Benefits of Launching a Business During a Downturn
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A down economy doesn’t always mean you need to scrap your business plan. Find out why.

Despite the economic downturn caused by the COVID-19 pandemic, more than 1.3 million applications for new businesses have been filed in the United States as of early November 2020 — an increase of 14% from the same period in 2019.

Whether you’ve had a business plan in the works for months or you’re taking advantage of an unexpected layoff, here are three reasons why you may consider launching your company during a recession.

There’s No Perfect Time to Start a Business

Many financial advisors tell their investors to build a solid long-term financial plan instead of trying to time the market for big gains. The same goes for starting a small business. The economy continually faces ups and downs, and it’s nearly impossible to time a business launch with a period of economic prosperity or avoid a downturn. Plus, if you’ve developed a thorough business plan ahead of your launch, you’ve likely included some contingencies for dealing with different market conditions or stress scenarios.

Resources May Be More Widely Available

When the economy is down, there may be a larger pool of talent to draw from as you look for new hires. Workers might be available who wouldn’t be otherwise, and they may be eager for a new opportunity. Plus, with many companies now operating partially or fully remote, you might not need to worry about geographic restrictions when hiring.

Down economies might also offer opportunities for negotiating on prices with vendors. For example, digital ad prices might be down, businesses that have gone under may be interested in offloading supplies they no longer need, or you might be able to get a better deal on commercial real estate.

It Can Prepare You for Future Downturns

If you start a business in a downturn, you might build a leaner business than you had initially intended. By launching and looking for initial growth under tough circumstances, you might be building up your flexibility to withstand unstable periods or future downturns. Learning from challenges or setbacks as a way to stress test your business could help you make adjustments that may not have shown themselves during a stronger economy.

If you’re looking for tips on how to adjust your existing business plan to launch during an economic downturn, consider the following:

  • Understand any changes to your financing plans. Some lenders may have stricter lending guidelines during down periods. If you turn to alternative funding sources, make sure you know the implications of using personal savings, credit cards, or angel investors.
  • Clearly define your niche. In a tighter economy, consumers might be spending less, and individuals and businesses might be pickier about who they do business with. Make sure your value proposition is clearly defined and you are targeting your services to the right audience.
  • Plan for other bumps in the road. A down economy is just one scenario a business plan should consider. What if interest rates change or you lose a primary client? Make sure your plan has accounted for other “down” scenarios.

For more insight into the steps you can take to protect your small business during times of economic uncertainty, check out this special episode of Regions Wealth Podcast: How Can I Protect My Business?

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This information is general in nature and is not intended to be legal, tax, or financial advice. Although Regions believes this information to be accurate, it cannot ensure that it will remain up to date. Statements or opinions of individuals referenced herein are their own—not Regions'. Consult an appropriate professional concerning your specific situation and irs.gov for current tax rules. Regions, the Regions logo, and the LifeGreen bike are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank.