If you’re considering starting a business in the UK, you’ve probably got a lot on your mind (and to-do list). Your business plan is well underway, and your website is nearly ready to go live. It’s an exciting time, but it can also be a stressful period. There’s a lot to think about, and there are always risks when going out on your own — especially in tough economic times.
You’re probably well aware of the ongoing cost of living crisis in the UK. Businesses and the general public are struggling with rising costs across the board. To add to that, the Bank of England announced that the UK is set to face the longest recession in 100 years. With the economy as it is, you might be questioning whether now is the right time to start your own business.
The good news is that a recession can provide new companies with unique growth opportunities. Many well-established businesses have started in recessions — Netflix, Microsoft and Airbnb, to name a few. Plus, recent research shows that company formations have risen by 21% year-on-year, so you’ll be in good company if you’re considering starting your own business. Here are five of the best reasons to start a business in a recession.
1. Struggling Competition
During a recession, many businesses are struggling to stay afloat. Established enterprises have pre-existing commitments and overheads that can include:
- Business premises
- Supplier contracts
Alongside this, existing companies have processes that can make adapting to the changes in the economy slower. This can create opportunities for entrepreneurs looking to start a new business.
New businesses can launch with more flexible procedures and solutions in place. This allows you to offer customers a better price point than more established businesses and build your business quickly.
2. Better Startup Support and Investment Opportunities
Starting a business is always a risk, but there can be some advantages to starting during a recession. For one thing, more support may be available from government programs and private investors. This is because there is usually an increase in the number of loans and grants available for small businesses during an economic downturn.
New businesses are often seen as a way of bolstering the economy. This means the government makes a range of schemes, incentives and grants available to startups. Before launching your business, look into available schemes to check if your company is eligible.
There are also more opportunities to find private investors willing to help you get your business off the ground. While you might be wary of private investors so early, many angel investors are looking for new opportunities. They can help you by providing the financing you need to succeed without interfering with your vision.
3. Availability of Top Talent
When the economy is in a downturn, more highly skilled workers are available, either because they’ve been laid off or are looking for a change. Established businesses with high overheads often make redundancies to cut costs during a recession.
This presents an excellent opportunity to build a strong team of experienced employees who can help take your business to the next level. Of course, you’ll need to be careful about managing your finances during a recession and build your team carefully. But, if you’re in a position to hire talent, there will be plenty available.
4. Lower Overheads
Many businesses are forced to downsize or close their doors in a recession. This can create opportunities for entrepreneurs to start their own businesses. One of the main advantages of starting a business during a recession is that your overhead costs are lower. This is because office space and other resources are more readily available and, in some cases, may be offered at a discount.
For example, you may be able to negotiate a lower rent for commercial space or take advantage of government assistance programs. Plus, many people laid off during a recession may be willing to work for your new business at reduced rates. As a result, you can save money on operating costs while still providing quality goods or services.
5. More Competitive Pricing
By starting a business in a recession, you’ll be able to make your business more agile. Your business plan will outline how your business will not only survive the recession but thrive. While your competitors will be finding ways to cut costs, you’ll be able to ensure that your business is recession-proof from day one by ensuring your overheads are lower.
You can offer your customers lower prices by securing better contracts on supplies and rent. Offering lower prices is an excellent way to grow your business during a recession. As the economy affects customer spending, many look for cheaper alternatives to cut costs.
Ready to Start Your Recession-Proof Business?
Starting your own business can be a great way to achieve financial stability and independence in uncertain economic times. But before you get your business going, it’s vital to ensure that your business idea is recession-proof. Here are a few factors to consider when choosing a business:
- Your industry — Are you joining an essential industry, such as healthcare or food production? Sectors like these are less likely to be impacted by an economic downturn. If you’re joining a non-essential sector, consider ways to stand out from the competition.
- Your product or service — Consider whether your product or service is essential. Is it something people will continue to need or want even when times are tough? For example, people may cut back on luxury items during a recession but still need basics like food, clothing and shelter.
- Your target market — Be sure to target a market that is not as likely to be affected by a recession. You don’t want to choose a market that is already struggling.
By taking the time to choose a recession-proof business, you can give yourself the best chance of success during tough economic times. Once your business idea is confirmed, you can move onto your business plan, register your business with Companies House and make your entrepreneurial dreams a reality.