Starting a New Business in a Recession

Is this the time to start a new business?

Having been a banker for over 35 years, I can tell you that some of the best companies were started during a recession because they addressed a need during an economic downturn that continued to be successful even as the economy rebounded. One such type company is the employee placement companies. When companies have to downsize and cannot keep on skilled individuals on a full time basis or pay them benefits, then employment agencies are an ideal answer to meeting the needs of completing a job without their having to have a full time employee. When the job is done, the temporary employee is returned to the agency until needed again.

When I would lend money to businesses, one of the areas I would review is the company’s ability to withstand a recession. What was especially effective was a company’s ability to expand and contract according to impending business. Another would be if they were in a commodity market where they sold a high priced product that was discretionary and therefore would have difficult times during an economic crisis.

If you are starting a new business like Lola Kakes did with EffortlessHR, have you considered it’s relevance in a recessionary market Is your product affordable, does it fill an important niche such as being an alternative to a higher priced product or service out there. In the case of EffortlessHR, timing works because it is an affordable product, internet based, starting at as little as $24.95 a month.

Why does this work Because it helps small business owners to replace what some business owners are spending hundreds of dollars for in HR processing and employment management and retention. That makes sense.

A very good example of an existing company taking advantage of the difficulties of one of the kind of companies that has a high priced product, is McDonalds coming out with a premium coffee that is half the price of Starbucks. Brilliant timing! Many are saying, I’ll have McDonalds during the week and treat myself on the weekend to Starbucks so I can put gas in my tank.

What is your idea?

Considering how much you’re spending for gas and food right now, would you spend money on what you’re proposing to sell?

Would it work now and when we have an upward turn?

It is especially compelling if you were in corporate America and was laid off and said to yourself, this is the time to go out on my own. While that is true and the majority of businesses being started today are small businesses, be sure you have the right ingredients for success in this economic environment.

Also see our friend Chris Brogan’s article on how being a small business is a weapon and Seth Godin’s great article on why small businesses should not whine.