How to Start a Business During a Recession When Unemployed
Starting a business during a recession while unemployed could require a lot of creativity and some risk-taking. People whose unemployment benefits are about to run out often consider self-employment because they simply have no other choice. Jobs are usually scarce in a recession, and it is not unusual for some people to be out of work or underemployed for more than a year during a severe recession. However, successful businesses can be launched in tough economic times. Inc magazine reports that there are many cases of successful businesses being launched in the middle of recessions.
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Instructions
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Choose a business that you can start on a shoestring. Resist tapping into cash in personal savings accounts or in your 401K. Starting a business is always risky and even more risky in a down economy. The last thing you want while unemployed is to dump all your savings and retirement money into a business that fails. Instead, choose a business that offers minimal startup costs. For example, start a temporary staffing agency business out of your house. A telephone and Internet access are all you need to begin, along with money for marketing materials, building a website and advertising. Once you start placing temporary workers with firms, you'll need money to cover their payroll until your clients begin paying you.That's a lot less risky than spending tens of thousands of dollars for a more expensive business startup, such as a restaurant or used car dealership.
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Emphasize your strengths as you choose a low-cost business. Consider a small catering company if you have a background as a chef. Rent kitchen space on an as-needed basis as you complete small jobs while growing the business. Or start an independent maid business if you formerly worked in housekeeping at a hotel.
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Get free help from a trained business consultant before opening the business. What sounds like a good business idea may actually be the wrong move for your market. Independent advice about your business idea can help you avoid costly mistakes. The Small Business Development Center Network, a partner of the U.S. Small Business Administration, offers free business consulting around the country. The small business network is located in more than 1,000 locations. The offices are staffed by trained executives, many of whom have owned businesses. Rely on their experience to properly analyze your business idea. Find a Small Business Development Center Network office by visiting the website (see Resources).
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Review your business plan with the consultant as you discuss the local economy as well as feedback the consultant is hearing from other people currently in business. If temporary staffing agencies are suffering because companies just aren't taking on extra help, then that's important to know. Spend as much time as you need with the consultant until your business plan is solid.
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Search for investors no matter what size business you decide to open. Going it alone is fine, but taking on investor/partners can help you grow faster once you open your business. Network for potential investors through your social networks and business meetings such as local chamber of commerce functions. Or convince an existing business to partner with you on some joint ventures. The existing business can offer back-end operations such as billing and clerical services while you focus on sales and business development as part of an expansion into new markets.
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Open your business with or without the help of investors. Keep expenses as low as possible as you build the new business during the recession.
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