the defining factor of whether your business becomes successful or not (especially in a cooling economy).

Business Trends

If you feel the trend is in your favor and that your line of business will have tailwinds in the future (regardless of whether those tailwinds occur 3 months or 3 years from now), then starting a business during a recession could actually be a tremendous opportunity. Many consumers often question whether to save or invest during a recession. The same goes for any line of business that is "recession-proof" or countertrend. However, it’s important to note, you might want to think twice about starting a business that is "recession-proof" after a recession has already started. Jeff Bezos speaks on this a lot, you want to put yourself and your company in a position that allows you to capitalize on tailwinds as the arise. Ideally, when those tailwinds arise you already have your business' foundation setup and ready to act on any upcoming opportunities. You typically don't want to do this after the fact and chase tailwinds, because this will lead to you continually chase the next best thing and that won’t do you much good in the long term.

Is Starting a Business in a Slowing Economy Commonplace?

Many well established and highly profitable corporations were formed during times of economic uncertainty. Your odds for success could actually be increased, if input costs are low and your competition is not a nimble as a startup with lower overhead, it might be the perfect time to strike. These things often depend on circumstances but if you put yourself in the right position now could be as good a time as any to start a business.

How to Use the Economic Climate to Your Advantage

This all depends on industry specific factors but the important thing to note here is that almost "anything" is negotiable during a recession (we appear to be in the beginning stages of one currently despite recent stock market activity). If you are looking to lease a storefront, make sure you negotiate with the landlord and get as good a deal as possible.

Lower Cost to Operate

If you are in a competitive market where input costs have decreased due to lower demand, make sure you take advantage of this and be as productive as possible while your cost of labor/capital is lower. Larger and more established companies might not have the same opportunity since they are stuck adjusting to the change in economic landscape. Your ability to react quickly is your biggest asset here. When just starting out, this will always be one of your biggest advantages. Blindly following what the competition is doing is not the move. Never be afraid to go an unconventional route and always go for opportunities that are low-risk, high-reward. There are huge benefits to differentiating yourself from everyone else, especially in a recessionary environment.

Just Starting Out?

If you are just starting out the cost of starting a business can vary significantly., now is a great time to put your head down and go to work. Greatness is usually born during times of economic uncertainty and this is most likely to be the time when you have the most opportunity. Not every aspect of your business requires significant amounts of capital, if you are light on working capital use your "energy & time" to make up the difference! This is a great way to cut costs when taking any sort of business action seems "expensive". Finally, never be afraid to start somewhere! Planning is vital when starting a business but things don't always go according to plan. Things will never line up perfectly and as a business owner you need to understand this and make sure to adjust whenever possible. Start with a base (or MVP) and always try to build on it from there.