Starting a business almost always entails some risk. One out of every five new businesses fails within the first year. Half are out of business within five years.
You would think starting a business during, say, a pandemic might increase the odds of failure. After all, many long-time established businesses have folded due to the effects of COVID-19. In addition to the economic uncertainty caused by COVID, the public health conditions also limited business activity in many sectors, such as restaurants and entertainment.
In some cases, it might be true that you’re more vulnerable to failure if you try to start a business during a down economy or global crisis.
And yet, there are many examples of thriving businesses born out of recession, depression, or world war.
- Two regional grocery store chains, Publix in the southeast U.S. and Hy-Vee in the Midwest, were founded in the midst of the Great Depression and still operate nearly a century later.
- Microsoft was launched in the mid-1970s during a recession that brought with it high inflation, high interest rates, and a crippling gas shortage.
- The last major economic downturn, in 2008, saw the emergence of companies like Uber, Venmo, and Instagram.
Even in the worst of times, there are people who still have an income. Some may be more careful with it, but many will continue to spend on products and services that enhance their quality of life.
Is now a good time to start a business? On the one hand, pent-up demand from 2020 has many people spending freely, and most businesses have persevered through the last 18 months. On the other hand, new COVID-19 variants have emerged, mask mandates are back in place in some areas, and it’s been difficult getting many people to get vaccinated.
The answer to whether you should start a business mostly depends on you and the type of company you want to start.
The traditional model of a small business is a full-time venture that requires a considerable investment of time, money, and energy. You may need to invest significant resources in a physical location, equipment, and marketing. You may also need to hire an employee or two to get started, or at least find contractors to assist.
Many business ideas nowadays can be started with minimal upfront investment. According to the Small Business Administration, about half of all U.S. businesses are operated from homes. Also, a third of small businesses are founded with less than $5,000 of startup capital.
As you consider whether to launch a business during the pandemic, you may want to gravitate toward a service that requires a small upfront investment.
It takes more than just the right skills to run a successful business. You also need an entrepreneurial mindset, especially if you want to launch a business during a pandemic.
An entrepreneur should be resilient, tenacious, and agile. You need the ability to persevere when sales are down, thrive under deadlines, and continue learning as the world changes around you. Mindset is especially important if you’re attempting to grow a business during a pandemic.
One economic trend that has emerged during the pandemic is the great resignation. Whether by a desire to pursue a greater purpose or dealing with pandemic-fueled burnout, many employees are voluntarily leaving their jobs, many with little to fall back on. This would have been almost unheard of in the past.
Many of these workers are looking to start their own businesses. While this is one way to transfer from employee to entrepreneur, it’s less risky if you’re able to launch a business while you’re still employed. Many successful companies start as side hustles. As long as you’re not violating a non-compete clause with your current employer, it may work out better in the long run if you can keep your regular income while you build your business.
[ Related read: 10 practical side hustle ideas for 2021 ]
Entrepreneurs often start a business because they fall in love with their own idea. Two problems often emerge. First, not enough potential buyers are interested in the idea. Or, there are too many established competitors and a new entrant hasn’t figured out a way to differentiate themselves.
Before you commit to starting a business, conduct thorough market research. Evaluate the potential size of the market as well as existing market participants.
If there is little competition for your product or service, ask yourself if there’s enough demand, then search for an honest answer. If there are already a number of competitors, can you find an underserved niche within the market, such as a specific demographic?
If you want to succeed as a business owner, especially during the pandemic, you need a business plan. Without one, you may not discover until it’s too late that:
- The barrier to entry in the market is higher than you anticipated.
- Your business processes are inefficient and creating too much overhead.
- Your product mix doesn’t fit the market you are trying to reach.
- You don’t have enough capital to keep you going until you generate cash flow.
Not only does a business plan guide your business, but the process itself can also help you uncover potential pitfalls before you’ve made the investment.
Your business plan should also specifically address where your startup fits in the post-pandemic economy, if at all.
There are a number of online templates to help you put together a business plan. Your plan should include a company description, the organizational structure, market analysis, your products and/or services, sales and marketing strategies, distribution, funding needs, and revenue/profit projections.
Tough times can often be the catalyst for a successful business.
Take the example of StepNpull. The Springfield, Missouri company manufactures a foot-operated door opening device that eliminates the need to use your hands to open public doors. While the company launched in 2007, business exploded in 2020 due to COVID-19. The virus made people think harder about hygiene and increased the need to avoid touching the same surfaces, such as restroom doors. Suddenly restaurants, retailers, colleges, and office buildings were buying StepNpull openers by the truckload, which even garnered them a recent appearance on the reality TV show “Shark Tank.”
Think about the economic and cultural changes brought about by the pandemic, especially those that may become permanent. Delivery services have ubiquitous. Remote work has become an economic staple. Recreation has migrated from cruises and theme parks to staycations and RV travel.
Consider these and other possible permanent shifts brought about by COVID and whether your business plan addresses the consumer demand they’ve created.
If so, now may be a great time to launch.
If your new business will rely on supplies and inputs from other sources, now may not be the best time to start a business. The post-pandemic economy has been marred by supply chain disruptions on everything from lumber to computer chips. These disruptions have idled factories, left store shelves empty, and increased the cost of everyday items.
Before you get too far down the road, research the availability of the inputs you may need to sell your product or service to ensure they can deliver and that you can deliver.
There’s a lot of uncertainty involved with starting a business when the economy is stable. Trying to launch a startup during a pandemic amps up the unpredictability.
But many of the fundamentals of successful startups are the same whether the economy is booming or struggling. If you want to be your own boss badly enough and you have the right idea and a good plan, you can make it work.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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