Data suggest that around 70% of small business firms fail within the first 18 months. This drives a number of people away from investing in or starting their own business. Owning a business assumes one’s ability to fail because it’s an uncharted territory and higher the risk, higher is the chance of failure. Most people who seek constant personal growth, stability and comfort prefer not to give up prime years of their life in struggle while entrepreneurs tend to be more of believers and passionate towards what they want to achieve.

While entrepreneurship can provide one with an opportunity to grow beyond imagination, it sure comes with risks. Hence, in this respect, jobs are considered to be more stable but for someone who’s been working in the same job for years, it might seem that they’re stuck or not being able to grow beyond a point. Hence, it depends on the individual’s personal and professional goals. While jobs have lesser risk and provide one with a lot of time to make mistakes and learn without losing much but for a business, one is required to keep learning and upgrading but with an added risk that one mistake can cost you a lot.

Why is recession a good time to start-up?

Recession might cause many industries to slow down but that doesn’t mean you have to go slow on your dreams. In fact experts argue the exact opposite. It turns out that economic slowdown might just be a great time to start a business for a host of reasons. A recession is a time when big businesses and investors are most cautious. This is the time for new startup owners to shine. At a time when businesses are folding, there will be less number of people trying to get into new businesses and hence less competition for running a business. This can be a time when you can show the confidence to start a business as long as you have funds to go ahead. Bigger companies are generally wary of expanding at this time for the fear of losses. This creates a great opportunity for small businesses and new entrepreneurs to be on their feet and make the most of the gap in the market, meet impending demand and max out your chances to succeed.

One can actually make a lot of difference during a recession as a small business generally has fewer overheads and is asset-light. This allows them to take quicker decisions and increases their chances of taking risks as compared to a bigger firm. Also, during a recession, your clients/customers are also looking to save money. A bigger company cannot afford to reach out to them because of their overall costs being high whereas a new business can very well reach out to potential clients during the time of crisis and build on customer loyalty and client acquisition. Many other businesses like Apple, Microsoft, Hewlett Packard, IBM, General Motors, etc. thrived during tough financial crises. It is proof that starting a business during a recession might not be an entirely bad idea.

Another important reason why this is a good idea is that the government offers more support for going independent during a recession. In India, Aatmanirbhar Bharat scheme or vocal for local push resonate with the same feelings. There is never a right time to start, and you are never ready. But with lost jobs, a rise of the gig economy and talent sharing becoming the new normal, this might be the best time to find your true calling. Economy going downhill means there’s more space and need for startups and hence this might just be the right time to start. 

9 reality checks before you start-up 

Now that you know that literally any time is the right time to start, it is a good idea to ask yourself why you want to start, what’s your motivation, what is the problem you’re looking to solve, what pain point you are trying to address, etc. Your friends and family may love the idea of your app that connects all the elderly people from the neighbourhood for them to socialise but it’s important to first figure out who’ll be willing to pay for it. Even good causes need to make for a good business proposition at least in the short-medium term.

Here are 9 reality checks you need before you decide to take the plunge:

Are you ready for the entrepreneurial/start-up lifestyle?

If you work for a company and decide to quit your job in order to become an entrepreneur, it would mean a 180% lifestyle change. Entrepreneurship is not a way of getting rich quickly. In fact it’s the other way around. If you are getting into it after quitting a well-paying job thinking that it will be able to match your earlier lifestyle, you’re in for a ride. One has to make a well-calculated analysis of their situation and whether they are in it for the long-term.

Do you have the skills to run a start-up?

Most new businesses tend to fail because either the founders are not trained enough or they give up too easily. One has to realise that as a founder of the company, the buck stops with you and more often than not they have to play the jack of all trades to run a successful business initially. One needs to have an understanding of finances, funding, networking, marketing, packaging and of course the nuts and bolts of the product or service they’re trying to sell. This requires them to be quick learners and sharp leaders.

Have you conducted enough market research before starting up?

Most new products or services fail to make a mark because either they speak to the wrong customer base or fail to package their idea well. To start a business, it is imperative that one conducts enough market research before entering the business. You should know who your target group is, what do they want, and can they afford it? Is there a requirement for your product and how are you solving their problem or making their life easier? These are some questions one needs clear cut answers for before starting a business.

Do you have a business/start-up plan?

Having a good idea is not enough unless you figure out a plan. A business plan will not only give you a checklist of things to do, it also builds a realistic picture and acts like a progress sheet for you. Passionate early-stage entrepreneurs have a tendency to overestimate sales and underestimate input costs. Listing everything down on a piece of paper helps avoid this mismatch of expectations. A business plan is all about translating an idea from your head into a tangible business value proposition.

Who’s going to fund your start-up?

This is probably one of the most important things to think beforehand. Before you take the plunge with your business idea, make sure that you are prepared financially. This is something people keep for the end. It’s essential to have a financial cushion to support yourself before going in for the big ride. It makes financial sense to figure out whether the business is going to be self-funded, investor-funded or crowd-funded.

Do you mix your business and personal finances?

Most people are unable to separate their business expenditure and personal finances and end up suffering if the business takes a hit. One very important reality check for early entrepreneurs is to keep the two separate so that your family is able to manage financially despite the performance of the business. This means that one needs to manage their personal finances before stepping a foot in the entrepreneurship journey.

Scale v/s sales in a start-up

Some entrepreneurs are driven by long-term plans of scalability (often taking a financial hit in a few initial years) while others think of being sales-driven right at the beginning. One needs to think what kind of startup they want to be. An entrepreneur needs to have a business plan with realistic financial projections for both the short-medium term and long term. And this should not be driven by their own judgement, passion or feeling but solid, on-ground market research. Only then they will be able to decide what will drive their growth—scale or sale.

Do you have a good start-up team?

Entrepreneurship might seem like it’s run by a one-man army but it actually takes a lot more than that. Most successful businesses start with a good team. One of the most important reality checks include whether you have the ability to set up a dream team before starting out. Most startup projects require special skills and that requires a motivated team. An entrepreneur might not be able to code, market the product/service, do media planning, get investors all at the same time. Hence, it is important to invest time and money to set up a good team. A successful startup is made of the right people with the right execution of the right idea.

Are you open to unlearn and relearn?

Entrepreneurship is not about how much you know and how far you can go with it. It is about having an idea and letting it grow into a business opportunity by collaborating with the right minds. There is so much an entrepreneur doesn’t know when they start out. It’s good to have a mentor in the first few years of your flight. But in a constantly changing landscape, it is important that an entrepreneur enters with an open mind and with an enthusiasm to change according to the needs of the market. They would require one to have a flexible mindset while starting out while having a positive outlook towards the potential of their business idea.  

Entrepreneurs also need to keep in mind that there are a number of myths that surround them. People start their business with certain expectations in mind based on what they have heard or known which might not turn out to be the same eventually. One of these myths include that you’re your own boss. One of the reasons why one wants to start a business is because they aspire to be their own bosses. However, in reality the customer becomes your boss and dictates where the market is going to go. You have a tendency to lose that new-found freedom right after you accept funding from angel investors. Another myth that they’re surrounded with is that entrepreneurship means loads of money. Not really. One needs to be prepared for all kinds of possibilities and understand that a business is not a guarantor for anything. One might be disappointed if they choose to get into it solely for the money rather than value, learning, following their passion, social capital, etc. It is important to realise that starting a business is a huge undertaking. It can either turn out to be better or worse than expected.