Good time to start a business?

Moderated by Rick Badie

Your business plan is gathering dust. You feel like you’re ready, but a question lingers: Is now a good time to start a business? Data show more businesses are started during and after recessions than in prosperous times. So go for it, writes a motivational speaker and owner of a web development firm. An economic expert says it’s unwise to fixate on start-up cycles.

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By Marianne Carlson

Starting a new business is not for the faint of heart. For those who possess the entrepreneurial spirit, though, now might be the perfect time to begin a venture.

In the midst of the worst recession in decades and the most dismal recovery since the Great Depression, it might seem prudent to postpone a business launch. But there are some compelling reasons why now is actually a really good time to start a new business.

Beginning a business venture in lean times will force the entrepreneur to pay very close attention to planning, market research, cash flow and other critical issues frequently at the heart of business failures in the first five years. Tough times encourage start-ups to protect assets and invest more cautiously to avoid the “irrational exuberance” that Alan Greenspan warned would lead to financial collapse.

In tough economies, you understand from the start that you’ll need to use the first several months to position your company for future success. You’ll need adequate funding to sustain a slower growth, and a more targeted approach to marketing. When the economy is booming, it’s easier to realize early success. A company that can grow early successes in a weak economy is poised to surge ahead when the situation improves.

Right now, tThe costs of starting a new business are lower than they have been in recent years. Many of the products and services you’ll need are available at discounted rates: professional services like accounting and legal services, real estate, office furniture, and other goods and services.

During hard times, you as a consumer are in a much stronger position to negotiate favorable terms than you would be if you wait for the economic rebound.

With the presidential campaigns bringing new focus to the government’s role in business development, it seems likely that the current uncertainty in the business environment will be replaced with regulatory and tax conditions that will truly promote job growth, along with real opportunities for both new and existing businesses. If you’ve already begun laying the groundwork for a well-planned and marketable business, these policy changes could enhance your efforts with some genuine support from local, state and federal governments.

The impact of regulations on business are likely to be defined so that businesses can plan and make decisions on known conditions. As that takes effect, your new business could be in position to benefit from “the rising tide that lifts all ships”.

Naturally, these hard times will require some meticulous attention to detail as you develop the plans for building your dreams and starting your new business. You’ll need to be certain you have the operating capital to sustain your business and your family while you work to develop your customer base. And you’ll need to have a robust and realistic budget for marketing and promotion. But cCareful planning, adequate funding and attention to detail are the cornerstones of any successful business venture, regardless of the economic environment in which they are born. If you have what it takes to be successful in business, starting a new business now could position you for greater success when the economic environment improves.

Marianne Carlson is president of Emcie Media, a Web development firm.

By Paul Kedrosky

When asked whether this is the right time to start a company, I often use the old line about planting a tree: When is the best time to plant a tree? Twenty years ago. The second best time is now.

After all, starting a company takes time and effort. Get on with it. What’s stopping you? Money? Health? Family? Fear? There is a term , after all, for people who claim to want to start companies but never do: “Wantrepreneurs,” and it’s not a compliment.

Say, however, you’re coming to this entrepreneurship question belatedly, that you had never given it serious thought, but now are. Is this a good time, you wonder?

Well, At the Kauffman Foundation, we have studied this subject, and here is what our research says: Looking back at the last few decades of company creation in the U.S., the most auspicious time to start a company was during recessions. A disproportionate number of the fastest-growing and most important companies of the 20th century – from Ford to FedEx to Google – all started during downturns.

Why? Economic downturns decrease company supply while they increase the number of founders and hires. Few people want to create companies, but many people are let go by their employers. Fewer competitors and more potential employees is a potent mix. It has helped drive the success of many young companies. (One of my favorite examples: The single best time in the 20th century to start a bank was during the Great Depression.)

Of course, it’s not necessarily happy start-up trails if you create a company during a downturn. Investors exhibit pack behavior, just as entrepreneurs do. While it’s easier to get a company funded during good times, it can be much harder during downturns.

Similarly, downturns can make it more difficult to sell your product or service. Getting customers, especially large ones, to take a chance on a start-up is never easy. It is generally harder during downturns when prospective customers are worried about their suppliers’ longevity.

Turning things around, however, tThat doesn’t mean economic good times are great for pursuing your start-up dreams. You trade off capital scarcity for capital oversupply with seemingly every company with even a remotely interesting idea getting funding. During boom times, every emerging niche seems to be over-populated with start-ups, much like what we’re seeing today in certain social networking niches. Most of these companies should have, like trees, been started years ago. Or never.

So, is now the best time to start a company? We’re in a start-up boom and not in an economic downturn so, statistically, the answer is “no.” Having said that, consider two things: As Like with trees, the best time to start a company is always going to be sooner rather than later, whatever any cyclical statistics say. Secondly, there are so many things that have to go right for a company to succeed. Fixating on start-up cycles is mostly a sign you shouldn’t be starting a company in the first place.

Paul Kedrosky is a senior fellow at the Ewing Marion Kaufmann Foundation.

2 comments Add your comment

MANGLER

October 24th, 2012
12:12 pm

So zeke is that your GOP self sufficiency rationale there?

zeke

October 24th, 2012
11:49 am

NOT IF OBAMA IS RE-ELECTED! ESPECIALLY IF THE DEMOCRATS RETAIN 50 SENATORS OR MORE!
If Romney is elected, and, Republicans can get at least 50 Senators, business and the economy will flourish! It would be great if there could be 60 Republican Conservative Senators!!