Light Your Fuse Now
by Rob Spiegel
With the economy struggling to recover from a lengthy recession, you might think that starting a business would be a bad idea. According to columnist Rob Spiegel, however, just the opposite is true. Find out why he believes right now is the best time to launch a new business.
Have you been thinking about launching a company? Or perhaps you’re considering an expansion of your existing business. Finally, current economic conditions are conspiring to offer you the best environment for a business start-up. Current conditions are as favorable for start-ups as any time we’ve seen since late 1982, the year we were just beginning to emerge from a deep and prolonged recession and enter a 20-year expansion that was interrupted only briefly in 1991.
Our present environment looks even better than 1982, as interest rates are lower, and the job losses during our recent downturn were not nearly as devastating as 1982, when the jobless rate hit 10.8 percent in October, a dreary number that still holds the post-Depression record for unemployment. More people are employed now and they’re paychecks are relatively higher thanks to productivity gains over the past couple decades.
Here are the reasons why the present moment is great time to start a company or expand your business:
The long-stretch between recessions. The best time to start a company is during the bottom of an economic trough. When you begin at bottom, you get the longest possible stretch before your fledgling company has to weather it’s first recession. Starting a business during a long stretch of good times increases your likelihood for success.
Low interest rates. We’re now experiencing the lowest rates we’re likely to see for many years if not decades. This means money is cheap, and cheap money means your start-up costs will be lower. Whether you’re financing your start-up with a second mortgage on your family home, through a Small Business Administration loan, or simply by maxing out your credit cards, the result will be a lower-cost start-up than would have been possible two years ago or likely to be possible two years from now.
Companies are getting ready to buy. American businesses large and small have kept tight purse string during the past three years. In order to produce profits in a down economy, they have laid off workers and frozen or cut most of their budgets, which means it’s been very hard to sell business-to-business. That is just starting to change these past few months. And since companies have held off on their buying, they have pent-up needs that will drive a new round of robust purchasing over the next few years. If you’re planning to sell to business, you’re entering a new healthy market.
Consumers never stopped buying. If you sell to consumers, this downturn hasn’t been bad at all, since those with jobs kept buying and fewer jobs were lost than in past recessions. Things will just get better from here. As the job market tightens over the coming years, wages will begin a new round of swelling and more jobs will be created. For those companies selling to consumers, the market is beginning a new period of growth.
The one caution: employees will be hard to find and you will have to pay them higher relative wages. The only dark news for start-up entrepreneurs or business expansion is the tightening job market. Right now, it still looks gloomy, but that is about to end. Already, the economy has begun to create new jobs, and that trend will be acerbated in the coming years when the baby-boomers begin to retire.
The boomers will be replaced by a smaller work force, which will put higher demand on employees. This will present a challenge to small companies as they try to compete for workers. Your best bet to combat the strains of a tight job market is to seek creative ways to outsource needs such as bookkeeping and payroll. Difficulty in finding cheap employees is a small price to pay, since it comes with the good news of fatter consumer wallets.
All if these positive elements add together to give the entrepreneur the best possible chance at business success. It will be many years, perhaps decades, before we again see such a positive environment for business launches.