Wednesday, February 4, 2009

Recession startups not such a bad idea

By Mark Miller

A friend lost his job recently at 64. He had been a fundraiser for a national charitable organization that has seen its donor base hammered by the recession.

My friend doesn't want to retire, but he understands that the odds aren't great he'll find a new job at his age -- and with his level of seniority and pay.

He's thinking of going the entrepreneurial route, and he's hardly alone. The ranks of older entrepreneurs have been growing quickly, and even more boomers will take the plunge in 2009.

But is it smart to start a business during a recession, when consumer demand and business-to-business spending is falling, especially as a midlife entrepreneur?

Yes, with a couple of qualifications.

• Identify a business for which you're confident that demand will exist and you have the skills and passion to succeed.

• Be sure you have saved up at least six months of living expenses to use while waiting for revenue to build.

If you think long-term demand will exist for your product or service, starting in a down market shouldn't be a problem.

Midlife can also be an ideal time to start a business.

"If you're an empty nester, your living expenses have stabilized and you can devote more hours to the business," says Anita Campbell, editor of, an online resource for entrepreneurs.

Sole proprietorships are the most common form of startup: 85 percent of all business tax returns are filed by companies with no employees, according to the National Association for the Self-Employed.

Many small enterprises can be started for a few thousand dollars, thanks to the Internet and inexpensive technologies that enable working from home.

Here are some other plusses to starting a business during a recession:

• Expenses fall during a recession. Suppliers are cutting prices, and fees also fall for services such as graphic design and bookkeeping. Corporate downsizing throws a lot of high quality office furniture and equipment on the market at bargain prices.

• Angel funders still exist. If you need to raise capital to start your business, consider looking for angel investors: wealthy individuals who fund startups.

Sources of angel investing can include friends and family. You can also find an angel investor through a membership organization or club that networks and shares investment leads.

• Tough times weed out weak competition. If your business has staying power, you'll find a more open field, with a great chance to position yourself for real growth in the eventual recovery.

• Certain markets tend to be recession-proof. Consider anything related to health care or insurance, including services to doctors or medical equipment companies.

If President Obama gets the stimulus package he's looking for, anything related to national infrastructure will also be booming.


Post a Comment