42 Degrees - Business from a different angle

Although she would never have planned it that way, Claire Owen launched her new business during a recession. It turned out to be a stroke of genius. Here's why an economic downturn can be a great time to start a business.

• It's cheap. Commercial rents, capital equipment, supply and labour costs tend to fall when economic times get tight. While obtaining bank credit can also be difficult, if you do manage to get a loan, it is easier to keep start-up costs to a minimum during a slowdown. That said, it should be remembered that in the present environment, some costs are rocketing such as energy and food supplies.
• New business ideas are welcomed, providing they offer a break with the past. Many exciting new ways of doing business are created in hard times. For instance, budget airlines were launched in the mid-1990s amid tough conditions. It was a result of airline deregulation, but was opportune and came at a time of lower fuel costs and demand for value flights. There is always space for ideas that cut costs. Take, for example, the rise of the price comparison sites after the dotcom downturn at the turn of the millennium. It should be remembered that some of the top internet businesses today, such as Yahoo! and Amazon, started in the slow times of the mid-1990s, Many of the quirkier web ideas of the late 1990s were binned, such as ClickMango, the online health and beauty retailer.
• Recessions are often ended with the help of new technologies. The trick is to back the right technological horse.
• In a slowdown, madcap business plans tend to get ignored in favour of solid entrepreneurial ideas offering high liquidity. Starting a business in a recession is not for the leftfield or whacky. Those with low-risk ideas are more likely to raise funds from risk-averse banks.
• There is an argument that since you are likely to experience lower activity during economic sluggishness, an entrepreneur may have more time to concentrate on getting some of the basics right for launching a business. These include having a well designed website and marketing materials and ensuring basic management and accounting systems are in place. Some successful businesses have been brought down by a failure to address basic business issues.
• Established competitors with high overheads in your marketplace may collapse, giving you an opportunity to move into their space and to buy up their equipment and hire their staff.
• A slow period gives you time to experience the business at a measured pace before orders start flooding in as better times arrive. It is better to start at the beginning of an upward curve than at the top of a downward one.
• Downturns can wipe out badly run businesses, leaving the way open for those that operate efficiently. It is a good time to put into practice all your carefully cultivated business skills and those entrepreneurial tips picked up on 42 degrees.