Over the last few years, damage to
world financial markets has negatively impacted the global economy. One area in
particular which has felt the greatest impact has been the labor sector.
Companies and in some cases entire industries (such as the US automotive
industry) have been hit hard leaving many without jobs and a means to support
themselves. Individual approaches to remedy the situation have varied greatly.
Some have gone back to school or switched industries and others have resorted
to defining their employment on their own terms- by starting a business.
Starting a business during an
economic downturn can be a complex affair. By definition, economic and
also consumer activity have slowed down considerably. There is less
available for consumers to spend and the little that they do have is much more
carefully guarded. With all this in mind, does it make sense to start a
business during a recession? Entrepreneurs starting out during recessions face
higher failure rates as consumers are less willing to spend overall and in
particular on new products. Additionally, there is increased financial
risk. If you sink what you have into the business, it fails and you are unable
to find employment afterwards then you’ve dug yourself into a deep hole.
For entrepreneurs targeting
specific niches however, a recession can be a perfect time to start a business.
The professional networking site Linkedin for example has achieved enormous
success during the recent recession. Social media is the new way in which
professionals network and for those looking for jobs it has proven to be an
invaluable and efficient tool. Do-it-yourself businesses catering to
entrepreneurs (for example software) have also enjoyed positive results during
the recession as businesses try to cut back on external costs.
Overall the stakes are higher, but
the rewards can also be greater- is it worth starting a business when the
economy is in bad shape?
Juliana
A Taylor
Fuqua School of Business, Duke University, 2012
Princeton University, 2010
Fuqua School of Business, Duke University, 2012
Princeton University, 2010
