Is it a good idea to start a business in a recession?

01 Dec 2020

Even in a recession, the right time to start a business is now

It is no secret that most of the globe is in a dire recession following the wrath of the Covid-19 pandemic. The world has seen mass retrenchments, liquidations and business rescue. Anyone may say – you must be crazy to start a business now. Well, in my view, it is a matter of perspective.

Business is hard work, regardless of the climate. However, there are several advantages to the current environment. Three of these are vital advantages right now in my view.

Increased Access to People and Talent

Because of the scale of retrenchments and liquidations, many good people are in the job market. This presents an advantage to entrepreneurs  – that is employers. Therefore, the ability to access talent that is critical to early-stage growth that would otherwise be lured by larger salaries or more stable opportunities.

Furthermore, the opportunity to engage on less traditional terms, such as equity ownership, share options and performance bonuses; enables companies to hire well without proverbially “breaking the bank”. This unlocks much needed human capital, of course, whilst observing the Minimum Wage requirements.

Great Time to Negotiate

Many key stakeholders, such as landlords and critical suppliers, offer more attractive terms. From a leasing perspective, this often includes a cash allowance for office renovations and more flexible lease terms.

All of this decreases the cost of starting a business and allows entrepreneurs to deploy precious capital resources into income-generating spending.

Technology and Innovation

Due to economic necessity and changes in buying patterns, consumers may be more willing to try new products and services or even technology and innovative (disruptive) solutions. Besides, the environment could very well be ripe for customers to switch brands from their regular selection. This provides ample new opportunities for “getting to market” and to scale quickly. The environment for selling is therefore positive.

Entrepreneurship remains a personal decision, requiring sacrifice and commitment, but it can be done even in trying times. We therefore recommend that you seek advice from professionals such as those at SchoemanLaw to ensure that you have the correct contracts and structures in place to ensure success.

See also:

• The difference between a supplier relationship, agency and distributor
• Planning for a resurgent hospitality market after COVID-19
• Post COVID-19 property market solutions
• There is no such thing as a standard lease!
• The pitfalls of standard contracts: Check your T’s & C’s
• Pre-incorporation contracts explained

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)