Please note: this blog was published in May 2020 and its content is based on what was correct at the time of writing. As a result, some of the facts and opinions may no longer be current or relevant.
Before we get into anything here, there are a lot – like a lot, a lot – of things that you need to have in place before you even think about starting a business. For a start, you need an idea of what you want your business to be. You’ll need to know how you’ll make money, whether there’s a market for it, and if you’re in the right position financially to try and give life to your idea.
If you have all that in place, then you may be thinking that with the end of the coronavirus pandemic in sight – is now the right time? Let’s take a look.
What’s your business model?
The global rollout of vaccines may have provided light at the end of the tunnel, but we’ve been warned by the Head of Public Health that face coverings and social distancing rules could be in place for years. So, if your business model relies on large groups of people together and face-to-face contact, you may want to have a good long look at your plan.
Digital models on the other hand have thrived during the various lockdowns, and according to one study, it’s accelerated digital transformation by seven years! If you’ve been fortunate enough to benefit from that, then this could be the perfect time to get started – as long as everything else is in line.
Is a recession the best time to start a business?
Covid-19 caused the UK to enter its first recession in 11 years and has had a huge impact on the UK economy. But this hasn’t impacted every business equally. Large supermarkets like Tesco saw a surge in their sales as the first lockdown was introduced in April 2020, and technology company Zoom saw an 88% year on year increase in revenue.
Meanwhile, the retail and hospitality industry took a massive hit. With pubs, restaurants, and stores all shut, we saw a large number of chain stores entering administration in 2020 and others have announced that they will be shutting branches permanently when the world eventually does return to normal.
Why are we saying all this? Because what your business does will have a large impact on whether now is the best time to start.
Are there any successful businesses that started in a recession?
Yes, plenty! A recent example would be Uber and AirBnB – both of which were set up during the 2007-2009 Global Financial Crisis. And, if you wanted to go further back than that, General Motors launched in 1908, following the 1907 financial crisis, and Burger King started flame grilling burgers in 1953 during another US recession.
That’s not saying that to be a successful business you need to start in a recession, or that starting in a recession helped these businesses become successful. It’s just saying that businesses that started when times weren’t looking great have grown and gone on to do some really cool stuff.
However, being in a recession mind-frame could help from a financial perspective. When purse strings are tight and you have to scrimp and save to make ends meet, you tend to focus a lot on efficiency – and efficiency can be key to success.
With businesses closing, is there less competition?
That’s certainly one way of looking at it, although it could equally be that only the strongest survive. But if we’re going with animal metaphors, and you’re a big believer in the younger and fitter member of the species replacing the old and worn-out ones, then you might think now is the perfect time to start.
This pandemic has changed many people’s perceptions, brought about some new ways of thinking, and introduced some new ideas for businesses – who’d have thought in 2019 there’d be such a demand for facemasks! So, if you have a new way of doing things, a business that takes advantage of the changes brought on by the pandemic or something that fills a gap, then there is a chance you may have less competition.
You could get free money
The government has been very supportive of businesses throughout this pandemic, offering a furlough scheme early on and providing relief on business rates. But, in addition to this, there are also a wide range of grants that you may be able to apply for – depending on your business.
If you’re thinking of starting a business, it may be worth checking if you could receive a grant or financial support from the government first: https://www.gov.uk/business-finance-support You could also look at what’s available from organisations like the National Lottery business grants or Innovate UK.
You could start running quicker
One of the biggest difficulties for many people during a recession is losing their job. However, if you’re starting a business, it could mean that you have a great selection of talent to choose from. This could work in your favour, helping you find some excellent people to put in the right places to launch your startup with a bang.
Another negative that you could turn into a positive is commercial space. The work from home orders made many businesses realise that remote working wasn’t just effective, it was more affordable. This then resulted in many commercial properties being left empty and the rental agreement expectations being significantly less than pre-pandemic.
The future’s looking bright
According to a report by the Centre for Economics and Business Research (CEBR), Brits are planning on having a £50billion spending spree when restrictions are lifted. Apparently, we’ll be a lot more likely to take more holidays – both in the UK and overseas – and go out for food to pubs, bars, cafes, and restaurants. Which makes sense, I’m not sure about everyone else, but I’m sick to the back teeth of my own cooking!
And with nearly half of all households (45% to be exact) having built up more coronasavings in the last year, we will be looking to spend some of it. How much, is another thing – the bank of England’s survey gives a rather pessimistic view, while the CEBR’s report is far more optimistic. Only time will truly tell!
Do you just want your money to work harder?
Some people who are thinking of starting a business only really want to get more from their money. If you’ve built up a good pot in the last year and are looking to get more out of it, then starting a business could be a good idea, but then so could investing in an existing business. Investing may not have the same ‘be your own boss’ vibes that you get from starting a business, but it does give you the opportunity to give your money more potential.
The government gives you a tax break on investing too – you could open a Stocks and Shares ISA and tuck away up to £20,000 each year without HMRC getting their hands on it. Not sure where to start? Wealthify makes investing really easy, we do the hard work for you, and all you need to do is tell us how you want to invest and how much. Then sit back and we’ll take it from there.
So, is now the right time to start a business?
That is completely up to you and no blog will ever give you an answer that’s specific to your business, circumstances, or needs - not even this one. Possibly the best thing you could do is to sit down, work out your finances, make sure that you have a solid plan, look at the competition, do your research and then you've run through a few scenarios to make your business watertight.
Starting a business isn’t for everyone and it’s no easy task, so if you end up going for it – good luck!
Please remember the value of your investments can go down as well as up, and you could get back less than invested.