Starting a Small Business in a Recession

By Dana Hinders , last updated December 22, 2011

Starting a small business in a recession is not without risk, but the rewards can be great. If you’ve always dreamed of being an entrepreneur and you suddenly find yourself without full-time employment, channeling your energies into starting a business is a much better idea than wallowing in your misfortune.

The best small businesses to start in a recession are those with relatively low start up costs. This includes most types of service businesses, such as accounting services, virtual assisting, freelance copywriting, and web design. Many of these businesses require only a computer, Internet access, and a small budget for marketing your services to potential clients.

As you’re deciding what type of business to start, it’s a good idea to think about what products and services are in demand during a recession. For example, businesses providing tutoring and education-related services are a good idea since many people are seeking to upgrade their job skills during a recession. While a business selling expensive luxury goods is likely to have a hard time during a recession, stores selling affordable merchandise can still be quite profitable if you’ve researched the market carefully.

When you start a small business during a recession, keep in mind that you’ll likely save money on labor and equipment costs. People who have been unemployed for quite some time will be more willing to work for a slightly lower salary. Companies that sell computers, furniture, and other business supplies often provide great sales during a recession to help attract new customers.

The primary disadvantage of starting a small business during a recession is that banks are less likely to lend money during difficult economic times. Many aspiring entrepreneurs compensate for this obstacle by using money from their corporate severance packages or personal savings to start their businesses. Loans from friends and family can also be useful, although you will want to consult a lawyer to make sure everyone’s financial interests are protected.

Owning your own business is challenging even under the best possible circumstances. However, if you’re passionate about your idea, you shouldn’t let an economic recession get in the way of pursuing your dream.

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