6 reasons to start a company during recession

With the recession hanging over our heads, the questions popping in our heads are what are the job prospects available and how much of a job security do we really have? Well if you haven’t heard yet, the situation is bound to loom around for another quarter or so. So what are the numerous number of people out in the job market going to do. The hard bound ruling on H1B visa’s which may seem as a curse actually turns out to be a blessing for India, because the crux of intelligence who were the key drivers behind major organizations and responsible for over 33% of all patents filed are thinking of heading back home and joining large corporates back in India or starting up their own ventures.

Now the next question is whether this is the right time to start a new venture. Well here are my 5 cents on it.. well actually, my 6 reasons on why this is the right time to start your dream company or something close ;).

Well first off, its a really difficult time for companies trying to woo venture capitalists to provide fund during such a crisis. But wait, this just means that it is not an ideal time to start a firm requiring lot of start-up capital to launch itself. But, small Internet and technology-based companies are a whole different story. In fact, a recession is just the right time to incubate a small company ! So here’s those 6 wonderful reasons :

1. Recession forces the founders to be prudent: When an entrepreneur starts a company without much initial funding, it’s an excellent discipline for such an early-stage company. By being frugal, entrepreneurs tend to be more creative and adopt healthy deliberation on expenditures. And the obvious outcome; founders pay more close attention to cash flow, budgets and balance sheets.

2. Recessions make businesses and businessmen tougher: Although an economic crisis or recession may be the right time to start a venture, it definitely isn’t the easiest. Facing such challenges, brings out such traits and qualities which make a true entrepreneur, namely guts, problem-solving, strength and perseverance.

3. Startups get a prime mover advantage: If you have a great idea, it’s only business sense to start right away because it give you the competitive advantage over others and any hardships in the way will surely pay off. The reasoning is pretty simple; by the time the economy is back on its feet, your venture will be that much into its life and that much closer to being ready to raise capital (VCs will surely fund at that time when they’ve been sitting on their cash for quite some time owing to the recession).

4.  Recessions are a cause for entrepreneurs to introspect their ideas: During a recession, entrepreneurs will definitely be posed with very valid questions on the worthiness of their idea. A great team or a lot of money could lend the appearance of success, but if it is not built on quality ideas, it will backfire in the long run. The various questions that entrepreneurs will ponder over are the product/service value creation to customers during the current recession and later boom, the market sustainability during the recession owing to cost cutting and the ability to finance operations without VC funding. Eventually, what’s left is a rock solid, fool-proof B-plan.

5. The timing couldn’t be more perfect: If you plan your business right, you could emerge out of the recession during the growth phase of your business. Thereby you would save a lot of money on advertising and marketing because of the reduced market rates during the recessionary period.

6. True entrepreneurs sprout of a recession: True entrepreneurs are creative thought leaders who are willing to take risks to make a legendary mark in business. During a recession, jobs are in jeopardy, everyone is anxious about job security and wouldn’t want to quit their jobs to join a start up. But the ones who do will be truly committed. Thus the founder will have a truly committed team who truly loves their job and are willing to go with the added risks.

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