Many people are worried about an impending global recession due to the economic slowdown that the COVID-19 pandemic has brought with it – and your average entrepreneur and startup founder is chief among them. It makes sense to assume that with so many people watching what they spend and with so much uncertainty in the air, it’s too risky to launch that business of your dreams anytime in the near future.
But at the same time, that idea and reality may not line up quite as nicely as you’d think. Some argue that entrepreneurs actually should not worry about a potential recession for the simple reason that the state of the global economy doesn’t directly impact startups on a large scale.
Some factors will determine whether or not a startup will succeed, but they have less to do with the coronavirus or an impending global recession than you might think.
The Positives of Founding a Startup in a Recession: What You Need to Know
One of the significant reasons why founding a startup in a recession isn’t necessarily the issue you thought it was going to be, has to do with the fact that products and services are generally cheaper during these periods of economic downturn. Smart entrepreneurs aren’t scared by this – they’re ready and waiting to take advantage of it.
While larger companies are looking for any opportunity to retract and shed costs, those struggling businesses will likely sell off many of their assets at bargain-basement rates. Retailers and other organizations will usually drop their prices to move as much inventory as possible before it’s too late. Interest rates fall to their absolute lowest, meaning opening new credit lines or taking out loans has never been easier.
Sure, none of this is precisely positive for those larger organizations – but it’s good news for your new startup that couldn’t have come along at a better time. Provided that you already have a plan in place, you can save on costs and still bring your vision of the perfect company into reality at the same time.
Top Talent Will Always Be Looking for Opportunities
Along the same lines, your startup will need high-quality employees, though depending on the financial side of your business, getting to that point may often be easier said than done.
If a global recession occurs, this is another primary reason this could be good news for your efforts. As soon as the worldwide recession sets in, those larger companies will begin shedding workers – and fast. As unemployment rates rise across the country, it means that there will be a far larger number of qualified, passionate, and talented people available to fill whatever positions you have available.
By putting in the effort to build a secure hiring plan, you’ll know what type of candidates to go after as soon as they become available. Not only that, but you’ll likely be able to secure these people at lower rates than you would have if the job market were more vital in your industry.
Many people agree that this is an excellent opportunity to bring in a co-founder to complement your skillset. Never forget that a big part of your success will ultimately be determined less by what you do and more by whom you are surrounding yourself. If you’re able to attract qualified individuals who A, believe in what you’re trying to accomplish, and B, who possess the desired skills, you’ll be in a far better position, significantly earlier on in your company’s lifecycle.
Entrepreneurs Solve Problems. That Will Always Be True (and Necessary)
In the end, the same factors that will impact whether a startup can succeed are as real today as they were before any of us had ever heard about the coronavirus. They are and will always involve your founding team and their ability to solve a problem for a paying customer. You cannot overstate the importance of starting your business with a qualified, well-balanced, and experienced team.
People will always have problems, and they will always look to new and innovative companies to help them. Yes, the issues may change given what is going on around the world – but the fact that people are looking for real, efficient solutions will not.
In other words, it’s still all about the product-market fit. If your startup was founded on a genuinely innovative idea that speaks directly to the heart of a universal problem that many people are experiencing, it will be successful. It may take a bit longer in a global recession, sure – but the odds are very much in your favor.
Many times, achieving this product-market fit has little to do with broader macroeconomic trends, which is precisely why a recession is probably a far better time to launch your startup than you thought. Once you remember that all recessions eventually come to an end – and the startups founded on a stable foundation during this time are in the best position to rebound – you’re looking at a stimulating position for any entrepreneur.
Please contact us if you are considering launching a business and would like assistance, or if you have any questions.