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Is now a good time to start a business?

Thursday, 16 September 2021, 11:07 am
Article: Digitl

A pandemic could be a good time to start a new technology business¹.

On one level that sounds nuts.

We live in uncertain times. There’s a logic in staying with your current employer.

That’s more the case if that employer has stood by you. You can’t overlook collecting wages through 18 months of worldwide upheaval.

Less so if you work for someone who has shirked their responsibilities.

Yet, there’s a strong case for starting a business in an economic down phase.

Born in a storm

The world’s two largest businesses, Apple and Microsoft, were both born in recession.

If we’ve learned one thing about business, success is about people and great ideas.

Sure, the economy has an effect on performance. Yet compared with the founders and their ideas, it doesn’t register.

The right people and the right product or service will win in the worst economic conditions.

A bad idea coupled with less gifted people will flounder even in a boom.

Business cycles

You can’t ignore economic cycles. This would be a terrible time to open a restaurant or a new tourist venture.

It’s different for a tech company. While there may be a link between a tech company’s sales and the state of the economy, that’s not always the case.

In the past 18 months the tech giants have more than doubled in their market capitalisation.

When Bill Gates and Paul Allen started Microsoft the pair had nothing more than a version of Basic for a microcomputer. There was a serious recession.

Yet, it turned out that Microsoft Basic was the product a sizeable market was waiting for.

Give 'em what they want

Which brings us to another point about today’s uncertain economy. There are products and services that match what people need in a pandemic.

Think of Zoom, a product almost no-one heard of 18 months ago. Think of online grocery sales, a market that was struggling to take off in 2019 but now struggles to meet demand. There are other examples.

Another advantage to starting a business in interesting times is there’s less competition. Others are not a brave. You may have your chosen niche to yourself.

Getting investors onboard during uncertain times is more of a challenge. It’s not insurmountable.

The smartest investors know that you buy bargains in down markets. When the good times come everyone wants to invest.

Risk

Your biggest risk is that you quit your job, start a business, then it fails. You may fear you will be broke and looking for a work in a deep recession.

First, if you are smart enough to get a business started, you have what it takes to earn a crust in the toughest of times. Even a failed venture can be a springboard to better things.

Second, if things get that bad, your employer could be looking at trimming headcount. That security blanket you were hoping to cling to could disappear overnight.

If you’ve got the right plan. Now is the time to use it.

This is not legal or business advice. Go to a professional for that. This is the thoughts of someone who has watched the tech sector for 40 years. ↩︎

Is now a good time to start a business? was first posted at billbennett.co.nz.

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