Is A Recession A Good Time To Start A New Business?

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While economic downturns are a time of hardship, they could also be a time of opportunity. Here are the major threats and opportunities for new startups during a market downturn:

However, in a time of cost-cutting and layoffs in the giants, experienced people suddenly become available on the market. This doesn’t just mean you can find and hire people more easily - you can possibly find co-founders of a very high caliber.

It’s not unheard of in layoff periods for ex-colleagues to become partners and start their own projects related to the industry they were previously working in. A recession is a great period to apply the lessons you learned while working for your previous employer during the economic boom periods, in which big businesses tend to grow more inefficient.The favorable market conditions and availability of capital during periods of economic boom make inefficiency less fatal for large corporations.

This is both a threat and an opportunity for young startups. The agility of such projects gives them the opportunity to adopt innovative practices and business models - in other words, to apply the lessons we mentioned. Moreover, the failure of old businesses opens up space in the market for new companies that are able to provide better products and services.

Nonetheless, the cost-consciousness and conservativeness of consumers make it harder for unestablished brands to attract new customers, which means that in order to be successful, being the new shiny thing isn’t enough. You need to provide something of real value that people are actively searching for.

In conclusion, there are pros and cons of starting businesses during an economic downturn. All things considered, however, the higher likelihood to attract high-quality tech talent to your project makes it a great idea to try something new.

 

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