Although a recession may not feel like the right time to start a business, Tobi Nifessi explains why NOW is a great time to start a new business – even with the uncertainty.
On May 1, the C.D. Howe Institute officially confirmed what most of us already knew — Canada is in a recession.
In the last 40 years, the Canadian economy has been plagued with four recessions. In each of these recessions, there were dramatic changes in consumer behaviours.
In response, Canadian businesses tossed their financial forecasts in the bin and made new adjustments. Some businesses exited the market but new businesses — like Daiya, Frozen Mountain and Slack Technologies in 2008 — entered the market and thrived.
The entry and survival rates of new businesses born during recessions are consistent with annual averages. Inflation concerns, the U.S. housing bubble and declining oil
prices led to severe economic downturns in 1991, 2008 and 2014 respectively. Yet, over 70 per cent of new Canadian businesses born in those years survived at least their first two years of operation. This could happen again in a 2020 COVID recession.
Kayla Isabelle, the executive director of Startup Canada, tells Douglas, “Entrepreneurs will be at the forefront in bridging gaps — we saw this in the 2008 recession with the inception of Slack, Square, Uber, etc. What’s the next big innovation we’ll see in 2020?”
The major concern of entrepreneurs who are considering starting businesses during a recession is the possibility that their businesses could fail as a result of poor economic conditions. The flip side of this is the idea that there actually are perfect conditions for starting a business. The reality is the best time to start a business depends more on the business’s value proposition than on economic conditions.
The capacity of a business to withstand headwinds will determine its sustained growth. There is hardly a better time for businesses to push through any opposing forward motion than during an economic downturn. Instead of fixating on the timing, entrepreneurs and new business owners will benefit from ensuring their value proposition matches the realities of the current market.
Dawn McCooey has spent over three decades advising small business owners in Victoria and across Canada. Having helped local businesses navigate through three recessions, McCooey believes that in 2020, entrepreneurs and new business owners are well-positioned to usher in a new reality.
“Some say the world has changed, and the new normal hasn’t even settled yet,” McCooey says. “Entrepreneurs can help to create a new normal in business. How can your start-up idea fit with this new reality? What trends have been created? What are the possibilities of a strategic alliance with an existing company? These are all ways of exploring where the gaps are and what may be possible as a start-up.”
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