Tuesday, April 21, 2009

Why a Recession May Be a Great Time to Start a Business

While it might not seem intuitive, a recession may actually be the best time to start a business. According to a blog post on the City University of New York's web site, a recession often directly and indirectly creates a set of circumstances in which it's easier to get a new venture off the ground.

First, a soft economy will often spur local and state officials to eliminate or reduce red tape in an effort to stimulate growth and get back some lost tax dollars. The result can mean getting a license just days or weeks after applying, rather than months. Second, vendors and suppliers, who are often struggling to maintain their own businesses, often are much more willing to accommodate an entrepreneur with lower prices or better service. Need something delivered to your new storefront today? No problem... The vendor's truck is empty and available whenever you need it. And anyone who has seen all of the "For Lease" signs posted all over the U.S. shouldn't be surprised to hear that commercials rents are quickly dropping in most markets.

According to data published by Columbia University's Entrepreneurship Center, the number of small businesses that shut down actually declines during a recession, in part because of the factors mentioned above. And, as a recession drags on, the number of business started each year tends to grow, perhaps as an early sign of a pending turnaround.

If you're interested in starting a business, should you dive right in, or perhaps earn an MBA first and then try your hand at entrepreneurship? That largely depends on your own personal situation and how much experience you have, but one thing is clear: Don't worry too much about timing the market, since even a recession may be a great time to start a business.