Why Recessions Can Be Good for Business
Throughout the recession years, there was a seemingly endless amount of ominous anecdotes and statistics about America’s small businesses. The number of small business declaring bankruptcy shot up between 2007 and 2009, while the nation’s small businesses as a whole lost an astounding $2 trillion in profits during this period.
Yet the economic downturn also proved to be a great opportunity for many business owners who were not afraid to follow King Remodeling’s example and pump more money rather than less into launching or expanding their companies.
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“Recessions are traditionally very good times to start or grow a business, primarily because your competition is weaker,” said Rhonda Abrams, a small-business columnist for USA Today and president of the Planning Shop, a publishing company that focuses on putting out resources for business owners.
As companies in a given industry consolidate or go bankrupt during tough economic times, it creates a unique opportunity for ambitious competitors to gain a significant amount of exposure and new customers, simply by continuing to expand their operations and improve their product.
At the same time, according to Beth Schoenfeldt, a serial entrepreneur who has helped launch hundreds of businesses, the cost of rent, advertising and employees typically go down in a tough economy, which makes it all that much cheaper for businesses to expand.
Unfortunately, as Abrams notes, it was particularly difficult for businesses to invest more during this recession than during previous slow periods because this was a “deeper and longer recession, resulting in more personal losses.” Many business owners suffered declining home values, dwindling stock portfolios or dealt with a spouse losing their job, or all three, making it that much harder to take risks.
When the Risks Pay Off
Since the recession officially ended in June of last year, though, and the dust has seemed to settle a bit, it’s become clear that many of the businesses thriving today are the ones who were able to pursue this strategy.